Talking Trade blog
Restoring the multilateral trading system?
Published 10 April 2015
BEIJING—I have not participated in a workshop on the multilateral trading system in a while. But this week, I was invited to Beijing by UIBE, the South African Institute of International Affairs, and the Cordell Hull Institute to discuss the restoration of a multilateral trade cooperation dialogue.
The discussion this morning has focused on particularly on how to conclude the Doha Development Agenda (DDA) at the World Trade Organization (WTO). While I knew there was a large gap between the multilateral system and what I would call “the real world,” I was struck all over again by how wide it appears to have grown.
The workshop opened with some remarks by one of the best WTO trade ambassadors I have ever met—savvy, knowledgeable, and experienced. He discussed what was on the table for discussions in Geneva and urged WTO members to work together to be as cooperative and accommodating as possible to get the round done.
We’ve been meeting with 4-10 companies a week since we set up the Asian Trade Centre last August. In all those meetings, I could not recall a single company mentioning the WTO. Not once. These are meetings with some of the biggest companies in the world as well as some of the smallest. All are active in Asia, but are otherwise engaged in a wide range of economic sectors from manufacturing to services to investment and finance. They are nearly all oriented outward, in that they either already trade across borders or would like to do so.
No one has raised the WTO.
But it actually gets even worse. I am similarly struggling to think about any of the companies mentioning any of the issues under discussion or negotiation in Geneva. Of course, companies that face tariff barriers, for example, will perhaps discuss the lowering of these obstacles. But they do not look to Geneva to solve these problems. Partly this is because they have given up after waiting so long for an outcome from talks that started in earnest in 2001 building on an agenda started even longer ago. This problem has been compounded by the fact that many companies think that the tariff cuts they might want are unlikely to come from the resolution of the DDA.
Many of the issues that companies raise repeatedly as major challenges, like incompatible standards, labeling barriers, complex domestic rulings at borders, opening of services markets, inadequate protections of investments, and repeated backsliding from existing commitments in some markets, are not on the table at all. They were either not on the agenda in the DDA or, in some cases like competition policy, were tossed off the list early on.
Again, I would argue that the situation gets worse. It is not just that these issues are not on the agenda, but there seems to be no desire to put most of these items on a future agenda either. For example, many of the least developed countries (LDC) often argue that the WTO agenda has to include provisions to help the poorest members of the system compete. Most of the issues mentioned in my company discussions are likely to be viewed as “too hard” or “too complex” or “too biased in favor of developed economies” and would not be helpful to LDC members. Thus the very issues that may be necessary to get companies reengaged are likely to be kept off the agenda in the future.
It’s also not only the least developed members that may make these sorts of arguments. There are all sorts of members in the “developing” country basket who would and will make similar complaints. Recall that, unlike the LDC classifications that are set by the United Nations, WTO members are allowed to self-certify as developed. This means that countries like Singapore and South Korea remain, officially, developing country members in Geneva.
Of the 161 members of the WTO, the vast majority are now classified as developing. Nearly a quarter of the membership are LDCs. Clearly, their needs and interests are important and need to be considered in setting the rules and outcomes of the WTO.
My own bias (or at least one of them) is that the global trading system ought to be beneficial for trade. This means that it is critical that company interests be placed front and center in creating a trade agenda. Other issues certainly matter and do play a role, but ignoring the needs of business in this century is not a recipe for multilateral success either. How can multilateral trade agreements better provide the platform for businesses of all sizes in all members to engage in global trade arrangements?
Over the years, lots of very smart and clever people have suggested methods to bridge gaps in the system. These range from restarting dialogue in Geneva in a non-negotiating setting to tweaking the rules for decisionmaking to adjusting the agenda by grouping issue areas differently in the hopes of overcoming entrenched divisions between members.
Yet, listening to the range of interests just around this table in Beijing presented by some of the best global trade policy experts, I can clearly see why governments that have options are increasingly just leaving the multilateral system behind. It does not appear to be possible to move on and address the issues that matter in the real world until the past agenda is completed. But this past agenda is largely irrelevant to many key potential stakeholders. Thus, if I were a government official, I am not sure why I would invest important political capital in pushing through a potential deal in Geneva that my own stakeholders are largely not interested in supporting.
This has been, frankly, a very depressing morning. I think I can make a powerful argument for why trade cooperation at the multilateral level is best. The WTO rules serve as the foundation for every bilateral and regional trade deal. Transparency and non-discrimination remain key fundamental principles. Global trade rules benefit the largest number of people in the greatest set of members. It helps companies—especially the smaller firms that struggle to make sense of a complex, overlapping world of smaller bilateral and regional deals. Global trade can serve as a driver for economic growth.
The race to regional agreements will leave many potential participants on the sidelines. As I frequently say, not every country is an attractive dance partner when searching for new agreement partners. Thus, the stampede to smaller deals will leave some countries completely outside the dance hall.
One participant just mentioned the worries of his country for trade and investment diversion as a result of regional and bilateral trade agreements. I think this is a likely outcome, particularly from some of the deeper, more meaningful megaregional agreements. To cite just one example, the creation of the Trans-Pacific Partnership (TPP) in textiles is likely to change trade patterns around textiles and apparel into the future. Countries that are not members of the TPP will struggle to keep market share in major economies like the United States because their exports will not get the same benefits (reduced tariffs and other issues) as competitor, TPP-enhanced firms will receive.
So where do we go from here? It is not clear at all, other than being depressing. The situation is currently impossible—many members are refusing to budge on anything until the old agenda is addressed while other members have zero interest in the old agenda. There is no way to satisfy these two positions. As a negotiator, I can only reach agreement when there are some (even if quite small) overlapping interests. I don’t see these overlapping interests taking place at the moment.
Perhaps, if I might make my own contributions to a growing set of reform proposals, it is that the business community must reengage with the multilateral system. In this case, it is necessary to explain to officials in Geneva what are the issues that matter to large and small firms and why these concerns must be discussed in the WTO as the most suitable venue. Companies have increasingly just left the building and it appears to me that their absence alone is not making the point. No government officials are going to be ambitious if they do not think they have sufficient input and endorsement from businesses. To get a trade agenda underway that matters to companies operating globally now, firms need to clearly and regularly articulate what ought to be on this agenda.
If this group of experts meeting in Beijing comes up with some outstanding, creative ideas of what else ought to be tried, I’ll write another post about it next week.
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