The future of the world trading system
Dr Ganeshan Wignaraja - Principal Economist in the Office of Regional Economic Integration, Asian Development Bank
Guy de Jonquieres - Senior Fellow, European Centre for International Political Economy (ECIPE)
Sheila Page - Senior Research associate, ODI
Edwin Laurent - Adviser & Head, International Trade & Regional Co-operation Economic Affairs Division, Commonwealth Secretariat
Dr Dirk Willem te Velde - Head Of Programme, International Economic Development Group, ODI
The introduction to this event by Dirk Willem te Velde, Programme Leader, International Economic Development Group, was guided by the following questions: should we declare the Doha Development Round (DDR) dead? What would be the implications for the WTO? Or should we proceed with Plan B and what is it? How could progress be made on this front, for example, related to the use of export restrictions? How can these issues be resolved if Doha is not ongoing?
Ganesh Wignaraja, Asian Development Bank
The next WTO Ministerial meeting will be held on 15th December 2011. The mood at this meeting will be an important determinant for the future of the world trading system. However, it is important to note that all is not lost if agreement cannot be reached on Doha. There is scope for a post-Doha agenda, which is related to:
• the emerging ASEAN regionalism and;
• adopting a more pragmatic approach towards Aid for Trade.
Before moving onto the post-Doha agenda it is important to take stock of the reasons for the slow progress of the DDR, which includes the number of countries compared to in previous rounds, which creates strains in the negotiating process itself. A limited deal on the DDR is better than no deal and would help to maintain credibility in the multilateral trading system.
Several further points were made by Ganesh Wignaraja:
• If no deal can be reached on the DDR then a Plan B is needed. This would at least deliver on the development aspects of Doha.
• The risk, if not concluded this year, is that it could be another ten years until another opportunity arises.
• This means a post-Doha agenda must be initiated urgently.
Free Trade Agreements (FTAs) are spreading rapidly. In Asia there is now talk of consolidation of these agreements. The approach being adopted in this region could perhaps provide a platform for wider discussion under the WTO, including such issues as services, investment, intellectual property (IPR) and government procurement.
Aid for Trade is now the second most important issue facing the multilateral trading system after the DDR. However, a more pragmatic approach is needed towards disbursements, for example, blending rather than grant based; engaging the private sector; improving monitoring and evaluation and general lesson learning etc.
Guy de Jonquieres, European Centre for International Political Economy
The situation is far from ideal at present. We have to ask how we got here. Multilateralism is under strain not just in relation to the DDR and at the WTO, but also within other fora such as the G20 and UNFCCC. Guy’s explanations for where we are included the following:
• The post-war multilateral model no longer works as it used to.
• This is because the global hegemon (the US) which has set and kept rules, motivated to do so in its own self interest, has been undermined in the 21st century.
• There has been the rise of other industrial powers around the world. But so far no new emerging power has been willing to shoulder the burden of global leadership. This has created a situation of stable disequilibrium and a disordered state of international relations.
• Moreover, it has led to profound changes in what should be the WTOs negotiating agenda:
o FDI and the proliferation of global production networks.
These developments affect the politics as much as the economics. This is because the interests of countries and companies are no longer the same. The WTO has struggled to find ways of reengagement, although there are positive developments in Asia with agreement being reached on, for example, IPR. The US on the other hand is struggling to make the case that new trade deals create jobs at home. The rise of China and the competitiveness of its exports is a challenge for members of the WTO. The lowering of tariffs towards China has led to fears of being overwhelmed by some WTO members. The 1990s wave of liberalism is backsliding. This is not only due to the effects of the global financial crisis but also because of the need for structural reforms, which are inevitably more difficult and challenging, to accompany further liberalization.
Sheila Page, Research Associate, ODI
Doha has not failed. It had two main purposes:
• to create a positive signal to the world after 9/11;
• to avoid problems between the EU and US on agriculture.
These objectives differ to those in previous rounds, in that some countries desperately did not want something; this has led to a limited negotiating interest in the current DDR.
