The WTO Risks Losing Its Influence

The ten-weeks-long Geneva talks among World Trade Organization members have failed to produce a comprehensive ‘trade facilitation’ agreement initially expected to be signed at the Ninth WTO Ministerial Conference in Bali, Indonesia, early in December 2013. The proposed accord, once achieved, could have helped to breathe life into the moribund Doha round of world trade talks. So, yet another attempt to introduce the first-ever worldwide trade reform has failed.

The Doha round of world trade talks has been under way for 12 years already (it began in 2001 at Qatar), its main goal being to eliminate trade disagreements between countries with different levels of economic development. As the talks failed to produce an agreement among their participants, an increasing number of countries have been resorting to regional free trade agreements with their key partners in trade in an attempt to further develop their economic relationships and expand sales markets. The availability of that simpler option creates negative incentives for WTO members to participate in multilateral negotiations and serves as a strong obstacle to multilateral trade liberalization.

The existing controversies are a direct reflection of the current world trade structure: the developing countries predominantly export their agricultural products to world markets, while the developed ones are major exporters of industrial and hi-tech goods. Accordingly, they set trade barriers so as to restrict the inflow of imported cheap foodstuffs into the developed countries, and that of industrial products - into the developing ones.

Thus, for example, one of the unresolved issues in this round of negotiations has become the agricultural support policies of the developed economies. The developing countries have been demanding that the USA and the EU give up their comprehensive agricultural support projects, whilst the latter, in their turn, want lower import duties on their imports of industrial goods into the developing economies. In mid-November, Director-General of the WTO Roberto Azevêdo said that the differences in approaches to the issue of granting access to the agricultural imports from the least developed countries to developed markets had been removed, thus leaving unresolved only the issue of ‘trade facilitation’ measures to streamline customs procedures globally. However, as it turned out later, some controversies remained over the issue of agricultural support and the issue of securing financing for technical modernization of the customs services in the developing countries.

Another important factor that complicates the conclusion of current negotiations is the impressive number of participating countries (as of now, the WTO numbers 159 member states) coupled with lack of an adequately developed system for conducting negotiations. According to economic theory, multilateral trade liberalization will inevitably bring about significant economic and development gains. But the underside of the issue is that the resulting growth will differently affect the participants in this growth process - some of them will gain too much by comparison with others, and a few may even become absolute losers.

On a theoretical level, such issues have long been dealt with by applying various methods of income and wealth redistribution. However, the contemporary practice of trade liberalization negotiations is a different story altogether, as has been vividly illustrated by the ongoing efforts to put together a package of outcomes capable of harvesting positive results.

At present, the world community is concerned that, if the current round of WTO negotiations proves unsuccessful, the World Trade Organization will lose its influence, and so the main rules of international trade will be determined by bi-lateral agreements.

B.V. Chokaev – Senior Researcher, Center for Empirical Finance