ITA

Getting to Yes—Negotiating Final Compromises

Any negotiator will tell you that reaching the last few points of an agreement are always the hardest part.  No matter how long talks have been underway, the last few days and hours usually devolve into intense, marathon sessions where people may have little sleep and barely eat. 

To appreciate the challenges of getting to yes in a complex, multiparty negotiation, think about trying to order pizza with a dozen people.  The rules of this particular meal require the purchase of only one kind of pizza.  Everyone must eat the final result. 

To make it more complicated (and a little closer to reality), imagine that the pizza is supposed to have 10 different toppings to be chosen from wide menu with different prices for each.  Finally, the dozen people planning to eat pizza have varying abilities to pay for the check.  

Some negotiations are likely to devolve rapidly.  The pizza might end up just having dough, tomato sauce and cheese (by, potentially, ordering “extra” servings of sauce and/or cheese to reach 10 items). 

The Regional Comprehensive Economic Partnership (RCEP) officials are at risk of eating a lot of cheese (or a mountain of dough) on their hypothetical pizza. 

The recent ministerial meeting in Malaysia appears to have resulted in a determination that the negotiations will not conclude this year as planned.  This is actually very good news, since it provides more time for officials to reach consensus and create higher quality final results.  

But the rest of the discussions with RCEP ministers were ominous.  For example, officials are trying to figure out how to order one pizza with different toppings on each side.  India, in particular, is trying to create market access commitments that vary across the 16 parties of the agreement.  South Korea or Singapore might get more liberalization (or pizza toppings) from India than China will receive. 

The discussions in RCEP remain largely stuck on goods, with limited discussions of how this pizza will be delivered to the table.  Unless services (like food and beverage operations) are included in RCEP, the end result will not satisfy.  Investment discussions remain shallow. 

Even an area like e-commerce where Asian economies should be looking for future growth has been relegated in RCEP to a “discussion group” with apparently no concrete outcomes expected.  Yet, in the real world, more and more people are using e-commerce to order and pay for their pizzas.  Having some consistent regulations in place to help reduce uncertainty for local and foreign firms would be extremely helpful in boosting growth prospects for companies.

Another trade “pizza” that has been in discussion for years is the World Trade Organization’s Information Technology Agreement (ITA).  Last week’s blogpost noted delays in reaching an agreement.  This week, however, officials appear to have (almost) gotten to yes.

A draft text is now under discussion in national capitols.  Final work is to be wrapped up on the agreement by the Nairobi ministerial at the end of the year.  (With the added benefit of giving the potentially beleaguered WTO something to talk about in their meetings.)  Implementation is tentatively scheduled for July 2016.

The final deal highlights the challenges of deciding on the last few items.  To get the ITA2 finished with more than 200 tariff lines included, officials had to jettison their aspirations of including some items.  For example, analogue car radios were dropped from the list at the last moment.  In exchange, a specific type of measuring instrument was also taken off the table.  A similar bargain was struck over optical lenses and some types of medical devices.  LCD displays remained off the list, leaving at least one party so deeply dissatisfied with the final result that it may leave the table entirely.

Arguing over analogue car radios is surely the equivalent of fighting over whether the pizza should contain a sprinkling of cinnamon.

Nevertheless, the final list of products to be covered in ITA2 represents an important step forward in updating this trade agreement.  In rapidly evolving industries like information technology, maintaining and updating the list is critically important.

The biggest “pizza” negotiation in the region is about to get underway in Maui.  Chief negotiators for the Trans-Pacific Partnership (TPP) are flying in and preparing for what most want to be their last meeting.  Officials will likely be engaged in furious negotiations over the last few items to be added (or subtracted) from the pizza in the hopes of presenting a completed product to their trade ministers at the end of the month.  Fingers crossed that everyone around the table will be satisfied with the final result.

***Talking Trade is a blog written by Deborah Elms, Executive Director, Asian Trade Centre, Singapore***

Making 2015 a “Year to Remember” at the WTO?

At the last General Council meeting of the year in December, the World Trade Organization (WTO)’s Director General reminded ambassadors that the institution had many deliverables to achieve in 2015.  Roberto Azevedo said, “We have important work to do and real deadlines to meet.  So let’s make sure it’s a year to remember.”

