World Trade Organisation Truly Delivers

ANALYSIS - The World Trade Organisation’s Bali Ministerial Conference ended last week in a fanfare of triumph, writes Chris Harris.
calendar icon 13 December 2013
clock icon 6 minute read

Agreement had been reached on a package of issues designed to streamline trade, allow developing countries more options for providing food security, boost least developed countries’ trade and help development more generally.

Indonesia’s Trade Minister Gita Wirjawan, who chaired the conference, said: ““We did it! We achieved what many said could not be done.”

WTO Director-General Roberto Azevêdo said: “For the first time in our history: the WTO has truly delivered.

“I challenged you all, here in Bali, to show the political will we needed to take us across the finish line. You did that. And I thank you for it.”

The Bali Package is ostensibly a selection of issues from the broader Doha Round negotiations.

“With the Bali package you have reaffirmed not just your commitment to the WTO — but also to the delivery of the Doha Development Agenda,” Mr Azevêdo said.

“The decisions we have taken here are an important stepping stone towards the completion of the Doha round.

“And it is very welcome that you have instructed us to prepare, within the next 12 months, a clearly defined work program to this end.”

Mr Azevêdo, said members’ attention should now turn the rest of the round, known semi-officially as the Doha Development Agenda.

But how far forward has the much acclaimed Bali agreement taken world trade negotiations?

On some crucial issues, the agreement does not seem to have advanced things at all. In the agricultural negotiations, which have been the historical sticking point for any agreement, there still appears to be stalemate over some issues between the developing and the developed nations.

The agreement appears to agree to disagree and put things on hold while further negotiations are conducted.

On trade facilitation, the WTO ministerial agreement says: “The trade facilitation decision is a multilateral deal to simplify customs procedures by reducing costs and improving their speed and efficiency. It will be a legally binding agreement and is one of the biggest reforms of the WTO since its establishment in 1995 — other agreements struck since then are on financial services and telecommunications, and among a subset of WTO members, and agreement on free trade in information technology products.
“The objectives are: to speed up customs procedures; make trade easier, faster and cheaper; provide clarity, efficiency and transparency; reduce bureaucracy and corruption, and use technological advances. It also has provisions on goods in transit, an issue particularly of interest to landlocked countries seeking to trade through ports in neighbouring countries.”
The WTO said that the agreement on the agriculture part of the Bali Package required sorting out two issues.

Much of the focus was on shielding public stockholding programmes for food security in developing countries, so that they would not be challenged legally even if a country’s agreed limits for trade-distorting domestic support were breached.

The rules allow developing countries to support the farming sector by buying in stocks of up to 10 per cent of production.

The developing countries were and are concerned that if they exceed their support and help poorer farmers more, they are going to be punished by the WTO.

The Bali deal came up with an interim solution, which will exist until a permanent one is agreed, with a work programme set up aiming to produce a permanent solution in four years.

Even before the Bali meeting, the WTO was admitting that no firm agreement was going to be reached over this issue.

“As the Bali conference approached, it became clear that amending the Agriculture Agreement on this point was too controversial to be agreed in time for the conference. Instead, chairperson John Adank, New Zealand’s ambassador, began working with members on an interim solution,” the WTO pre-Bali documents state.

The compromise that was approved at Bali means that countries will temporarily refrain from lodging a legal complaint (“due restraint”, sometimes also called a “peace clause”) if a developing country exceeded its Amber Box limits – the 10 per cent of production - as a result of stockholding for food security.

Work on finding a longer term solution is to continue after the ministerial conference.

However, disagreement still exists on the “safeguards” to ensure that the public stockholding programmes would not be misused, that the released food would not affect trade, the number of eligible products (“traditional staple food crops”), how long the restraint on disputes would last and the work to be undertaken after Bali.

Another issue - "tariff quota administration" – or how a specific type of import quota is to be handled when the quota is persistently under-filled also caused difficulties.

The WTO negotiators agreed on a combination of consultation and providing information when quotas are under-filled.

The WTO paper says: “Under the proposal, if a quota is persistently under-filled — and information-sharing and consultations prove fruitless — the importing government would have to apply one of a prescribed set of methods for administering quotas aimed at removing impediments. Either they would accept quantities within the quotas, first come first served, at the importing ports until the quota limit is reached, or they would issue import licences for every request (“automatic licence on demand”) up to the quota limit.”

The one remaining issue to be settled was which countries would reserve the right not to apply the system after six years. They will be Barbados, Dominican Republic, El Salvador, Guatemala and the US – the only developed country and one of the world’s major exporters and importers.

The third major issue that has caused political turmoil in the negotiations surrounding the Doha Agreement and the post Uruguay round of talks at the WTO is in the area of export refunds and subsidies.

At Bali, the ministers agreed to ensure export subsidies and other measures with similar effect are low.

Prior to the Bali talks, the WTO starkly admitted that this would be a stumbling block.

“It is also proving a difficult subject for the Bali meeting, with some developing countries complaining that the demands on them to make commitments in trade facilitation are not matched by developed countries’ willingness to make commitments on export subsidies. Some other countries say the two should not be linked,” the WTO said.

The outline for the Bali agreement was that WTO countries would “exercise utmost restraint” in using any form of export subsidy.
They would “ensure to the maximum extent possible” that progress will be made in eliminating all forms of export subsidies, that actual subsidies will be well below the permitted levels, and that disciplines will apply to export policies that may have the same effect as subsidies.

In May, the G–20 group of developing countries had called on developed countries to halve their ceilings on the money they spend on export subsidies by the end of 2013 and phase in a 540-day limit in the repayment period for export credit. The final target is 180 days.

The G-20 also called for a limit on the quantities of subsidised exports, at the average actually exported with subsidies for 2003–2005.

However, a number of countries opposed any legally binding decision in Bail, including lower limits on export subsidies. They said they could only do this as part of an overall agricultural package within the Doha Round.

Because of this inability to reach binding decisions, the Bali agreement is open ended and relies on good will and restraint.

In all, the agricultural package in the Bali agreement has move the stakes on very little.

With no legally binding arrangements, the good will statements are open to abuse and the disputes’ panel of the World Trade Organisation could be just as busy as it has been with countries arguing over subsidies and tariffs and quotas as much as they have over the last decade.

The fact that the US has opted out of the tariff quota arrangements also forewarns of arguments and trouble and it appears that the current trend for bilateral negotiations for free trade agreements will be the route forward and the work in the WTO, on agricultural issues, could be largely ignored. 

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