WTO gets back to work, providing trade increase of $1 trillion

WTO gets back to work, providing trade increase of $1 trillion
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The World Trade Organization (WTO) has remained more or less docile for the past 20 years until it passed a critical agreement last Saturday. The agreement shows that the WTO is still relevant, and will provide significant benefits to global trade.

On Saturday, December 7th 2013, the World Trade Organization came back to life. After several days of dramatic negotiations, the 159-member organization agreed on the first global trade deal in 20 years, finally putting worries that the WTO was becoming irrelevant to rest. The deal is said to reflect the new power relationships in the global economy, with increased emphasis on developing countries’ needs, but will nevertheless prove to be a huge boost to overall global trade.

Since its inception in 1995, the WTO has consistently failed to promote trade liberalization. Especially with the launch of the Doha Development Round of trade negotiations in 2001, it was clear that the WTO, with its ever-expanding membership, had bitten off more than it could chew. Bitter feuds over tariffs and subsidies on agricultural products, among other issues, has often been simplified as a struggle between the developed and developing countries (led by China, which  joined the WTO in 2001). These issues have long seemed insurmountable, and the biannual trade talks have been mostly disappointments.

In reaction, as trade liberalization continues to be something to strive for, countries have looked to the alternatives: bilateral and regional free trade agreements. Thus, efforts such as the EU-US trade agreement, the TPP, and ASEAN’s mission to form its own FTA have gained ground, further dampening hopes for the WTO to rise to its challenges.

But the deal reached last weekend in Bali, Indonesia has once again reinstated belief in effective global trade negotiations. While all of the Doha Round’s issue areas were not addressed, the deal will greatly help promote trade facilitation, cutting red tape in customs procedures through global coordination. An often-cited U.S. think tank report has estimated that trade facilitation alone will provide over $1 trillion in global export gains, or an increase of around 5% to global trade. The WTO’s decision will also ensure that the least developed countries have full access to more lucrative developed countries’ markets, helping to promote greater equality in global trade.

On top of this, India spearheaded a ‘peace deal’ that allows countries to maintain higher levels of farm subsidies in the name of food security. This means the Indian government, and others, can purchase staple foods and sell them at lower prices to poor, rural areas without fear of being charged over a trade dispute by other WTO members. However, the deal is only in place for the next four years, after which farm subsidy limits are likely to be put back in place.

Although the WTO agreement comes as welcome news, some say it does not go far enough and that there is still much to do. While it is true that more could be done to open up the EU’s and U.S.’ notoriously defensive agricultural markets, and that lowering general tariffs still needs to be addressed, the Bali agreement has paved the way for future talks to tackle other issues of the Doha Round. Importantly, the fact that the talks were not subdued by Cuba’s veto threats over lifting the U.S. trade embargo proves that, when push comes to shove, the WTO members are willing and able to reach compromises on stubborn issues.

Interestingly, with the WTO re-entering the global trade discussions, many of the current regional and bilateral trade negotiations will be given new support in terms of providing dispute settlements and narrowing the range of issues. At the same time, as more and more non-global trade agreements are reached, the WTO’s own mandate may also become easier. Global and non-global trade is often linked and mutually supportive on a number of levels.

As such, Yemen’s admittance to the WTO after 13 years of negotiations could not come at a better time. Following the recent admittance of other poorer members such as Tajikistan and Laos, as well as Russia in 2011, the WTO is hailed as the most representative trade club in the world. Now with the deal in Bali, it has shown that it can also listen to all of its members – not just the rich ones – giving it much-needed credibility.

Nevertheless, if there is any hope of the Doha Round of trade negotiations ever coming to an end, the WTO membership is going to have to put in a lot more time and effort. The good news is that the Bali agreement will undeniably provide a solid push in the right direction, and those benefiting from free trade can expect a positive future.

More on world trade from GRI:

The US is Winning the Asian PTA Race

Big Questions Loom with China’s Trade Liberalisation

How Protectionist Will the Upcoming EU-US Trade Agreement Be?

Categories: Economics, International

About Author

Karl Sorri

Karl has gained global experience working at the Transparency International Secretariat in Berlin, the Political/Economic Section of the U.S. Embassy in Helsinki, and as a freelance journalist. Karl holds an MA in Politics from the University of Glasgow and an MSc in International Relations from the London School of Economics.