Despite this, since the global financial crisis it is important to note that the WTO has been surprisingly resilient. There has been some increase in protectionism in areas not regulated by the WTO. But generally areas regulated under the WTO have been resilient. The Dispute Settlement Mechanism has not broken down. No one has left the WTO.
A Plan B for the DDR is unrealistic. Looking ahead, the current crisis represents a missed opportunity to have got a deal on agriculture. Subsidies are being cut in the EU and US anyway. These cuts could have been consolidated. An international institution must deal with agriculture.
Other relevant areas include borderline problems between the WTO and such as issues as climate change, IPR, finance and exchange rates. The principles of Most Favoured Nation and National Treatment have relevance beyond trade, but are about first principles.
Aid for Trade: The WTO has kept this on the agenda. The framework is there for this to be carried forward.
Edwin Laurent, Commonwealth Secretariat
It is important to understand the reasons for the failure of the DDR. These include administrative challenges such as ambition and scope. In addition to the fact that it was simply initiated too soon after the Uruguay round. Adopting the approach of a single undertaking meant that dealing with these issues soon became a challenge.
The rise of the emerging economies has shifted the balance of power. The food and financial crises have resulted in shocks to the system. Regionalism is considered a viable alternative and a preferable approach.
• But the continuation of a mercantilist mind-set within the negotiations must also be considered a reason for the failure of the current round.
• Putting development into the name of the round was an attempt to make the project sailable for a number of reasons. But there has been no serious attempt within the
WTO to really mainstream development. Moreover, the approach appears to be contradictory. For example, through enabling a phase-in or tariff reductions which suggests precisely that liberalization could be damaging for an economy.
Aid for Trade represents something that could be salvaged from ten years of work at the WTO related to Doha. However, rather than a focus on the quantity it is important to focus more on the impact.
In relation to the Plan B, this could include aspects of important to the Least Developed Countries such as cotton, Duty Free Quota Free, etc. However, the risk is that this will result in rather limited gains and possibly be meaningless. In order to really give meaning to the potential developmental aspects of the DDR there needs to be a change in the mercantilist mindset of WTO members. If not a culture of indifference to the round will persist.
Questions and Answers
Is the LDC package under Plan B significant? E.L: It is not really significant. There is a danger of accepting such a minimum package of concessions. DFQF does not really take account of development. G.W: The LDC package is rather limited at the current time because the middle income countries need to do more.
What is the post-Doha agenda? G.W: Next generation issues such as investment, addressing the proliferation of FTAs. The 1980s neoclassical arguments for free trade are now very different to those that exist today, this means a new paradigm for development that takes such issues as employment and competition policy is important. G.J: Perhaps countries should reconsider their accession process, renegotiate and join. There is a need to consider the relevance of the WTO.
Isn’t the WTO just about multinational companies when what really matters is small and medium sized enterprises? S.P: Larger companies have other means to deal with trade issues. Rules matter most for smaller companies which is precisely why the WTO matters for such parties. There needs to be a lot more reengagement between local constituents and their negotiators precisely for these reasons.
After a decade of negotiations, there are few signs that the long-running Doha round of global trade talks will be finalised soon. Although members refrained from declaring the round dead, few doubt that the round in its current form is in fact exactly that. Looking forward, trade officials now openly speak about a so-called “plan B” involving salvaging non-divisive issues from the current round and agreeing upon those as a stand-alone agreement. Despite rising momentum for such an approach, confusion and uncertainty persist at the WTO about the state of the Doha round, the content of a “plan B” and the future role of WTO in the world trading system.
This seminar will address the following key questions:
- What are the explanations for the repeated failed attempts to conclude the Doha round and who are to blame?
- What are the issues relevant for a “Plan B” agreement, is such an approach realistic and what are the alternative approaches to reviving Doha?
- Without trade liberalization rounds, what is next for the WTO and how does the WTO remain relevant as more than just a dispute-settlement process?
- What is the effect, if any, of widespread FTA proliferation on the central role of the WTO in liberalizing trade and the Doha round?
- What the key factors shaping the future world trading system?