After Nairobi, what lies ahead for world trade?

January 2016

After four days of intense talks plus 24 hours of overtime, 162 ministers walked out of the trade talks in Nairobi having agreed on six things. All of them aim to improve the terms of trade in agricultural products and for developing countries. And 53 members (who together represent over 90% of world trade in information-technology products) agreed to provide global duty-free access in these goods to their markets.

Kenyan Cabinet Secretary for Foreign Affairs and International Trade, Amina Mohamed, heralded the results as “reaffirming the central role of the World Trade Organization in international trade governance”. Yet the Financial Times and New York Times declared it the end of the Doha Development Agenda (DDA) and called into question the future of global trade negotiations.

So how should WTO member governments – and the business community – understand the outcomes and approach the road ahead?

The successes

Although 14 years of Doha negotiations have resulted in fairly little, it should be remembered that the WTO, as an institution, continues to perform admirably in most of its functions, with a lean secretariat of fewer than 700 people. Its dispute settlement system is the most used, and may well be the most effective, international regime, with 500 cases having been administered. The WTO monitors how well members comply with trade rules and ensures accountability of governments to trading partners, all supported by extensive research and analysis. And its technical assistance and training for country officials smooths the way for less developed economies to participate in international commerce.

While many observers would point to the continuing failure at successive ministerial conferences to conclude a comprehensive package to meet the Doha objectives, as Director General Azevedo said in Nairobi: “Two years ago in Bali we did something that the WTO had never done before: we delivered major, multilaterally negotiated outcomes. This week, here in Nairobi, we saw those same qualities at work. And today, once again, we delivered.”

So what were these significant results? Most prominent is the decision to eliminate subsidies for farm exports. Long promised, the legally binding decision sets out a schedule for ending current programmes, prevents governments from introducing new ones, and includes disciplines on other tools, such as export credits, state trading enterprises, and the abuse of food aid to ensure they do not act as disguised export subsidies.

A separate decision on cotton promotes access by the least developed countries (LDCs) to developed country markets. And in their communiqué, ministers committed to further negotiations to address barriers to market access for agricultural products more generally, as well as to tackle domestic subsidies.

Nairobi also resulted in decisions of specific benefit to LDCs, including enhanced preferential rules of origin for LDC products, preferential treatment for LDC service providers, and recognition of the particular problems faced by food-importing developing countries and small, vulnerable economies. Decisions on public stockholding for food-security purposes, and on a special safeguard mechanism that recognises the right of developing country members to temporarily increase tariffs to address import surges, also respond to developing country priorities.

Another of Nairobi’s successes was the plurilateral talks expanding the product coverage of the Information Technology Agreement (ITA). This constitutes a major global tariff-cutting deal, with the tariff cuts to be extended to the full WTO membership on a most-favoured-nation basis, covering products valued at well over $1 trillion annually. Ministers also agreed to continue a global moratorium prohibiting customs duties on electronic transmission of goods.

World Trade Forecast to Grow Less than 3% for Fourth Consecutive Year

The failures

Nairobi fell short, however, on a number of fronts. Despite broad interest in disciplining subsidies that contribute to overfishing, no agreement was reached. Nor was any progress made in tightening rules on anti-dumping practices.

More profoundly, ministers “agreed to disagree” on whether the Doha Development Agenda can remain the basis for ongoing negotiations. For some members, WTO negotiations must address outstanding issues within the confines of the DDA agenda. For others, the long impasse in these negotiations have left international disciplines falling behind the way business is conducted today, thus leaving open the risk that governments will find new ways to pursue protectionist policies outside the existing WTO rules-based framework.

The road ahead

When ambassadors reconvene in Geneva later this month, they are instructed by ministers to advance negotiations on the remaining Doha issues, and that although some members wish to discuss other issues for negotiations, any decision to launch such negotiations would require a consensus, which is not likely forthcoming in the short term. But the Nairobi Communique also states that, mindful of the fact that “many members want to carry out the work on the basis of the Doha structure, while some want to explore new architecture”, ministers direct officials to “work to find ways to advance negotiations”.

What can be expected, therefore, is a continued push from key players to address major outstanding issues, including the Cairns Group, Brazil, and other major exporters to negotiate agricultural market access and disciplines on domestic subsidies, alongside India and others seeking relief from disciplines for public stockholding of major crops; continuing calls from developing countries for additional preferential, or “special and differential” treatment; and growing interest in many quarters in addressing more meaningfully the implications of global supply chains for both trade and investment, the implications of the digital economy on cross-border business, and how to promote the participation of micro-, small and medium sized enterprises in this context. Plurilateral discussions will continue on a tariff elimination agreement for environmental goods, modeled on the ITA and ITA-II, and on a more ambitious regime to liberalise trade in services.

Time to think

At the same time, it is likely that a period of reflection will be required on both the “what” and the “how” of further global trade negotiations. Discussions are likely to be complex: one of the most challenging aspects of the negotiating dynamic in Nairobi was that views did not divide neatly along north-south or developed-developing country lines. To take just a few examples, many developing countries consider their agricultural prospects threatened by growing subsidies and other programmes pursued by India, China, and other major producers. Sub-Saharan cotton producers’ interests are not the same as those in Bangladesh and other competitors who already have economies of scale. With “southern” multinationals themselves major investors abroad, and increasing awareness globally of the importance of corporate social responsibility, the time may be ripe for a conversation, if not negotiations, on international investment.

On the ‘what’

The sobering reality of Nairobi’s fairly modest results will require a realistic articulation of what is achievable within or beyond the Doha framework, in the next two years.

On the ‘how’

It is open for consideration whether, based on the success of the ITA-II negotiations, the time has come to welcome back a “multi-speed” WTO. Under the General Agreement on Tariffs and Trade (GATT), the Tokyo Round produced a series of “codes”, plurilateral agreements among willing members on a range of subjects, making the GATT corpus of disciplines into what at least one observer described as a “club of clubs”.

Today’s WTO encompasses both open and closed plurilateral agreements: as mentioned, the ITA-II is applied on an MFN basis, whereas the Government Procurement Agreement limits benefits to those undertaking the disciplines. Another question of “how” is whether the current structure of committees and councils, of special negotiating groups, are conducive to reaching results. Growing appreciation of the important value of services “embedded” in the trade of goods (from lawyers and accountants to transporters and bankers) lead some to conclude that separate tables for goods and for services negotiations is obsolete, and the so-called “e-commerce” work programme is dispersed across four different committees and councils. Officials will need to consider whether new or different tables for discussion are required. A further area for study is the relation between the regional and now mega-regional trade agreements and multilateral rules, a task for the WTO’s committee on regional trade agreements that ministers are being directed to consider.

A good time to rethink trade

This period of reflection and debate means it is a particularly opportune time for the public policy community to aid governments with analysis and insight, and for business to articulate clearly, in capitals and in Geneva, what it wants and needs from the global trading system. Whether in the name of individual firms or through industry or sectoral associations, it is essential that governments are reminded of how to respond to the stakeholders in whose names they claim to act.

Just as business became an effective voice in both the lead-up and follow-up to Bali in championing the red-tape cutting Trade Facilitation Agreement, so too in 2016 business can help shape tomorrow’s trade negotiating agenda.

This article first appeared on the World Economic Forum’s Agenda blog.

Jonathan Fried is the Ambassador and Permanent Representative of Canada to the World Trade Organization and other international organizations in Geneva. He is a member of the E15Initiative Steering Board.

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