Packaging Bali

is my Trade Tripper column in this weekend issue of BusinessWorld:

International trade does sometimes come up with surprises. Although the quality of the surprise is another matter. In any event, the 9th Ministerial Conference in Bali, Indonesia of the World Trade Organization (WTO) did try monumentally hard to live up to its hype. Say what you will, those engaged in international trade do have a flair for the dramatic.

With the shadow of past collapses looming, particularly the ghost of Cancun, negotiators agreed at the last minute (is there any other way?) to the "Bali Package." It essentially consists of 10 past agreements made at separate previous Ministerial Conferences and covers the areas of food security, trade facilitation, cotton, and preferential treatment for poorer countries.

The Package also contains provisions on the lowering of tariffs and agricultural subsidies, the inclusion of which nearly derailed the proceedings. In the end, India decided to go along but not after securing certain exemptions for its own agricultural subsidies.

Trade ministers certainly tried to put on optimistic faces regarding Bali’s conclusion. Our own Trade Secretary Greg Domingo, in an interview with local media, said that "overall, the Philippines will benefit from the Bali package. Under the agriculture agreement, developing countries like the Philippines will be able to maintain and expand its public stockholding for food security free from WTO dispute."

But, really, the significance of the Bali Package could only be considered suspect when you have commentators wryly concluding it was "better than nothing." DW’s Rolf Wenkel certainly thinks so, albeit with certain qualifications: "Many observers might see the compromise with India as a bad deal. But on the other hand the compromise is what made the Bali agreement possible and this will bring plenty of advantages in many other fields -- not just for a small number of countries like in regional agreements but for 159 countries around the globe. And that’s not just better than nothing but a historic success in the fight against protectionism."

On the other hand, Bloomberg reportage on the deal makes it appear as merely something to "buy time": "‘A successful Bali buys the WTO time to prove that multilateral trade talks can be productive on a regular basis and in a timely manner,’ said Terence Stewart, a trade lawyer based in Washington, in an e-mail yesterday. ‘The risk is that members will not address the underlying issues that have crippled the organization’s ability to respond to the changing business environment.’"

In short, the Bali Package doesn’t end anything, doesn’t conclude anything, but merely, in keeping with the "bicycle theory" of international trade, keeps the negotiations moving along in the hope something turns up in the future.

But even within that context, the significance of Bali is still dubious. Reuters had occasion to get the comment of Simon Evenett, professor of international trade at the University of St. Gallen in Switzerland, and his assessment was that "beyond papering over a serious dispute on food security, precious little was progress was made at Bali. Dealing with the fracas on food security sucked the oxygen out of the rest of the talks."

Two considerations also need to be made regarding the Bali Package. The first has to do with the fact that the same needs to be approved by each individual WTO member governments before it becomes effective. In that regard, that India has an upcoming general election next year and with US President Barack Obama still without Trade Promotion Authority (and with an upcoming mid-term Congressional elections coming in 2014 that the Republicans are poised to gain advantages in) may even lead to possible delays in any eventual actual application of the Bali Package.

The other is the effect that the Bali Package has on the Trans-Pacific Partnership Agreement (and vice-versa). The TPP is an expanded version of the 2005 Trans-Pacific Strategic Economic Partnership Agreement and currently includes as parties or potential parties Australia, Brunei, Chile, Canada, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States, and Vietnam. Japan and China are also considering or being considered for TPP membership.

Australia’s Trade Minister Andrew Robb, although lauding the Bali Package as making it easier for trade in goods due to the trade facilitation provisions of the agreement, nevertheless was quoted by the Financial Review as saying that the WTO deal will "not influence" ongoing negotiations for the TPP.

And there lies whatever significance Bali may have. Because, as the Wall Street Journal pointed out, immediately "after reaching a deal in Bali, several trade officials traveled to Singapore to work on a regional trade pact involving 12 Pacific Rim countries, known as the Trans-Pacific Partnership."

The best way to ensure "developmental" success for developing countries is through multilateralism. But, as your Trade Tripper presciently wrote last week, if the developed countries won’t "practice what they preach, then just expect Bali to be declared a ‘success’ simply because of small agreements like trade facilitation," to the detriment of poorer countries like the Philippines.