With six months remaining, it is a good time to take stock of how far the WTO has come in meeting its own objectives for 2015.  Although miracles can happen, it is already looking increasingly likely that the multilateral trading system will stumble badly on its way to the finish line this year. 

One deadline to be met was the ratification of the Trade Facilitation Agreement (TFA) signed with such fanfare in Bali, Indonesia, in December 2013.  Originally, countries agreed on a deadline of July 31, 2015. 

But members recognized the difficulties in meeting this objective and moved the goalposts even before Azevedo gave his speech in December.  In fact, WTO members ensured that they would never miss the deadline for TFA ratification by removing the finish line entirely.   Now there is no date by which members must submit necessary paperwork to proceed with implementation.

This may have been a good way to deal with a deeply troubling situation.  For the agreement to come into force, 2/3 of the WTO membership must agree.  However, as the original deadline approaches, only 8 countries (Hong Kong, Singapore, United States, Mauritius, Malaysia, Japan, Australia and Botswana) of the necessary 108 have actually submitted their paperwork. 

But now the WTO remains on track for ratification of TFA—whenever sufficient members opt to participate, the agreement will move forward.  No more irritating deadlines to meet or miss.

A second deadline is looming for the organization at the end of this month.  By the end of July, a work plan is due.  This plan is meant to lay out the path forward for the institution to address elements of the Doha Agenda.  It will not get done on time.

This is, quite frankly, almost hard to write.  Members are going to miss a deadline to create a work plan to discuss a path forward on an agenda that was first proposed more than 15 years ago and was formally launched in 2001. 

Officials began discussions again on this workplan more than six months ago.  The comments of Ambassador John Adank are instructive.  At the beginning of the process, he said, “I think that for those who had forgotten the issues, and the positions of each other on those issues, that the meeting served a useful purpose, at least to bring us back to where we were, although I don’t think it’s really given us a clear indication of where we will go—that will need significant change from where we are now.”

Some members are likely to argue that the workplan deadline is quite fungible.  In the past, the WTO routinely missed its own targets for completing workplans and agendas needed for big meetings or ministerials.  Officials will likely argue now that they can keep adjusting the workplan “deadline” until right up to late November for the upcoming ministerial in December.

But anyone who works in a large company will recognize the problems with this argument—big meetings with staff flying in from around the world usually require more than just an agenda.  For a meaningful outcome, everyone needs to start early on preparing background materials, figuring out the context for discussions, matching up likely outcomes with their specific regional needs and requirements, identifying gaps that must be addressed, and so forth. 

The groundwork must also be laid for compromises and for agreements across the myriad groups with issues of concern.   This takes time and, in spite of more than a decade now spent on negotiations, if the agenda is going to be significantly revised, reaching consensus on a new or altered set of outcomes will need more than a few days or weeks.

Another “deadline” of sorts that will be missed are the revisions of the Information Technology Agreement (ITA2).  Unlike most WTO commitments, the ITA applies to only a subset of members.  The original ITA entered into force in 1997.  It lowered tariffs on listed technologies and telecommunications products. 

But this agreement also contained a fatal flaw.  The list of covered products was fixed and has not been changed in the years since it was first negotiated.  Particularly given the rapid pace of change in IT, a frozen list means that record players are included but not new items like mobile phones. 

Repeated attempts to negotiate an ITA2 have foundered.  Officials thought they had reached an acceptable compromise late last year when the United States and China finally worked out their differences.  However, the deal jammed again when South Korea, Taiwan and China were unable to agree on coverage for flat screen panels. 

Despite hopes that ITA2 would be finally completed in early 2015, no breakthrough has been announced.

Any institution with more than 160 members and a widely diverse membership will struggle to meet its objectives.  But the pattern of missed deadlines should be of increasing concern. 

One deadline that cannot be missed is the commitment to hold a ministerial in Nairobi, in December 2015.   The absence of a workplan to guide negotiations and a series of missed deadlines do not inspire confidence in a successful outcome.  

Let us hope that ministers do not gather in Kenya and pledge to make “2016 a year to remember.”

***Talking Trade is a blog post written by Deborah Elms, Executive Director, Asian Trade Centre, Singapore***