TFA

What Does 2017 Mean for the WTO?

Last year ended with a whimper for the World Trade Organization (WTO).  The multilateral trade institution had hoped for several big announcements that would show the organization could do more than just fight trade disputes.  But as the last day fell in 2016, the countdown on the number of countries that have ratified with Bali Trade Facilitation Agreement (TFA) remained stubbornly stuck.  For the agreement to come into force, 108 members have to ratify it.  The countdown has now been changed to show that only six more ratifications are needed before TFA comes into force.

Meanwhile In Global Trade…

This disconnect will need to be addressed.  The global rule book is getting badly out of date.  Current provisions do not match up well at all with the reality of how business is being done on the ground.  While FTAs help, a patchwork of trade agreements is not the best way to address the needs of a dynamic sector of the economy.  The WTO just announced that Argentina will host the next Ministerial round in late 2017.  Member governments cannot show up a year from now and begin to put into place a few more small initiatives.  It really is time for the global trade regime to get out of neutral and get back into gear.

Multilateral Trade at a Crossroads: 20 Years of the WTO

The World Trade Organization (WTO) is gearing up for a major ministerial meeting to take place in Nairobi, Kenya, at the end of this year.  The meeting will coincide with the 20th anniversary of the WTO. 

This ought to have been the occasion for a happy party and celebration.  It is not.  Officials are struggling to deliver even the tiniest package of positive outcomes and concrete results. 

This is a depressing outcome for an institution starting its third decade.  It matters too, particularly for the smallest, poorest and most vulnerable economies. 

Normally, for a ministerial meeting just six weeks away, members would have already agreed on the basic texts of the final declaration.  All outcomes would be mostly lined up and ready to go.  After all, the WTO is a bit like an ocean liner.  It takes time and considerable effort to get more than 160 member countries to agree on declarations and outcomes, even if the greatest will in the world exists to get these things done.

Unfortunately, political will is in terribly short supply in Geneva, as shown by the meager harvest of possible outcomes for Nairobi:

1.  Negotiations on the Doha Development Agenda (DDA) are at a complete standstill.  These global trade talks, launched in 2001, are supposed to address (at least) agricultural and services trade and help modernize the rulebook for the WTO. 

No one can say so publically, but these talks are dead.  The various partial “deals” that were on the table in the past are simply not going to be the basis for future negotiations.  Key players have moved on and will not accept a return to the past in 2016 and beyond.  Since the WTO is a consensus-based institution, the unwillingness of many to engage in an old agenda or use old frameworks for addressing issues effectively means the DDA is finished.

Where the institution goes from here is a good question.  Unfortunately, discussion of future pathways cannot begin in earnest until the existing approaches are firmly put to the side.  The topics may remain, but the mechanisms for achieving outcomes will have to change.

2.  With the main product stuck, officials are scrambling to cobble together anything positive.  Still on the table as a possible deliverable for Nairobi: a commitment to rule out export subsidies (or, put more crudely, to do anything related to agriculture).  The basic issue with reducing subsidies explicitly for the purpose of export is that almost no country provides such subsidies any longer.  It could be worthwhile to discuss export rules and restrictions, but an export subsidies commitment is going to have minimal implications for the global trade system.

3.  Promises on transparency.  There are lots of things that might usefully be done to increase transparency at the WTO, including full implementation of previous pledges to immediately provide information on new bilateral and regional trade agreements (FTAs).  However, whatever happens on transparency in areas like antidumping actions or fish subsidies or FTA notification requires willingness by members to actually be transparent and timely.  So far, the track record of members to abide by WTO transparency rules is not good—no matter what may happen in Nairobi.

4.  Measures to help Least Developed Countries (LDC)s.  Even here, members continue to disagree on what sort of promises might be usefully made to improve the prospects for LDC members in the WTO.  For example, negotiations on a services waiver have been difficult.  Granting duty-free, quota-free access remains controversial. A new dispute has erupted over extending a waiver on pharmaceutical patents for public health in LDC countries.

5.  In the absence of DDA progress, some WTO members would like to announce progress on other issues.  First up, the Trade Facilitation Agreement (TFA).  This agreement was signed with great fanfare at the last ministerial meeting in Bali in December 2013.  Unfortunately, movement towards implementation has been extremely slow. 

The 52nd country (Pakistan) stepped forward with its implementation commitments on October 27.  This sounds impressive, but do recall that the number is skewed upwards by 28 members of the EU who all accepted at once.  Two-thirds of total WTO members must agree to participate before the deal can start moving.  Getting substantial new members to sign on will be challenging with the limited time remaining before Nairobi.  Two years have already passed.

6.  Members want to announce movement on the Information Technology Agreement II (ITA2).  This is a plurilateral (meaning not all WTO members are involved in the negotiations) agreement designed to extend an existing plurilateral commitment on tariff-free coverage for technology goods.  While members did agree on a list of 201 products for inclusion on the list, they remain quite divided on the timing of tariff reductions.  Hence, the deal is really only partially finished.

7.  The Environmental Goods Agreement (EGA) has also received some positive coverage by the WTO.  This is another plurilateral agreement designed to make it easier for countries to trade in environmentally-friendly goods by lowering tariffs on specified products like wind turbines. 

Looking at the progress of these negotiations closely, however, not much of note can likely be announced at Nairobi.  Of the 665 products on the provisional list at the beginning of this month, member states disagreed about the placement of nearly 200, or almost 1/3, of the total number of items under consideration.   

8.  Another important plurilateral negotiation, Trade in Services Agreement (TiSA), is also not yet ready for unveiling in Kenya.  Negotiations are progressing, but too slowly to achieve results in a few weeks.

Even changes to the Secretariat that might be helpful in updating the institution are proving problematic.  For example, while the dispute settlement system is often described as the “crown jewel” of the WTO system, growing backlogs are tarnishing the crown.  Discussions of how to alleviate a staff shortage and adjust the system have been mostly languishing since 2013.

My own modest proposal to revamp the WTO’s website and extend outreach to new stakeholders with a better use of social media outlets was coolly received at a meeting in Singapore last week of Asian trade officials and Secretariat staff.  Such changes, it was suggested, could require buy-in from members and may also prove impossible given resource constraints. 

I would argue that an institution that cannot fix its own outdated website without encountering pushback and internal disagreement is not well-positioned to handle many of the toughest trade issues as it heads into a third decade of existence.

***Just in—Indonesia’s President Jokowi apparently told President Obama that Indonesia “will join” the Trans-Pacific Partnership (TPP).  The New York Times did not provide a timeline for this “eventual” commitment.  Bets anyone?

***Talking Trade is a blog post written by Dr. 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***