Today marks the kick-off of the 10th Ministerial of the World Trade Organization (WTO), in Nairobi, Kenya. The WTO’s multilateral Doha Round negotiations among the 163 members have been ongoing for over 14 years, with no end in sight. Meanwhile, talks to form free trade agreements such as the Trans-Pacific Partnership (TPP) have been thriving; 40 trade deals have been signed since trade ministers last met in Bali in 2013 and overall 406 bilateral and regional trade deals are now in place. Will Nairobi bring the WTO back at the center of the global trading system?
Started in 2001, the Doha Round is the most ambitious multilateral trade round since global trade rounds were first launched in the wake of the second world war. The main carrot Doha negotiators has been new market access: developing countries want greater access for their agricultural products in advanced country markets, while advanced economies want developing countries in exchange to liberalize their markets for manufactured products and services.
The Doha Round stalled in 2008, when members disagreed on whether poor countries should be allowed to increase tariffs to shield their farmers if food imports surged sharply. The only meaningful deal to date is the Trade Facilitation Agreement (TFA) inked in Bali. Committing countries to cut red tape and accelerate clearance of goods in customs, TFA is politically much less controversial to than opening up markets in sensitive, protected sectors. Market access talks, meanwhile, remain jammed.
In other words, Nairobi takes place when low-hanging fruit is harvested, and high-hanging fruit still far from reach.
Perhaps the best possible outcome from Nairobi is for the poorest WTO members, those classified as least developed countries (LDCs), to qualify for deeper preferential market access in advanced economies and secure further aid to unlock supply-side constraints to trade. The main roadblocks in other areas are three-fold:
- First, the WTO has long afforded preferential treatment for developing countries to take on international trade regulations in a more gradual or limited manner. However, China, India, Brazil, and many other economies have grown into vibrant emerging markets that, advanced economies argue, ought to play by the same rules as advanced nations do. For example, under the current set-up, emerging markets would be exempt from Doha cuts of agricultural subsidies that U.S. and European Union have already been making. Emerging markets however want advanced economies to do more before themselves assuming greater responsibilities.
- Second, the WTO's very work program is contested. The world is very different from 14 years ago when Doha started. Twitter and Facebook had yet to be born and the Internet of Things was not even a term. Today, multinational companies are concerned about liberalization of trade in services, open and fair environment for cross-border investments, 21st century intellectual property rights, and rules to free and regulate trade in ecommerce and digital trade (such as services delivered on the cloud). Against this backdrop, the Doha agenda is grossly outdated. The United States has dared to go on record saying it wants to scrap the Doha Round and start multilateral talks from scratch and include new issues in the talks. This, however, is objectionable to many developing economies that worry about competition from advanced nations and lag behind in the global digital economy.
- Third, with multilateralism delivering precious little, countries around the world have set out to pursue bilateral and regional trade agreements, such as the "mega-regional" trade deals, TPP forged among 12 Pacific rim economies, and the Transatlantic Trade and Investment Partnership (TTIP) between the United States and Europe. These deals do respond to global companies' needs: they are deeply liberalizing and far more comprehensive than any conceivable package that could be agreed on at the WTO. China too is forging its agreements in Asia, most notably the Regional Comprehensive Economic Partnership (RCEP). Several WTO Members have also moved to form sectoral agreements among coalitions of the willing, such as the Trade in Services Agreement (TiSA) now negotiated among 25 WTO Members accounting for 70 percent of world trade in services. Other such “plurilateral” deals have been proposed in such areas as investment and global value chains. There are two plurilaterals under discussion at the WTO - an expansion of the Information Technology Agreement aimed to eliminate hundreds of tariffs on $1 trillion of technology products, and a "green goods" plurilateral aimed to free trade in environmental goods.
Companies and leading economies’ focus is today squarely on bilateral, regional, and plurilateral trade deals, not on the multiateral talks at the WTO. In today's world, the agonized multilateral rounds are moot: rather than big-bang deals at the WTO, world trading powers are likelier to advance toward a multilateral deal from bottom-up, through a gradual expansion and merging of free trade agreements and further negotiations of plurilateral trade deals. How the WTO can remain relevant is by serving as a negotiating and dispute settlement forum for plurilateral, sectoral deals and by seeking to “multilateralize” the best rules agreed in free trade deals among the broader WTO membership. Until it does, companies in the United States and elsewhere look to free trade pacts to go to market around the world.