BALI, Indonesia – Top trade officials began talks Tuesday that will either produce an eleventh hour deal that could boost the global economy by $1 trillion or possibly spell the end of the World Trade Organization’s relevance as a forum for negotiations.
After more than a decade of inertia in WTO talks, negotiators are close to a slimmed-down deal but there is no finished document for the dozens of trade ministers attending a summit on the Indonesia resort island of Bali to sign. So close to an agreement, some have been urging the trade ministers to take the unusual step of completing the negotiations themselves.
An agreement on simplifying customs procedures could help revive the WTO’s broader Doha Round of trade negotiations, sometimes known as the development round because of sweeping changes in regulations, taxes and subsidies that would benefit low income countries. Still, WTO ministerial summits are designed for enshrining done deals, not technical negotiations, so producing an agreement at a four-day conference would be unprecedented.
“Even though still possible, the chances of reaching a deal are rather slim,” said Matthias Helble, a global trade expert at the Asian Development Bank Institute and former WTO adviser.
The goal of the Doha Round, so called because it was launched in the Qatari capital in 2001, is to create unified rules for the 159 member economies of the WTO in myriad areas: lowering import taxes on hundreds of goods, limiting market-distorting subsidies for farm produce and creating one standard for customs procedures that will make it easier for goods to move across borders.
The idea is that if all countries play by the same trade rules, then all countries, rich or poor, will benefit. With fewer trade barriers, goods and services of all types would be more affordable, creating more employment and business opportunities. The WTO estimates that easing customs barriers would increase total world trade to $23 trillion from its current estimate of $22 trillion.
Critics of the WTO rules, though, say they may hinder countries from setting their own priorities in environmental protection, worker rights, food security and other areas. And they say sudden reductions in import tariffs can wipe out industries, causing job losses in rich and poor countries. Hundreds of Indonesian activists protested outside government buildings in Bali.
“We know it is not an easy task,” said Brazil’s foreign minister Luiz Alberto Rieguero Machado. “But we are now here, and we are here to do something,” he said. “We are willing to do our best effort to leave Bali with an adopted package.”
Because all WTO members must agree on every aspect of the dozens of points of contention for a broad trade agreement, progress has been tortuously slow. The recent negotiations meant to revive the talks are on trade facilitation, only part of the agenda but still sweeping and complex.
In the meantime, the U.S. and other countries have been developing separate regional trade deals. Many such pacts already exist. The newest, largest of them in the works — the Trans-Pacific Partnership among the U.S. and 11 other Pacific Rim economies and a U.S.-European Union free trade deal — would give developed economies fewer incentives to forge WTO deals.
That’s why another summit with no deal after more than a decade of trying could signal the twilight of the WTO’s significance as a forum for trade negotiations. It has thrived in its other a major role, as arbitrator of trade disputes, where countries can file complaints against each other for distorting world commerce by using tools such as subsidies to create an unfair advantage.
“Failure is not an option,” host Indonesia’s president Susilo Bambang Yudhoyono told delegates Tuesday as he opened the summit. “I fear that should we let this opportunity slip, it is developing countries that will lose out the most.”
With last week’s progress on customs rules, the difficult issue of limiting agricultural subsidies remains. Anti-poverty activists have long argued that billions of dollars that the U.S. and Europe give to support their farmers help large agricultural conglomerates more than family farmers and also hurt developing countries.
Economist Mark Malloch Brown, former head of the UN Development program, has said that developing countries lose potential earnings of $50 billion per year because wealthy countries’ subsidies keep them from competing in markets.
The last best attempt to seal the Doha deal failed partly because the U.S. refused to give up cotton subsidies. But with budget crunches in the aftermath of the global financial crisis, subsidies have lost favour in many developed nations and they are now more willing to limit them.
Yet since the core principle of the WTO is the same rules for all members, developing countries that subsidize agriculture to feed the poor — like India, whose recently enacted food security law would provide $22 billion in grain subsidies — might be unable to do so under the new rules. That is why India may hold the key to any last-ditch attempt to produce an agreement at this week’s summit.
Indian Trade Minister Anand Sharma said Sunday that India’s food-for-the-poor programs “cannot be compromised for minor gains of the developed countries.”
Johnson reported from Mumbai, India.