The WTO and Davos - Caribbean gains?
By Edwin Laurent
When trade ministers met in December in Bali, they seemed to inject new life into the World Trade Organisation (WTO).
This got a further boost from January’s World Economic Forum in Davos, Switzerland.
So what does that mean for the floundering Doha Development Agenda (DDA) and how should the Caribbean respond?
The DDA was launched back in 2002, as the ninth of the rounds of global trade talks since 1947 that have been working to make trade freer.
This time, though, there was a difference: development would be a central pillar.
These negotiations were therefore seen as a great opportunity to redress the imbalances in world trade and ensure fairer participation for developing countries.
In Bali, however, ministers shied away from reform of the trading system itself.
Instead, they brokered a deal on trade facilitation, to make it easier for goods to pass through ports and Customs. The formal agreement is to be adopted next July.
While this deal fell short of the ambitions of many developing countries, how significant were the other conclusions?
Agriculture has always been the most important and controversial subject on the WTO’s agenda.
This is not surprising, since it is the WTO that makes the rules governing trade in food and agricultural products and support given to farmers.
Those rules help decide whose agriculture will be viable and whose will not.
With its fragile farming sector struggling to compete with large low-cost producers, the Caribbean has a particular interest in fairer rules that take account of its circumstances.
However, ministers considered only the administration of the tariff rate quota (TRQ) and food security.
The TRQ is a sometimes controversial arrangement for restricting imports. It permits a higher duty to be charged on imports of a particular product, once they exceed a specified level.
Europe uses this device to protect bananas from the Caribbean, as well as the wider ACP (African, Caribbean and Pacific) region..
The discussion on food security centred on India’s proposal that governments should be allowed to hold higher levels of food stocks, something that would also help its farmers.
The Caribbean has long campaigned for special support for small economies, but there was no breakthrough here either.
Ministers dispensed with the section on small economies in three paragraphs, doing little more than endorsing ongoing work.
Another important topic for the region is Aid for Trade. It was given similar treatment and just two paragraphs.
There was encouraging support for least developed countries (LDCs), as classified by the United Nations, of which Haiti is the only one in the Caribbean.
In general, though, the proposals are not binding.
So what does Bali signify for the prospects of the DDA?
Roberto Azevêdo, the WTO’s chief, said in his closing speech in Bali: "The decisions we have taken here are an important stepping stone towards the completion of the Doha round."
Making progress just on trade facilitation admittedly does not seem like much.
After all, developing countries had high ambitions for the DDA.
They expected reforms to the global trading system that would provide new development opportunities and generate jobs and income.
And this has not happened.
Of course, making trade easier by increasing its efficiency and reducing its cost is good for all countries. But for most small developing countries, such as those of the Caribbean, the gain will come principally from lower prices on imports, as Customs departments become more efficient.
The big gainers from trade facilitation will be those countries that will export more, because they can get their goods onto the shelves of foreign markets easier and cheaper.
These invariably will be the star performers who are already internationally competitive and have the capacity to expand output.
The Bali accord therefore does not really change the balance in the trading system to give a better deal to those developing countries that are currently on the margins of world trade.
So might Bali have some other, less direct impact?
Prospects for the Doha talks
As the negotiations had virtually stalled, it became fashionable to suggest that the time had come to put the moribund DDA out of its misery and start afresh.
Convenient as this might seem, the biggest losers would be the smaller and weaker economies, because the prospects of getting new talks to focus on their development concerns would be even less promising.
The global economic crisis five years ago dampened enthusiasm for international development and the national agenda often trumps the global approach.
Hence, even if the WTO were to launch a new negotiating round, development would probably not be its centrepiece.
Instead, the overarching WTO goal of trade liberalisation could take priority.
Bali has anyway changed the calculation.
Reaching agreement on trade facilitation seems to signal that countries might now be prepared to negotiate constructively.
Opening a seminar for diplomats in Lisbon, Mr Azevêdo said: “We now have a ministerial mandate to look anew at core Doha Round issues and to develop a viable new approach.”
A side-meeting at Davos, chaired by Swiss Economics Minister Johann Schneider-Ammann, seems to have vindicated this optimism.
In attendance were ministers from most big countries, including China, the European Union, Japan, the US and India, who committed themselves to tackling the remaining difficult negotiating topics in the WTO.
They agreed to build on the "positive momentum" that began in Bali and address the really difficult subjects of agriculture, market access and services.
US Trade Representative Michael Froman said that "the WTO's first order of business must be to finish what we started”.
In other words, the DDA could be back on track.
Where does the Caribbean stand?
With Bali signaling that countries are now prepared to negotiate, the concern of small developing countries is that the menu on the negotiating table does not inspire confidence.
If the talks continue on their current track, it is difficult to see how they could succeed in delivering the fundamentally better deal that the countries require.
It is true that the DDA negotiations have so far only yielded trade facilitation and that the prospects for a major pro-development outcome are not rosy.
However, the DDA is the only vehicle available to the Caribbean for negotiating changes to global trade and WTO rules.
Nonetheless, if Caribbean and other small developing countries go along with the current agenda, they could be short-changing themselves by ruling out the possibility of securing the reforms to the trading system they need to expand their economies.
There is a way, though: be active in the negotiations, but make sure that they address proposals for reform that will help the trade of small and vulnerable economies, such as those of the Caribbean.
For countries with relatively little influence and power, that is easier said than done.
However, these countries have no choice but to push and fight to get their proposals considered and accepted by the WTO, since no one else will do it for them.
Reflecting on the impetus to revive the DDA, Mr Azevêdo stressed that “development has to be preserved as the central pillar of our efforts” but warned that delivering was going to be difficult, though “not impossible”.
It is imperative, therefore, that the region “ups its game” if it is to have any chance of securing the better trade deal and pro-development outcomes that it needs.
So what should the Caribbean do?
- determine precisely and clearly those changes to WTO rules that will help it both expand exports and improve the viability and sustainability of its participation in international trade
- work with other countries having similar interests, to include their concerns on the agenda and
- negotiate hard and astutely to get their proposals accepted in the WTO.
This three-point plan is much more challenging than it might seem, and comes with no guarantee of success. But the Caribbean must press ahead regardless.
At Davos, the IMF’s Christine Lagarde signalled: “We need to reset the way the economy grows around the world.”
Change will come, with or without the Caribbean.
Having so much at stake, the region cannot remain on the sidelines and leave other countries to negotiate new rules to benefit just their own trading interests.
Edwin Laurent has served as an Eastern Caribbean Ambassador to Europe and worked in London for the Commonwealth. He has recently been awarded the Cross of the Order of St Lucia for contributions to economic development.