Bali Update: What has happened since the WTO Ministerial?, Part II

WTO LogoSo, the July 31, 2014 deadline for adopting the WTO Trade Facilitation Agreement (TFA), as reported in Bali Update, Part I, has come and gone, and the Agreement has not been adopted. On July 31, 2014, the WTO General Council met to adopt the protocol that will insert the TFA into the WTO regulatory framework. However, as Director-General Azevêdo reported just before the midnight deadline:

At this late hour, with the deadline just a matter of moments away, I don’t have anything in my hands that makes me believe that we can successfully reach consensus. . .. On the one side we have the firm conviction, shared by many, that the decisions that ministers reached in Bali cannot be changed or amended in any way — and that those decisions have to be fully respected. And on the other side of the debate we have some who believe that those decisions leave unresolved concerns that need to be addressed in ways that, in the view of others, change the balance of what was agreed in Bali. These are the two sides. We have not been able to find a solution that would allow us to bridge that gap.

The “other side of the debate” refers to India’s insistence that the Bali Package agreed to in December be adjusted to address its food security concerns before the Trade Facilitation Agreement is adopted.

At Bali, the members agreed to continue discussions to arrive at a permanent solution on how to treat food subsidies. Meanwhile, they instituted a “peace clause” of four years during which such programs by developing countries that meet certain criteria are to be shielded from trade challenges, even if they negatively impact other countries’ trade. India wants this agreement to be interpreted to mean that the “peace clause” remains in place permanently until a comprehensive agricultural package is reached. India believes its interpretation will put more pressure on both sides to adhere to the December 31, 2014 deadline to arrive at an agreement on this issue.

Its refusal to budge on this position means that the Trade Facilitation Agreement remains draft text. This impasse will be revisited in September.

Launch of TFA Technical Assistance Programs

Nevertheless, some steps have already been taken on a key component of the Trade Facilitation Agreement (TFA). The TFA introduces requirements for members to improve the efficiency, effectiveness, and transparency of their customs procedures. The text further provides for technical assistance to developing countries to build the capacity needed to implement its requirements.

The WTO Trade Facilitation Agreement Facility (TFAF) has been launched to provide this assistance.

In a meeting on July 22, 2014, a group of major international organizations declared their intention to work together to assist developing and least-developed Members through a range of technical assistance and capacity-building initiatives. The joint statement is signed by the following international organizations, some of which have already also launched their programs:Imports

The US Agency for International Development (USAID) is establishing an Alliance for the Trade Facilitation Agreement as a public-private partnership. Other multilateral and bilateral donors are expected to launch their assistance programs shortly.

The WTO TFAF will act as a focal point for these efforts by supporting needs assessment, facilitating information flow among development partners and requests for technical assistance, disseminating best practices, and providing grants to support project development and implementation.

Fruition on these commitments is being made contingent on the still-pending adoption of the TFA. Will this reality pressure India to fall in line? (To be continued)

Bali Update: What has happened since the WTO Ministerial?

WTO LogoAfter having pulled the members together to achieve consensus to make some decisions at the WTO Bali Ministerial in December, 2013, months later WTO Director-General Azevêdo issued a warning against revisiting those decisions.

The “Bali Package” adopted at the Ministerial consists of a number of small deals pulled from the broader Doha Agenda for negotiating a new set of rules to govern international trade:

  1. Decision on duty-free, quota-free (DFQF) access for products of least-developed countries.
  2. Decision to simplify preferential rules of origin for least-developed countries to make it easier for them to qualify for DFQF entry into the importing countries.
  3. Decision operationalizing the “services waiver” that will grant least-developed countries preferential access to other countries’ services markets.
  4. Decision on a “monitoring mechanism” to analyze and review implementation of special and differential treatment rules for developing countries.

The Agreement on Trade Facilitation, in particular, is seen as the most important component of the Bali Package. It Importsintroduces requirements for members to improve the efficiency, effectiveness, and transparency of their customs procedures. The anticipated benefits are a 10%-15% reduction in the costs of international trade. For developed countries, these changes hold the promise of increasing trade flows and revenue collections. Furthermore, the Agreement contains promises of technical assistance and capacity building for developed countries to help them to make the required investments associated with implementing the Agreement.

At this point, the text adopted in Bali remains a draft. Though its substance is not expected to change substantially, its text will become final only when it is adopted by the WTO General Council. This adoption is currently scheduled to occur at the meeting of July 31, 2014.

Meanwhile, however, India has raised the concerns of food security and indicated that it wants to see more progress on this issue. At Bali, the members agreed to continue discussions to arrive at a permanent solution on how to treat agricultural subsidies. Meanwhile, they instituted a “peace clause” of four years during which such programs by developing countries that meet certain criteria are to be shielded from trade challenges, even if they negatively impact other countries’ trade. This issue is of prime importance to India who wants to see progress on this issue. India wants this “peace clause” to be made permanent and believes that, like the Trade Facilitation Agreement, this should become part of the Bali Package.

Such a proposal is likely dead-on-arrival, however. Developed countries such as the United States, have agricultural subsidies programs that they would dearly love to be able to protect from complaints by other WTO members. They consider India’s economy to be too big to be eligible for this type of protection.

