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Preparing for Buenos Aires, can the WTO Deliver on Nairobi Promises?


Preparing for Buenos Aires, can the WTO Deliver on Nairobi Promises?

Preparing for Buenos Aires, can the WTO Deliver on Nairobi Promises?

In December 2017, the 164 member states of the World Trade Organization (WTO) will convene the 11th Ministerial Conference (MC11) in Buenos Aires, Argentina. This is the first time this biennual event is being hosted by a South American nation. The Ministerial Conference, which is attended by trade ministers and other senior officials from the organization’s 164 members, is the highest decision-making body of the WTO. Under the Marrakesh Agreement Establishing the WTO, the Ministerial Conference is to meet at least once every two years. The last Ministerial Conference took place in Nairobi, Kenya, in December 2015.

This is an opportune time to relook at the ability of the multilateral trading system to deliver with respect to the following issues ahead of MC11. A number of these issues also featured in the discussions at the 10th Ministerial in Nairobi:

  • Prospects of resuscitating the Doha Development Round (‘DDA’) in its current format;

  • Agriculture and Public Stockholding for Food Security Purposes;

  • New Issues around E-commerce and the digital divide;

  • Agriculture and Domestic Support;

  • Non-agricultural market access (NAMA) and Exports of Interests to LDCs; and

  • Services Regulations and Exports.

The diverse interests of the WTO membership continue to pose a challenge to the multilateral trading system, and the possibility of having deliverable outcomes on the above issues at the MC11 is a distant reality. The Doha Round of negotiations are in their 16th year and very little has been achieved. The Doha Round’s aim is to achieve major reform of the international trading system through the introduction of lower trade barriers and revised trade rules. The work programme covers about 20 areas of trade, and the fundamental objective is to improve the trading prospects of developing countries. The developmental aspects of the Doha Round permeate all negotiating subject areas, which put special emphasis on the needs and interests of developing countries. Developmental aspects can be found in a wide range of issues under negotiation, such as agriculture including cotton, market access for non-agricultural products, and services.

Is the DDA dead? There is new thinking that the DDA cannot be resuscitated in its current form. There are firm proposals to include the introduction of new issues such as e-commerce, digital trade, investment facilitation and transparency, which are vital aspects of modern business practice. While the issues around the DDA remain a high priority for African countries, there is a seemingly emerging lethargy in accepting the introduction of new issues into the multilateral negotiations.

A number of developing countries have expressed the view that, before they can engage in negotiations, they need to understand the potential benefits of e-commerce and investment facilitation and the role these can play in enhancing their trade opportunities. They are also concerned about the significant digital divide between developed and developing countries, which ranges from infrastructure, to technical capacity, to logistics, as well as the wide gap between their policies and laws. As such, most developing countries are demanding that, before they engage in the negotiations on e-commerce, they be allowed to accumulate a better understanding of the developmental dimension of e-commerce and the digital divide, and how this latter can be reduced for the benefit of developing countries, and to assess their e-commerce trade readiness.

Many developing countries are interested in public stock-holding, given the need for food security for their poor and disadvantaged communities. A public stock-holding is a policy tool that governments can use to purchase, stockpile and distribute food when needed. Most of these countries face resilience challenges after experiencing natural disasters and flooding, which have an impact on food security. Current negotiations are focused on looking for a permanent solution, which is scheduled for the MC11 in accordance with the Nairobi Ministerial Decision. To date, a ‘peace clause’, issued at the 9th Ministerial Meeting in Bali in 2013, is operational and allows public stock-holding of traditional food staple crops by developing countries, subject to certain conditions. However, a number of issues still need to be resolved, in particular the possibility of stockpiling programmes disrupting international markets or affecting the food security of others. In addition, governments that purchase food at prices higher than the market price are considered to be subsidizing. As a result, the search for a permanent solution has led to public stockpiling discussions being linked with broader agriculture negotiations and domestic support. While different linkages are being made, it appears that the biggest challenge lies in building consensus among Members with different positions (defensive/offensive).

