Building capacity to help Africa trade better

Bali Package deadlocked: What are the bigger picture implications?


Bali Package deadlocked: What are the bigger picture implications?

Gerhard Erasmus, tralac Associate, discusses the implications of the recent failure by WTO members to “bridge the gap” on the Bali Package

July 31, 2014 was the deadline set by the Ninth Ministerial Conference of the World Trade Organization in Bali, Indonesia on 3-7 December 2013 for the adoption of the so-called Bali Package. This is effectively a new WTO agreement aimed at lowering global trade barriers and implementing the new Trade Facilitation Agreement. The package forms part of the Doha Development Round, which started in 2001.

The entry into force of the Bali deal would have been the first real result of the DDA. On Thursday night (31 July), a few hours before the expiry of the deadline, Director-General Roberto Azevêdo reported to WTO ambassadors that, despite intensive consultations, “we have not been able to find a solution that would allow us to bridge the gap” on the adoption of the protocol on the Trade Facilitation Agreement. He urged members “to reflect long and hard on the ramifications of this setback”.

What prevented the General Council from reaching an agreement and what are the implications? According to the statement of the Director-General (WTO News Items 31 July 2014) “the remaining gaps are unbridgeable with the time that we have. On the one side we have the firm conviction, shared by many, that the decisions that ministers reached in Bali cannot be changed or amended in any way – and that those decisions have to be fully respected. And on the other side of the debate we have some who believe that those decisions leave unresolved concerns that need to be addressed in ways that, in the view of others, change the balance of what was agreed in Bali.......At this late hour, with the deadline just a matter of moments away, I don’t have anything in my hands that makes me believe that we can successfully reach consensus on item 2 of the agenda of the General Council”.

The director-General made additional important observations:

  • This is not just another delay which can simply be ignored or accommodated into a new timetable – this will have consequences. These consequences are likely to be significant.

  • The manner in which Members were able to deal with the challenges of the financial crisis prevented a surge in protectionism. Having the rules in place and adherence closely monitored – with the dispute settlement mechanism there to back them up – helped to keep protectionism in check during a dangerous period for the global economy.

  • The multilateral trading system is essential not just to support economic growth and development, but also to deal with other systemic, global issues of governance – such as: guarding against protectionism; responding to new challenges at the global level; and working to resolve not just specific disputes but larger, more fundamental imbalances.

  • In this way, since its creation in 1948, the multilateral system has been a powerful force for openness, cooperation – and peace.

  • But all three pillars are needed for the system to function properly.

  • When the system fails to function properly then the smallest nations will be the biggest losers.

  • The major economies will have other options open to them. But the smaller, more vulnerable economies may not. They’re the ones with fewer options, who are at risk of being left behind. They’re the ones that may no longer have a seat at the table.

This summary by the Director-General of the implications of what has happened (or did not happen) now are about issues with profound implications for the multilateral trading system and for Africa. It leaves African policy makers with some serious challenges.

It is known that for some time now African Members of the WTO have, since December 2013, raised concerns about the manner in which the Trade Facilitation Agreement would have entered into force. They wanted decisions on other Doha issues to be included in a binding package. They became opposed to the separate entry into force of the Trade Facilitation Agreement. Some stakeholders (NGOs included) also started to criticize the effects of this agreement; claiming that exporters from developed countries stood to benefit most.

The financial commitments in terms of which developing nations would have been supported with regard to the financial implications of the Trade Facilitation Agreement also proved to be a difficulty; although there was an announcement recently about a special Facility to provide for the necessary funding.

The perception grows that the WTO system, which has functioned well with regard to multilateral trade regulation aspects, seems unable to accommodate the aspirations of African nations in particular; with gaps about structural matters appearing in the global trade debate. Where does this development leave the intra-African trade agenda?

  • The DDA is unable to generate the type of global reforms which African nations desire. However, they remain part and parcel of the multilateral order and trade extensively with developed countries.

  • In some instances ad hoc trade agreements are concluded or are being negotiated; such as the EPAs. These agreements have not generated the comprehensive packages needed for broad-based reforms. Many African countries are dependent on unilateral preferential trade arrangements such as AGOA, GSP and EBA. The benefits contained therein are not based on binding agreements, do not cover services, and can be altered unilaterally; as the recent warnings that South Africa may lose its AGOA status, indicate. They are not long-term answers.

  • Major new trade negotiations are taking place under the Trans Atlantic and Pacific regional configurations. They will, if successful, have major consequences for multilateral trade but will occur outside the WTO. African nations are not involved.

  • Intra-African trade needs a bold trade facilitation and services initiative. The prohibitive costs caused by red tape, border delays, duplication and un-coordinated domestic regulatory regimes are well documented. The present state of affairs undermines development plans and the implementation of national development policies. African nations cannot prosper in isolation.

  • Trade facilitation in the broader sense of the term (which includes customs reforms) is vital for Africa’s trade with the rest of the world.

  • Where will this debate be pursued? The Tripartite and CFTA contexts should be the obvious fora. However, present indications are that they are mostly about tariff issues. This is not the right focus and neglects the most urgent priorities.

  • Overlapping membership complications are a major obstacle to intra-African trade. The RECs will continue to exist and will focus on their own consolidation; while their services agendas are in their infancy. They do not generate the emphasis required for continental solutions and cannot simply be replicated on a grand scale as the way forward.

  • Africa rising has become a new rallying call. It displays the confidence that Africa is on an upward curve. However, it will be very difficult to maintain the momentum without institutional and legal reforms and arrangements which will lock in new advances for all.

  • Most of the RECs need urgent improvements in the manner in which they function. African development plansneed sound policies, the predictability of rules-based arrangements, and effective institutions; at home and in the regions. The integration debate should prioritize these concerns.

  • Industrialization is touted as the way forward. Development in the proper sense of the word and the employment of growing populations will remain distant promises if we stay dependent on commodity exports. Industrialization makes sense but the real test will be to adopt and implement the full array of policies and reforms for attracting investment, ensuring sustainable development, and locking in the services component. Services cannot be excluded from this debate and the whole of Africa cannot industrialise simultaneously.

  • Some political leaders apparently believe in soft alternatives – e.g. that trade with China will be the permanent answer or that the BRICS will become a new type of international order. This is flawed and dangerous. It also shows a lack of engagement with the fundamentals which drive Asian prosperity, their fierce competitiveness, and differences in the respective systems. Trade with China is obviously important; but Africa is not its exclusive priority or main partner. China is a global player and pursues its interest on a grand and comprehensive scale. 


Click here to read a related Discussion by Willemien Viljoen: The WTO Trade Facilitation Agreement – the central issue and the multilateral implication


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