is the subject of my Trade Tripper column in this Friday-Saturday issue of BusinessWorld:
What probably got trade negotiators excited was
the decision to hold the next World Trade Organization (WTO) Ministerial
Conference -- the highest decision-making body of the WTO -- in sunny
Bali, Indonesia in December next year. But that probably is just to hide the fact that international
trade is not going to make much headway into the next year or so.
US jobs growth, as compared to unemployment rates, is such that not that
even US President Barack Obama can spin it to benefit his reelection
campaign. Greece is still a problem and people are looking warily at
China’s economy. Adding to this are the political uncertainties that
Syria, Iran, and North Korea are making.
The problem, at least as far as trade is concerned, particularly boils
down to the current US president, who seems more intent on scoring
political points rather than showing the global leadership that is so
sorely needed. As Jagdish Baghwati, writing for Handelsblatt,
pointed out: "the US killed Doha. Or at least put into Intensive Care.
The WTO Ministerial in November 2011 ended without concluding Doha, in
defiance of all the efforts that leading scholars and statesmen
worldwide had been making in its behalf. The astonishing thing is that
Doha was a multilateral-liberalization initiative; and ironically, it
was killed by President Obama who had ironically been awarded the Nobel
Peace Prize by Norway in the expectation that he would promote
multilateralism and turn his back on US unilateralism!"
This is so because "under the Obama administration, already under siege
from the labor unions who were hostile to trade, was resolutely opposed
to closing the Doha Round unless numerous concessions were made to
appease its business lobbies. Thus, Obama administration wanted Doha
Heavy: several demands for more concessions by others, especially the
major developing countries, including new concessions in services, were
to be negotiated.
"This meant, of course, that the conclusion of Doha would be put off by
some years: Doha would then be dead for all practical purposes. So, many
preferred to opt for Doha Lite: add a few concessions by the US and
India on agriculture (which had earlier been a sticking point: the US
concessions were inadequate and the Indian demands for special
Safeguards were excessive), some minor concessions in manufactures that
would appease difficult Congressmen in the US, and close the Round. The
long laundry list of concessions demanded but not negotiated would then
be handled by declaring a new Round of ‘unfinished agenda’ just as the
Doha Round could be seen as one, tantalizingly an Obama Round,
addressing the ‘unfinished agenda’ of the Uruguay Round. But this was
roundly rejected by the US."
In short, expect the US to go into protectionism mode for the next
couple of years at least. Which means that the rest of the world will
follow. As Pascal Lamy, WTO Director-General, reported last June: "There
has been no slowdown in the imposition of new trade restrictions over
the past seven months. Since mid-October 2011, 182 new measures that
restrict or can potentially restrict or distort trade have been
recorded, affecting around 0.9% of world imports. The main measures are
trade remedy actions, tariff increases, import licences and customs
controls."
And the expected repercussions are grim: "An uncertain global context is
still prevailing, and economic conditions may get even worse. The
recovery of the global economy remains weak and unemployment levels are
high. World trade growth decelerated significantly last year, due mainly
to the economic slowdown in major world economies. Merchandise trade
volume grew by only 5.0% in 2011, a sharp fall from 13.8% in 2010. As
the global economy continues to lose momentum, trade growth is projected
to slow further to 3.7% in 2012, well below the long-term annual
average of 5.4% for the last 20 years. Exports of developed economies
are projected to grow by 2% this year, and developing countries’ exports
by 5.6%. With tight government budgets, high unemployment, slower
growth, and the prospects of further imminent multilateral market
opening seemingly reduced, the threat of protectionist pressures looms
even larger."
The seeming reaction of countries is to resort to more disputes. To
date, this year, there has been around 14 disputes filed already, which
is a little high considering that the past years saw the number of
disputes peak at 19 for the entire year. Trade observers point out that
if this keeps up, we could see a record 24 disputes filed this year.
Normally, disputes are considered welcome developments. It indicates
healthy trade among WTO member countries (or else, why resort to
disputes?). At the same time, it indicates continuing trust in the WTO’s
dispute settlement system. However, this year seems to be different and
2012’s disputes are looked at with concern by those who’ve been
monitoring the WTO for years.
The effectiveness of the WTO dispute system and the benefits it allows
developing countries is something we’ll examine in succeeding articles.