Agriculture domestic support continues to be one of the priority areas for most WTO Members, including for small states, lesser-developed countries (LDCs) and sub-saharan African (SSA) countries. Current discussions are focusing on identifying achievable outcomes for MC11. Any outcome in these complex negotiations would be a significant step. However, there are still huge gaps: some countries favour an overall limit on the domestic support that is fixed; others are calling for the complete removal of the Aggregate Measure of Support (AMS) as a prerequisite for the consideration of other reforms in the domestic support negotiations. Most small states, LDCs and SSA countries are neither heavy subsidizers of agriculture nor violators of WTO rules on agriculture domestic support. The use of subsidies by their trading partners has implications for the competitiveness of their agriculture exports, particularly to their traditional preferential markets, as there is a possibility of them being pushed out of the market. Also of critical importance is the need to take into account the possible negative effects of implementing reform programmes on net food-importing developing countries.

Negotiations on non-agriculture market access have been stalled since 23 July 2015, when the Negotiating Group on Market Access (NGMA) last had a substantive meeting, as Members could not agree on the scope and level of ambition of talks to open up markets for trade in industrial goods. The NAMA negotiations are aimed at reducing or completely removing tariff and non-tariff barriers for non-agricultural goods, in particular for products of export interest to developing countries and LDCs, including through less than full reciprocity, so as to help these countries effectively participate in the international trading system. The NAMA includes proposals that call for MC11 to agree on a number of actions aimed at bringing about greater transparency and access to information related to government regulations on food and product safety, so as to facilitate the participation of micro, small and medium-sized enterprises (MSMEs) in global trade. The proposed actions include the development of a common internet portal for sharing information, increased/greater consultation with stakeholders and the notification of changes to domestic regulations on sanitary and phytosanitary (SPS) measures and technical barriers to trade (TBT).

Currently, trade in services negotiations are focused on domestic regulations, with a number of countries looking at the possibility of an outcome on domestic regulation at MC11. The intention of the discussion, as laid out in the Council for Trade in Services Decision of 1999 to establish a Working Party on Domestic Regulation, is to develop ‘any necessary disciplines to ensure that measures relating to licensing requirements and procedures, technical standards and qualification requirements and procedures do not constitute unnecessary barriers to trade in services’, as outlined in Article VI.4 of the General Agreement on Trade in Services (GATS). The new disciplines should be presented in such a way that they prevent undesirable regulatory practices that restrict trade in services. Negotiations in these areas are important for some small states, LDCs and SSA countries to enable them to develop regulatory frameworks for certain services sectors where regulations do not exist. The issue is also of importance to these countries with regard to the preservation of their policy space, especially in view of the significance of services, particularly for small states. However, domestic regulation is a complex area, covering, for example, qualifications and licensing requirements and procedures, which are sensitive issues for many countries. Thus, countries have to strike a balance between developing regulatory frameworks that allow them increased market access to developed countries, particularly through mode 4 (movement of natural persons), while bearing in mind that new regulatory frameworks may also have them open up their sectors to services suppliers from developed countries.

While the global economic recovery is continuing, protectionist sentiment continues to rise. The overt trade protectionist measures under the Trump administration are indicative of rising global protectionism, which is posing a threat to the relevance of the WTO. Trade has the potential to strengthen global growth if the movement of goods and supply of services across borders remains largely unfettered. However, if policy makers attempt to address job losses at home with severe restrictions on imports, trade will not help boost growth and may even constitute a drag on the recovery.

The possibility of having firm deliverables at the forthcoming MC11 is doubtful, given the diversity of defensive and offensive interests among the WTO membership. In fact, one of the greatest challenges with respect to MC Declarations and WTO Agreements is the “best endeavor language” that is used in drafting the texts. The complex procedures built into these texts pose a challenge for many developing countries in terms of advancing their interests as well as improving their participation in the multilateral trading system. The Director-General of the WTO Roberto Azevêdo has called for flexibility and pragmatism to advance debates ahead of the Conference. Time is running out, and areas of convergence among WTO members are few. It might therefore be useful to start thinking of the post-MC11 work programme.

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