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Time for the World Trade Organization to change tack

Written by Yurendra Basnett


While Pascal Lamy continues to describe the Doha Development Round as ‘deadlocked’, the rest of us are still waiting for the official pronunciation of its death. After three days of deliberations at the latest WTO Ministerial Conference, there remained little light at the end of the tunnel.  The time has come for the WTO to consider its future and assess the importance of trade guardianship as well as ongoing liberalisation. The only starlit moment was the welcoming of the Russian Federation, Montenegro, Samoa and Vanuatu as WTO members.

At present it seems that the only likely outcome of the Doha Round, if there is one, is the package for Least Developed Countries (LDCs), which includes:

  1. duty-free and quota-free markets access: Trade Ministers at the plenary session expressed their commitment to duty-free quota-free market access for LDC exports, with commitments expressed thus far for up to 98% of tariff lines. As the devil lies in the detail, what is excluded under the 2% may make all the difference, however – LDC exports are limited and, hence, this 2% could exclude their major exports.
  2. an LDC waiver on services market access: This is also a welcome commitment, and will allow WTO members to give preferential market access on services for LDCs. It may have positive developmental implications, but again we need to see how it is implemented.
  3. benchmarking the guideline for LDC accession:  This has been long overdue. As an adviser to Vanuatu on its WTO accession, I have firsthand knowledge of how quickly the process of accession  can protract into surreal demands by existing members. It can be a frustrating and very expensive exercise and, without a benchmark, negotiations can digress to topics that have little relevance to the acceding country’s economy. One LDC chief accession negotiator shared with me that they were asked to reduce tariffs on a product they neither exported nor imported. When they asked the other party why they wanted reduced tariffs on a product that had no relevance to their trade portfolio, the reply was ‘because we can, it is our prerogative’. But accession also provides impetus for reform. For example, in Vanuatu’s case, many trade reforms were undertaken during the 16 years of the accession process. This benchmarking comes a little too late with not many LDCs left to accede, but it is a welcome sign for the few still to complete the process.

If this LDC package is all that the Doha Round delivers, it will be a spectacular failure in terms of meeting the expectations of its middle-name – ‘Development’. So what happens next?

Dirk Willem te Velde has already set out his suggestions, and to this I would add two more issues. First, the WTO needs to become a guardian of trade rules, norms and knowledge, shaking off its current mandate of expanding the frontiers of trade liberalisation. Second, meaningful trade liberalisation and integration is likely to happen at a much lower level of operation – bilateral and/or regional, as opposed to multilateral. Hence, multilateral rules and norms embodied in WTO rules must be constructed from the bottom up. The main challenge here will be to  ensure that trade liberalisation measures taken at different levels are not contradictory. Another will be how to protect the voice and interests of developing economies – which is especially challenging in an environment where power hierarchies and relations are felt more acutely.

The corridors of Geneva never brimmed with optimism about the outcome of the latest meetings, yet beyond the pessimism something more interesting is brewing – namely the decoupling of the WTO and trade liberalisation.

Momentum has always been heralded as the key to trade liberalisation, but we seem to have stalled. Those in the driving seat have hopped off, and the entire global governance of trade should have come crumbling down. But this has not happened. There have not been any accounts of significant or widespread breach of global trade rules, despite concerns that global economic crisis would be used as a pretext for breaching the rules. On the contrary, countries as vastly different as Russia and Vanuatu have become members of the WTO, and all four of the acceding countries stated that their interest in becoming members was because WTO embodies ‘trade rules and consensus-led decision making processes’.

The 8th Ministerial may mark the beginning of a redesign process of the WTO, which holds exciting prospects and challenges in equal measure, but it is important that developmental concerns remain at the centre of it all.