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Download Case study 15.1: The WTO – a victim of its own success?
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Case study 15.1: The WTO – a victim of its own success? Despite the absence of agreement, the EU continues to place multilateralism and the conclusion of the current WTO talks – the Doha Round - at the heart of its trade strategy. Launched in 2001 and still some way short of a conclusion in 2014, these talks have dragged on and, in the eyes of many, this failure is driving trading nations to seek alternative solutions for its trade policy concerns. The Doha Round has been plagued by setbacks from the beginning: initial attempts to launch the talks in 1999 in Seattle failed against a background of violent demonstrations and poor preparation. When the talks eventually got underway in 2001 at Doha in Qatar, progress was tortuous: the headline ministerial meetings, intended to make key political decisions, failed, or at best, ended inconclusively and in 2006, the talks were even suspended for a while. Since then, progress has been mixed and the talks have continued in a stop-go fashion. The most optimistic moments came after the Bali Ministerial of December 2013 when apparent agreement was reached on the trade facilitation aspect of the talks. However, subsequent meetings to settle outstanding technical arrangements arising from the political settlement on trade facilitation have missed their deadlines and the hoped for schedule for the conclusion of the talks on the remaining items on the Doha Agenda had not materialised by the end of 2014. This makes it extremely unlikely that the 2015 deadline for putting the whole Doha Agenda to bed will be met. Press coverage of the failure of the talks so far has understandably focused on key negotiating issues but some of the responsibility lies in the nature of the organisation itself. When it was launched in 1948, the GATT had only 23 members and the 1960 Dillon Round, for example, was concluded in under a year. By 2014, the WTO had 160 members, the majority of whom were developing countries and the Doha Round had been in progress for 13 years. There has been a notable change in the dynamics of the trade talks over the years. For many years, the US, the EU and Japan were able to reach a consensus on negotiating matters and impose it on the rest of the members. This process was facilitated by the ‘Green Room’ where ministers from the bigger, more influential countries would meet in an attempt to break the deadlock, perhaps inviting one or two developing countries into the process but essentially excluding smaller and developing countries. During the Doha Round, under the leadership of Brazil, India and China, developing countries have asserted themselves and developed country domination of the talks has declined. Tension between developed and developing countries has been apparent throughout the negotiations, particularly but not only in the agricultural sphere. However, developing countries themselves have differing interests and their heterogeneity has increased the difficulties in reaching agreement. The relative decline of tariffs on industrial goods arising from earlier rounds has highlighted the importance of non-tariff barriers (NTBs) and attention has shifted to their removal and other issues like service and agricultural liberalisation. NTBs first appeared on the agenda in a minor way during the Tokyo Round (1973-9) in relation to government procurement, technical standards and the special and distinctive treatment of developing countries. The Uruguay Round expanded the agenda further to include intellectual property, trade-related investment measures and dispute settlement. The agenda had expanded even further by the Doha Round and includes agriculture; non-agricultural market access (NAMA); agriculture; services; trade-related aspects of intellectual property; anti-dumping and subsidies; regional trade agreements; dispute settlement; trade and the environment; electronic commerce; small economies; trade, debt and finance; trade and technology transfer; special and differentiated treatment; and trade facilitation. The extensive Doha Agenda has also not helped the negotiating process. Launched ostensibly as a ‘development round’ designed to help developing countries in particular, the Doha Agenda has suffered paradoxically from being both too wide and too narrow. Since the Uruguay Round, the negotiating process has shifted from plurilateralism to a single undertaking. Under the plurilateral system, members were able to choose which parts of the negotiated package they signed up to. As a result of the introduction of the single undertaking, members have to sign up to the whole package. This makes negotiations more complex and, ideally, should encourage members to seek trade-offs between one part of the overall package and another. However, for the single undertaking model to work, there must be something in the overall package for everyone. Although the Doha Agenda encompasses a much broader range of issues than ever before, which can make it more difficult to reach agreement, it can also be argued that the agenda is too narrow for the single undertaking to work. For example, the EU and Japan were initially anxious to include the “Singapore issues” (so-called because they were the subject of four working groups set up at the Singapore Ministerial meeting in 1996) – greater transparency in procurement, trade and investment, trade and competition policy and trade facilitation - on the Doha Agenda. The US was lukewarm about these issues whereas developing countries opposed them. The only Singapore issue to remain on the Doha Agenda is trade facilitation, which is essentially about making the bureaucratic side of trade more efficient and which could greatly benefit developing countries. Once the other three Singapore issues disappeared off the agenda, and given the strong focus on liberalising agricultural trade, there has been limited scope for developed countries to trade off any concessions they make on agricultural trade for gains elsewhere. Agriculture proved to be a sticking point throughout the negotiations. Agriculture is a key and complex component of the talks. Developing countries want, among other things, an end to agricultural subsidies in developed markets and greater access to developed markets. This requires deep cuts in support to farmers in developed countries, which will only be possible for developed country politicians to sell at home if there are real gains to be made elsewhere – and, even then, they would find it far from easy. The consequences of the stalled negotiations, and potentially their ultimate failure, are far reaching. Many would celebrate the demise of the WTO which they see as a secretive, undemocratic institution which rides roughshod over the interests of sovereign states with scant regard for the needs of the poor. While the WTO is far from perfect, it has established the framework of a transparent, rule-based international trading system which does not allow its members to arbitrarily raise tariffs. The rules for businesses operating in this environment are, for the most part, clear and predictable. Without the trading environment established by the WTO, trading conditions would become infinitely more complex and costly and could descend into trade wars. Although a collapse of the multilateral trading system is a long way off, the present impasse does damage it. An immediate consequence is the acceleration of the growth of bilateralism and preferential trading agreements (discussed elsewhere in this and subsequent chapters). In order to avoid future deadlocks, in the longer term it is possible that, once the Doha Round has been concluded, however that might be, that future negotiations will be less ambitious, dealing with single or a limited number of sectors or issues. Case questions: 1. Why has it been so difficult for the WTO to conclude the Doha Round? 2. What can be learned from the difficulties of the Doha Round to prevent similar problems in the future? 3. What are the benefits for European business of a thriving multilateral trading system? 4. What would be the consequences for European business of the substantial downgrading of the multilateral system or even its demise?