The WTO faced with the challenges of the new global economy
Mehdi Abbas, Bridges,
International Centre for Trade and Sustainable Development (ICTSD)
Fifteen years after its launch, the failure of the Doha Round is more or less official. So how will the multilateral trading system look, after the WTO’s 10th conference to be held in Nairobi on 15th to 18th December 2015?
In an article for the journal Gateways (reproduced below1), Abbas Mehdi, Senior Lecturer at the University of Grenoble is trying to shed new light on this complex issue. He analyses both the origins of the Doha Round and the growth potential for the WTO in an environment marked by new power relations between north and south and new paradigms through the development of free trade agreements. He questions the difficult relationship between trade liberalization and development and challenges the limits of an approach centred on trade preferences.
For Mehdi Abbas, the WTO has not proven that its approach provides a sustainable response to the challenges of globalization, particularly concerning food security, consumer protection and the fight against climate change.
Although confident that the WTO will continue to exist after the death of the Doha Round, Mehdi Abbas raises the inevitable necessity for organizational reform if it wants to have an influence on future trade. A reform all the more essential that since 1994, issues surrounding agriculture are major obstacles to the success of WTO negotiation rounds. So what is to be the role of agriculture and food security?
momagri Editorial Board
The Doha Development Agenda’s (DDA) primary objective was the integration of developing countries into an "open multilateral trading system, rule-based [and under conditions] that meet the needs of their economic development." Fifteen years later, it is clear that this ambitious program has had little success. Suspended between 2006 and 2008, negotiations remain under deadlock despite the underwhelming success of the ministerial conference in Bali in December 2013 and the "Bali package" which covered only 10 percent of the Doha mandate.
While the WTO celebrates its twentieth anniversary, the DDA is in its fifteenth year and is preparing the 10th ministerial conference in Nairobi, it seems appropriate to analyse the structural and institutional significance of stalled negotiations, and question the growth perspectives for a post-Nairobi multilateral trading system.
The impossible globalization-development balance
By launching a new development round in Doha, WTO Member States made a dual commitment: 1) correct the imbalances in North-South relations caused by the implementation of the Uruguay Round agreements; 2) in the wake of the Millennium Development Goals (MDGs), ensure that the multilateral trading system supports development and aids the fight against poverty. An ambitious project. It meant not only reinterpreting agreements in their form, substance and purpose in terms of development, but also equipping developing countries (DCs) and least developed countries (LDCs) with adequate trading capacity in order to successfully integrate the global economy. This new relationship between globalization and development must go through a review of the provisions of special and differential treatment (SDT) "with a view to strengthening them and making them more precise, effective and operational" (paragraph 44 of the Doha Declaration).
But, drained of its initial ambitions throughout the different negotiations, the DDA has turned into a standard trade negotiation, marked by a program that has been scaled-down so that any anticipated benefits are now too limited to generate real interest. Added to this is the paradigm of “uncomfortable” free trade and the debate on the gains of liberalization being unevenly distributed between and within countries. Faced with this situation, would it not be better to give WTO governance a more qualitative angle, by reflecting on international compensation mechanisms capable of gaining interest from countries and social support for the organization's agreements?
In fact, the DDA has two fundamental problems: it did not clearly establish the purpose of "development" that should have been assigned to trade liberalization and in line with the above, did not have clear criteria and consensus for establishing whether an agreement is "good" or not for development. Nevertheless, the DDA highlights the limits of an approach centred on trade preferences. Development cannot be reduced to the preferential market access of developed countries and advanced developing countries. One of the main post-Nairobi challenges for the WTO will be to define an operational compromise between globalization and development.
Indeed, a program aimed at "promoting the achievement of development goals through improved market access" for DCs and LDCs is no longer relevant for at least three reasons. Firstly, integrating production and exchange networks is not measured in terms of export capacity but in terms of factors for the attractiveness of production and a competitive position within global value chains (GVC). Secondly, a marketer approach is no longer sustainable in a global economy with a number of countries in surplus and engaged in ultra-mercantilist policies. Thirdly, the WTO has not proven that its approach provides a sustainable response to the challenges of globalization: food safety, consumer protection, the fight against climate change, biodiversity and productive specialization, international security and work mobility, etc.
The Doha agenda could have been an occasion for reflecting on the limits of an approach centred on the expansion of exports on the principle of reciprocity of concessions. The differentiation of trade and economic trajectories in the South and its consubstantial heterogeneity of interests, South-South competition, the disintegration of the sectors, the taking into account environmental and climatic effects and the different dimensions of economic security related to trade liberalization, are all factors that might have led to a renewed conception of the relationship between globalization and development. A strong signal to the South would have consisted in establishing a Council on Trade and Development equivalent to the three WTO Councils for goods, services and intellectual property.
Multilateral trade policies challenging economic globalization
The DDA stalemate is partly due to the 2007 financial crisis, a product of financial globalization. It has refocussed the international economic agenda on financial issues and budget balance at the expense of trade governance. The DDA is a collateral victim of the Great Recession and despite the effects of financial globalization on the international trading system; monetary and financial issues (exchange rate, trade credit, export financing, etc.) are still remain outside the WTO regime.
But the stalemate cannot be explained solely by this exogenous shock. The transformation of multilateral trade regulations induced by WTO agreements has a lot to do with it. With the WTO, we are now entering the third generation of trade barriers, namely national, institutional, normative, regulation mechanisms. While hitherto, negotiations focused on tariff concessions and removing "administrative" barriers, it is now a question of subsidies, intellectual property, services, public procurement, investment, competition and sanitary, phytosanitary and technical standards.
The WTO regime moves the multilateral trading system from a logic of the orderly and disciplined opening of national markets to a logic of competition in international markets that would be governed by common standards. This poses the problem of the scope of the WTO regime because, in a globalized economy, trade policies interfere - and vice versa - with public policies, be they social, environmental, technological, fiscal or, of course, development policies.
Clearly, Member States have not fully appreciated the difficulty and the technical complexity of negotiations where trade issues become peripheral. And that would explain their strategy of status quo. So maybe the first twenty years of the WTO should simply be considered a learning phase for a new negotiation model. The fact remains that in the coming years, the multilateral trading system will have to find a solution that satisfies three systemic challenges of globalization.
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