We can expect the long-running “negotiations” over the difficult issue of agricultural subsidies to continue for some time. (To be continued -)

Bali Present: WTO 9th Ministerial Delivers

Bali Opens (www.wto.org)

Bali Opens
(www.wto.org)

In our last post, Hopeful Watching: The WTO 9th Ministerial in Bali, we discussed the high hopes with which the Doha Development Round had been launched, its shrinking agenda, and the hope that some consensus would emerge that could lead to a deal focused around the hopes and aspirations of developing countries.

Just in time for the holidays, after round-the-clock discussions that extended into an additional all-nighter of negotiations, the “Bali Package” was delivered. It consists of the following small deals pulled from the broader Doha Agenda:

On Agriculture, the thorny issue of Food Security led to a “peace clause” for four years during which food stockpiling programs by developing countries which meet certain criteria will be shielded from trade challenges, even if they negatively impact other countries’ trade, while they negotiate a permanent solution. This outcome, where it’s now advanced developing countries, notably India, that are seeking protection for their agriculture subsidies represents a complete turn-around from the original focus of the Doha Round – elimination by developed countries of their programs of subsidies. This issue, perhaps more than any other, indicates the extent to which the Doha agenda has evolved since 2001.

The consensus around Development Issues emerged in the form of Members’ commitments to implement four previous decisions:

New WTO Member

Bali Closes (www.wto.org)

Bali Closes
(www.wto.org)

In other business, thirteen years after submitting its application to join the WTO, Yemen was formally welcomed into its ranks. Once Yemen ratifies the terms of its accession, it will become the WTO’s 160th member. It is also the seventh (7th) LDC to join the WTO. Implementation of the Development Decisions (above) will improve the terms on which LDC products access world markets whether or not they join the WTO.

Post-Bali Package?

The Bali Package also includes hopeful language about returning to the other issues on the Doha Agenda. These include market access for manufactured goods, more substantive agreements on agriculture and an agreement on services. However, on services, for example, separate negotiations have already begun to conclude the Trade in Services Agreement (TISA). These talks are being pursued on a plurilateral basis, i.e. a sub-set of WTO members, allowing them to bypass the pesky requirement to achieve consensus among all (now 160) WTO members. It is therefore more realistic to conclude that the Bali Package has already delivered all that can be reaped from the Doha Agenda.

Hopeful Watching: The WTO 9th Ministerial in Bali

Trade ministers from around the world are once again meeting in an attempt to conclude the Doha Development Round of trade negotiations. The WTO’s Ninth (9th) Ministerial Conference opened December 3rd, 2013 in Bali, Indonesia and is scheduled to conclude on December 6th.

When they last met at the WTO’s Eighth (8th) Ministerial Conference in Geneva (December 15th – 17th, 2011), the trade ministers left the meeting with no clear path toward concluding the Doha Round negotiations.  Launched in November, 2001, the negotiations began with an apparent commitment to liberalize trade while addressing the longstanding concerns of developing countries, particularly continued agricultural subsidies by developed countries. Since then, however, the outcomes contemplated when the Round was launched are no longer an option. Several factors account for this reality:

Emerging Issues: Trade issues and concerns, particularly for the developed countries that drive the agenda, have changed since the launch of the Doha Round in 2001. At the top of these issues is recovering from the economic depression and identifying and addressing the new protectionist approaches by which countries attempt to gain a competitive, if unfair, advantage. Issues such as currency manipulation and climate change compete for attention, and at times make the 12-year old Doha agenda seem obsolete. At the same time, the unaddressed issues remain and developing countries have refused to take on new obligations while their concerns remain unaddressed.

Shrinking WTO Agenda: In compromise, the Doha Round negotiating agenda has been shrinking. The agenda in 2011 had shrunk from the goal of reaching agreement on a comprehensive deal to four main areas — agricultural market access, market access for industrialized goods, trade in services, and trade facilitation (streamlining customs and port procedures).  Two years later, it’s been further distilled to focus on areas of primary interest to developing countries – agriculture, trade facilitation, and special and differential treatment, particularly for least developed countries.  To keep the business interests in the developed world engaged, however, pressure is being placed on emerging countries, notably the “BRICS”, to lower tariffs and give greater access to their markets, even in a seemingly neutral area such as trade facilitation.  Meanwhile, the emerging countries continue to identify with other developing countries, particularly with respect to the technical and other non-tariff barriers that their goods face upon entry to developed country markets.  Without such compromises, however, it is unclear that developed countries will be willing to sign off on a deal.

Consensus around Development

In fact, however, a renewed focus on “development” may be what’s needed. There is already some consensus about what needs to be done for the “poorest of the poor” countries – the LDCs. For the broader group of developing countries, removal of negotiations on services is already a disappointment but any progress on addressing non-tariff barriers to developed country markets would be welcomed. And the election this year of Brazil’s Roberto Azevêdo as the current WTO Director-General  provides some hope that he can bridge the divide that exists between developed and developing countries.

Hoping against hope, we watch the progress of the 9th Ministerial.

