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9th WTO Ministerial in Bali: Trade Deal Struck, but What Implications for Geopolitics?

11-12-2013

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The 159 members of the World Trade Organization finally agreed on a deal in the early hours of Saturday 7th December in Bali, after intense and difficult negotiations, saving the multilateral trading system from the sclerosis of the past seven years. The results achieved in Bali clearly sealed the shifting power game between the emerging South and the developed world.

But did Bali witness a new era of trade negotiations that will have to conjugate with an increasingly louder voice from the South or was it, on the contrary, a last successful deal, like a swan song, given the challenges looming ahead of future trade talks?

What Was Achieved in Bali?

WTO members finally concluded a deal comprising three pillars. The first related to trade facilitation – that is simplifying trade procedures and reducing the cost of doing business at the border – which is expected to add $1 trillion to the global economy, if countries manage to cut red tape. The second package concerns agriculture and cotton, whereby members focused essentially on finding a sustainable mechanism to allow developing countries more options for food security without being challenged at the WTO and on improved market access for cotton products from least developed countries (LDCs) and with development assistance for production in some countries. The final package is meant to boost LDCs’ trade by providing improved market access and better rules of origin in developed countries.

The three-pillar Bali package is an “early harvest” of the full Doha Development Agenda (DDA) – an ambitious package launched during the 4th Ministerial Conference in 2001 in Doha, Qatar, but which has been very difficult to achieve, given the diverging interests of the increasingly large organisation. While the mere fact that a deal was finally agreed after decades of protracted negotiations was a good enough reason to celebrate, the depth of the agreement remains, disappointingly low. Save perhaps for trade facilitation, a necessary element to smooth the flow of trade and for market access for LDCs, the Bali package is far from the ambitions set at Doha. Reducing the talks around agriculture to merely public stockholding programmes and the administration of tariff-rate quotas missed out on the broader scope of what was initially aimed at in Doha, and that caused the failure of previous talks. While the outcome is important, it remains too small to celebrate.

Did Bali Really Succeed?

There was no choice. Bali had to succeed. And this was for several reasons, and in particular, to save the WTO as a negotiating body. Failing to have a deal in Bali would have significantly undermined the credibility of the WTO to drive trade negotiations at the multilateral level, de facto giving more relevance to the growing proliferation of bilateral trade agreements. Although the WTO would have continued to exist, it would have been relegated to being merely a dispute settlement body, the guardian and the monitor of trade rules. But it would have lost its more powerful role as the inescapable steer and maker of global trade rules that has, since 1947, continuously ensured a stable and non-discriminatory multilateral trading system, although often criticised by many to serve the interests of those who created it, that is, the developed countries. Whether the WTO trading system has lived up to expectations is another story.

The spectre of a failure in Bali was also simply not something many could afford to contemplate, let alone let happen. Parallel to the WTO, most developed countries are busy negotiating very ambitious trade agreements with their major trading partners, such as the US-EU Transatlantic Trade and Investment Partnership Agreement or the US Trans-Pacific Partnership Agreement, to name two major ones. While ambitions are grand to deepen market access quicker and faster, some key issues, such as agriculture, are deliberately often left out (or ambitions lowered) of these agreements, the WTO remaining the convenient place to “negotiate” – or not – questions such as the controversial domestic support or safeguards on agriculture. Stripping the WTO of its negotiating arm would have, therefore, implied that bilateral negotiating partners would have all the arguments and all the reasons to open the Pandora’s box on sensitive issues. And this is too politically sensitive to let go.

More importantly, Bali succeeded in rebalancing the power game between emerging countries and developed countries. Countries like India had perfectly understood what was at stake and keept a hard line all the way until in the end it finally paid off. It was clear that there was no politically acceptable alternative to the WTO as a negotiating body and that bilateral trade agreements, although strategically important to boost trade, have their limits in terms of what would be up for negotiation.

What Next?

Ministers gave themselves another four years to salvage the rest of the DDA. But the geopolitical power games have shifted profoundly and we should expect negotiations to be much tougher. More interestingly, we should expect developing countries to throw much more weight into future negotiations to bargain for outcomes that fit their own interests, at the risk of renewing the suspense of the death of the system at each Ministerial Meeting. This will not guarantee outcomes that will be more developmental – interests may not necessarily be about development. And success will depend on the capacity of the WTO to build consensus among the continuously growing membership.

The views expressed here are those of the author, and may not necessarily represent those of ECDPM.

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Economic Transformation and TradeRegional IntegrationTrade Policy and Economic Partnership AgreementsLeast Developed Countries (LDCs)TradeWorld Trade Organisation (WTO)