One area of particular importance for smaller firms engaged in e-commerce is dealing with problems at customs. Many e-commerce companies are not shipping 40 foot containers but a few boxes or even just one package straight to consumers or to other companies. Yet the paperwork and processing requirements to send one small box can be exactly the same a huge container. Firms often face complicated and cumbersome paperwork requirements at the border. Some markets charge high fees or inspect every single parcel, which causes expensive delays. Sometimes these issues are so significant that companies simply stop trying to send goods overseas at all. These problems are not unique to e-commerce shippers, of course, but if one important goal of RCEP is to facilitate trade for e-commerce, then a final agreement that does not address the real impediments to trade in smaller size, smaller value shipments at the borders will be a missed opportunity. The benefits of a robust e-commerce chapter that does not simultaneously tackle customs issues could be lost or watered down.
Officials have clearly got a focus on helping the smallest firms in RCEP benefit from the final agreement. This is a welcome development, since every country in the grouping is dominated by smaller size companies. The one area of sustained focus in RCEP that will be most promising for SMEs is e-commerce and digital trade. E-commerce and digital trade represent the fastest and easiest way for smaller firms to connect to suppliers, consumers and lead firms. Given the relatively higher levels of connectivity in Asia compared to other regions, this pathway can be developed further quickly with the right policies in place and help lead to new growth opportunities. Even getting this chapter right is difficult, since it requires that officials think hard about the rules that should structure the business environment today and still remain relevant tomorrow. The rules need to provide adequate protections for consumers, deal effectively with security concerns but not unduly hamper business plans now or in the future.
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 The global rule book is getting badly out of date.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.
Companies will only use trade agreements like RCEP if they include a range of interlocking requirements that solve multiple problems at once.
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***