Global Trends by Martin Khor

Monday 1 August 2011

WTO impasse a sign of larger global problem

The World Trade Organisation last week could not even agree on a small “package” of issues to benefit the poorest countries.  This crisis in the WTO is a sign of a larger impasse in international economic cooperation.

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The spirit of global cooperation on economic issues seems to have diminished, if we take the continuing impasse at the World Trade Organisation’s negotiations as an indicator.

At the start of the year, efforts were intensified to get the Doha negotiations concluded by the end of this year.  But by the end of April it was clear this target would not be achieved, since some key issues could not be resolved.

To save the WTO from the embarrassment of failure, almost all the member states agreed to conclude an “early harvest” of decisions to benefit the poorest countries, and announce these at the WTO’s Ministers meeting in December.

Four items would be given to the least developed countries (LDCs) – duty free access for at least 97% of their products into developed countries; a step forward in reducing rich-country subsidies for cotton (an important product of the LDCs); a waiver to allow LDCs to get special access to the services markets of developed countries; and more favourable rules of origin for their goods.

Agreeing to these would hardly cause a dent in the developed countries’ trade, given the small share of LDC products.  Moreover the two most important items -- giving duty-free access and reducing cotton subsidies -- had already been agreed to in 2005 at a Hong Kong ministerial meeting. The WTO was being called upon only to implement what had been decided six years ago.

But a few of the developed countries, particularly the United States, could not agree to this LDC package. They wanted other issues to be settled too, as a condition.  The “LDC-plus” list included agreements on trade facilitation, the elimination of tariffs on environmental goods, reduction of fishery subsidies, and so on.

These are complex issues, which cannot be resolved before December.  Linking them to the LDC package could kill the LDC package itself.

Last week, at two meetings of the WTO, this LDC-plus package was declared dead.  The developing countries, in a show of unity, then declared that the original idea of giving the LDCs their issues be restored, without conditioning it with agreement on other issues.

The WTO should show to the world that it has a heart – even if other issues cannot be settled, at least the LDCs would be given priority and have some benefits.  So went the argument.

But the chances for this “LDC-only” package look remote now.  The United States said last week that “it has become clear to us and to many others that a so-called Early Harvest package is not happening and is not going to happen.”

And although there is a temptation to say ‘let's keep trying', it would be of little use, since there is no prospect that entrenched positions would change, said the US ambassador.

Bangladesh, on behalf of the LDCs,  said that the so-called ‘early harvest' for LDCs is not even that, since  these are commitments already made by Ministers years ago.

“In fact for the millions of peoples in LDCs, this would be a rather ‘late harvest' after having waited for a decade of dry spell,” said its Ambassador.  “However, this would send a clear message to the outside world that we remain steadfast in our commitment to the conclusion of Doha.

“We need not wait for even greater disasters to befall on LDCs to give us a rude awakening into action. For over one decade, the LDCs have pinned their hope on Doha to unlock their development potentials. This has nonetheless remained largely a myth for them."

Bangladesh added that the share of LDCs in developed countries import is a meager 1.26 per cent of which only 0.7 per cent account for non-oil imports.  It is thus inconceivable that implementing an early harvest package for LDCs would put any considerable strain on developed countries imports.

South Africa said a down payment for development is just what the WTO needs to restore its credibility.

The December ministerial conference must discuss how it is we have come to this juncture, that  the world cannot even deliver on the promises made in 2005 to deliver duty free market access to LDCs and to remove the trade distorting subsidies that destroy jobs in cotton farms in poor African countries.

“We will need to discuss how is it that the Doha Development Agenda, the first round that has sought at the outset to address the inequities in the trading system, cannot be concluded after 10 years.”

China’s ambassador agreed.  Although the Doha Round is not going to conclude this year, a small package by December would maintain the Round alive and keep the ball rolling.  “If the Ministerial meeting has nothing to deliver on Doha, not even on the needs of the LDCs, the credibility of the WTO will be jeopardized."

At another meeting last week, the Chair of the WTO’s General Council, Ambassador Yonov Agah of Nigeria, announced that some countries had proposed that the Ministers in December take up some “21st century” new issues such as climate change, currency rates, and food security.

But senior trade analysts of developing countries point out that to embark on new negotiations on new issues, when the issues of the Doha agenda cannot even be resolved, would be counter-productive.

For example, the reduction of agricultural subsidies by developed countries, which is supposed to be at the heart of the Doha talks, remains unresolved.  So too the development issues, such as those in the LDC package.

Taking up new and complex issues that are of interest mainly of developed countries, would in effect be sidelining the unresolved development issues that are of concern to developing countries.

However, Agah remarked that any issues to be put on the agenda of the December Ministerial would have to enjoy consensus of all members.

It is unlikely that new and difficult issues will be put on the agenda, since this may lead to negotiations to new rules.  But it also unlikely that the package for LDCs will be agreed to either by December.

Thus the WTO faces a dilemma, a kind of identity crisis, as to what to in December and after.

 It still has many other functions, such as its review of member states’ policies, and the dispute cases which have grown in number and range.

Perhaps it is time for the WTO to be like other organizations, and be content to have its conferences discuss regular issues, rather than count success only according to whether there are negotiations to create rules.