Talking Trade blog
The World Trade Organization, or what happens when a tree falls and no one cares
Published 27 February 2015
There is an ongoing philosophical debate about what happens when a tree falls in a forest and no one hears it. Does the falling tree make a sound?
Update: As if to prove my point, check out this headline in today's Inside US Trade:
World Trade Organization members are facing such fundamental differences and are at such a preliminary stage in their efforts to devise a work program to conclude the stalled Doha round that Geneva sources expressed doubts they can meet their July 31 deadline for establishing a detailed blueprint for potential negotiations.
In Geneva, the “tree” of the World Trade Organization (WTO) might be in danger of falling. It might have already fallen. Either way, very few seem to even care.
It’s a bit like watching a slow-motion disaster—a flood or a prolonged monsoon rain period that gradually overwhelms the landscape. In the case of the WTO, the consequences of drowning will be felt (like in many disasters) by the poorest and least able to cope members of the global community.
In working with British trade officials over the past two days, I have explained how the global framework for dealing with trade in services was built in the GATT/WTO. In the late 1980s, officials struggled with developing new rules to bring some structure, order and predictability to international trade in services. This was a very tricky task, since services cannot be easily seen or measured.
Yet clearly, some governments were putting up barriers both large and small that blocked the trade of services like engineering, architecture, medicine, education, travel and tourism, construction and so forth. At the time—in pre-internet days especially—it was not entirely obvious how some services could be delivered across borders easily.
Officials had to devise systems to classify the mechanisms for providing services and then go on to discuss ways of opening up markets in services sectors and providing fair treatment of foreign service providers. These discussions required creativity and boldness and a willingness to try something different.
However, since it was all so new, as the last big round of trade negotiations finished, most governments were reluctant to commit very much in the new General Agreement on Trade in Services (GATS). As a result, from the moment the Uruguay Round ended, services were placed on the “built-in agenda” for further discussions the next time the new World Trade Organization met for trade liberalization negotiations.
It’s been 20 years and we are still waiting for the next round of global services talks.
The rest of the WTO agenda remains equally stalled. No new rules have been written for vast swaths of trade at the multilateral level in more than two decades. The Doha Development Agenda (DDA), launched with great fanfare in November 2001, has gone almost nowhere.
But it actually gets worse than that. The WTO General Council met in November 2014 and managed to achieve the following (after a nearly 20-year record of failure, missed deadlines, incomplete negotiations, and mounting costs):
Decides as follows:
• — Work shall resume immediately and all Members shall engage constructively on the implementation of all the Bali Ministerial Decisions in the relevant WTO bodies, including on the preparation of a clearly defined work program on the remaining DDA issues as mandated in paragraph 1.11 of the Bali Declaration.
• — As per paragraph 1.11 of the Bali Declaration, Members agree that the issues of the Bali package where legally binding outcomes could not be achieved, including LDC issues, shall be pursued on priority.
• — The deadline for agreeing on the work program mandated in the Bali Declaration shall be July 2015.
Seriously? The tree has fallen and cannot get up.
Let’s examine the evidence here. “Work shall resume immediately and all Members shall engage constructively on the issues.” Keep in mind that 160 governments are members of the WTO and many keep whole embassies full of staff members permanently based in Geneva to work on trade issues. These people have, surely, been working on something for the past 13 years. (If not, taxpayers really ought to monitor this much more closely.)
The WTO ambassadors agreed to create a program on the DDA. This is a trade agenda first prepared more than a decade ago. Business is utterly uninterested in rules of the trading game that might have been appropriate at the time but may be completely useless now. What good is it to discuss the rules and market opening for cassette tape players in a world increasingly ruled by smart phones?
Ambassadors said that they need a “clearly defined” work program to get to an outcome that hardly anyone cares about. This must surely be the very definition of futility.
The second bullet point (which is written so poorly that it does not make sense on its own terms) says that officials need to try to get to an agreement in areas where they were unable to get to an agreement. I suppose it could have been worse—it could have said something like, “We agree that we have agreed on a few items.”
Finally, it finishes with the statement that the work program will be decided in another 8 months. This is not the same thing as saying that we will finally finish the deal in a few months. This simply says that they might, possibly, given enough good will and constructive engagement, achieve a plan to discuss the things that they have been discussing for more than a decade.
Now, there are no doubt individuals who will fiercely argue that the WTO did or has, in fact, accomplished a bit more than I have suggested. The General Council has agreed on, for example, a different work plan to implement a deal that they all agreed they would implement on trade facilitation more than a year ago (the Bali declaration from December 2013). There was a little bit on food stockpiling and cotton.
But I think my broader point remains. Take a look at what was finally agreed on issues of importance to the Least Development Country (LDC) members:
Decides as follows:
1.1. With a view to facilitating market access for LDCs provided under non-reciprocal preferential trade arrangements for LDCs, Members should endeavour to develop or build on their individual rules of origin arrangements applicable to imports from LDCs in accordance with the following guidelines. These guidelines do not stipulate a single set of rules of origin criteria. Rather, they provide elements upon which Members may wish to draw for preferential rules of origin applicable to imports from LDCs under such arrangements.
That’s it. To help the very poorest members of the community, members ought to endeavor to use some guidelines. Not necessarily—mind you—guidelines actually developed by the very body that claims to create rules for global trade. But, rather, to use some guidelines as a starting point in crafting potentially individualized rules that apply only to each member.
There are so many tragedies here it’s hard to know where to start. However, when years and years of negotiations yield only the weakest set of guidelines for one part of one element of a deal aimed at the least developed members of a community, it is very hard to face the situation in multilateral trade with any sort of optimism. Whether or not this particular tree made a sound when it crashed seems to make very little difference.
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