Regularizing and Decriminalizing the Movement of People

130 people from Ghana, Eritrea, and Somalia, including pregnant women and children, drowned off the coast of Italy (October, 2013) when the boat in which they were traveling caught fire and capsized. The boat left from Tripoli, Libya with about 500 persons attempting to reach Italy and enter the European Union. This route each year claims thousands of lives.  The death toll from this latest incident will only rise as at least another 100 passengers are missing. These tragedies happen around the world because, as the barriers to the movement of goods and some services have fallen, those facing people who merely seek the opportunity for a decent life continue to go up.

Labor or Economic Migration          

Whether fleeing political persecution or economic instability, most migrants seek the opportunity to live a normal life, earn a decent wage and support their families. Economic or labor migrants are motivated primarily by the search for employment. The irony is that, if given the opportunity to come and go legally for work, many would do so. Instead, they are forced to become “illegal migrants”.

Whether its Africans trying to make it to Europe or Central Americans and Haitians trying to make it to the United States, the

(Courtesy of Wikipedia)

(Courtesy of Wikipedia)

barriers they face force hundreds of thousands of migrants to place themselves at physical risk. They rely on smugglers who provide passage using overcrowded leaky boats or airless trucks. Women and girls run the risk of being sold into prostitution and slavery. Those who make it to their destination may end up living and working in sub-standard conditions and in enforced separation from their families.

Yet, as the International Organization for Migration (IOM) reports:

. . . when properly managed, labour migration has far-reaching potential for the migrants, their communities, the countries of origin and destination, and for employers.

The IOM further reports that, in 2011, there were 105 million persons working in a country in which they were not born, generating income of US $440 billion. The money they sent back to support their families – remittances – was around US$ 350 billion.

Trade Rules & Migration

The WTO’s General Agreement on Trade in Services (GATS) identifies four delivery modes for services trade; Mode 4 is the movement of natural persons as service suppliers. GATS and other trade agreements that provide for free movement of persons focus almost exclusively on the movement of professionals and skilled workers. Trade rules generally ignore and marginalize the low-skilled or unlicensed service providers. As a result, their migration is considered illegal.

Yet their services are no less in demand. They are the ones who migrate to pick fruit, mow lawns, clean homes, and care for children and the elderly. Until this discrepancy is addressed and policies and rules put in place to support the free movement of skilled and low-skilled service providers, tragedies like the ones in the Mediterranean will, unfortunately, continue to occur.

The WTO Welcomes a New Director-General

logo_lite_enOn September 1, 2013, the World Trade Organization (WTO) welcomed a new Director-General, Roberto Azevêdo, of Brazil.

The WTO Director General is chosen by the General Council, comprised of all current WTO members, which at the time of Mr. Azevêdo’s selection stood at 159 countries. Like major WTO decisions, the selection of a Director-General is a consensus decision that is arrived at through a process of extensive consultations among the members.

According to the Procedures for the Appointment of Directors-General, the selection process began on December 1, 2012, when all WTO members were invited to nominate a candidate for the position. Nine (9) candidates emerged, who then were given until March 31, 2013, to make themselves known to Members and to engage in discussions on the pertinent issues facing the Organization. During this period, the candidates made brief presentations at a formal General Council meeting, where they each presented their vision for the WTO and answered questions from the Members. After four rounds of consultations, Mr. Azevêdo emerged as the winner on May 31, 2013.

Keeping this process in mind, this transition to Mr. Azevêdo from Mr. Pascal Lamy of France, whose term ended on July 31, 2013, is noteworthy for several reasons.

(1)   This is the second time that the WTO will be led by an official from a developing country. Seven of the nine original candidates (three of them women) were from developing countries, making it a very high probability that a developing country candidate would have emerged as the winner.

(2)   More importantly, this is the first time that a developing country candidate has emerged with a clear consensus to serve a full term as WTO Director-General. The first WTO Director-General from a developing country was the result of a compromise that led to Mr. Supachai Panitchpakdi  of Thailand sharing a term with Mike Moore of New Zealand. In 1999, the consensus decision-making process failed.  Both men split a six-year term; each served three (3) years while the usual term for the Director-General is one full four (4)-year term.

(3)   The apparent consensus behind Mr. Azevêdo allows us to hope that he will have some authority to bridge the divide that exists between developed and developing countries over the Doha Round trade negotiations.

About Mr. AzevedoRoberto Azevêdo

Mr. Azevêdo has been the Permanent Representative of Brazil to the WTO since 2008. He has served as Brazil’s chief-negotiator for the Doha Round and as its chief-litigator in many important disputes at the WTO. It is reported that he is well-liked and viewed as a well-prepared and credible negotiator.

Mr. Azevêdo will now need to channel this experience into representing not the interests of Brazil, but of the entire organization which leads the world trading system. The primary challenge facing the new Director-General will be to attempt to end the impasse that has stalled the Doha trade negotiations for the past three or four years. Much of that impasse, in the opinion of this writer, results from the mismatched expectations for the negotiations between developed and developing countries. Perhaps the consensus that led to his selection, as well as his position as a developing country leader, will assist Mr. Azevêdo in this goal.