The day after the WTO’s tomorrow

my Trade Tripper column for the 29-30 January 2016 issue of BusinessWorld:

It’s fair to say that international trade, as well as its main institutional engine -- the World Trade Organization (WTO), is at a crossroad. Not necessarily as dramatic as existence or oblivion but quite significant all the same. The ensuing outcome ultimately would be felt more by the developing countries, particularly whether the benefits of trade could help them sooner or much much later.

Certainly, many in the developed world would be happy to see Doha dead and buried.

But some, albeit qualifiedly, still see the value of Doha’s ambition. EU commissioner for trade Cecilia Malmström, writing for Politico (“Doha may be dead. Long live free trade”, 21 January 2016):

“First, since the Doha Round was launched in 2001, the world has changed economically, politically, and as the theme of this year’s Davos conference makes clear, technologically. Second, many of the issues at the heart of the Doha talks, which aim at improved trade rules focused on development and growth, remain essential. Third, the structures of the DDA [Doha Development Agenda] have not allowed us to reach a comprehensive agreement on most of these issues. We have had all the time in the world but have not managed to do it. Fourth, the WTO is still vital. Its comparative advantage is the most favored nation principle, which means each member should treat all others the same. This allows the WTO to set rules that apply everywhere. And these rules [are] upheld by a strong dispute settlement system.”

Setting Ms. Malmström’s conditions aside, I still say developing countries, like the Philippines, would do well to keep pushing for Doha. It would allow smaller countries valuable time to gather the ability to integrate better, with less pain as possible, into the multilateral trading system. It would also be an exercise in trust that the WTO membership is not engaged in a zero-sum game.

And particularly for the Philippines, this much is true: we need to develop an overarching national vision on international trade. The same, by the way, goes for defense. Our country’s development should not be made to depend on external motivation, spurred by international agreements rather than self-initiated legislation, as our more experienced policy makers advocate. No. We must develop our own strategy, for the long haul, drawing from our unique culture, situation, and history, formulated and then implemented in our own, our Filipino way. Regardless of any grad school gibberish, foreign relations will always be an extension of a country’s domestic policy, of its beliefs and values as a people.

Thus, while this column will not profess enthusiasm for special and differential treatment (both for developing countries and least developed countries), nevertheless, the Philippines should insist that development be the underlying theme of the WTO, at least for the remainder of this decade: capacity building, transparency, and market access (including, of course, the elimination of domestic farm subsidies).

It is there where developed countries should exert their focus on, rather than antagonizing poorer countries with constant demands for stricter and binding rules on trade facilitation, competition policy, investment, intellectual property, e-commerce, and digital trade. These should wait. There should be enough policy space to instead encourage countries to unilaterally do what’s best for their specific circumstances, while solidifying any further development gain that could be achieved under Doha.

Only after Doha has been achieved should the WTO move on from it. And only then will it be proper to agree to a practical (rather than theoretical) acceptance of the fact that international trade is different now than a decade ago.

Aside from goods (and even services) no longer following the one country-selling/one country-buying model, more tellingly (as Jon Huntsman, “The Future of Global Trade”; Wall Street Journal April 2015, relates):

“Trade flows will reflect the realities of global power as well as demographics. The Pacific will no longer be the dominant trade hub. Instead, the focus will shift to the Indian Ocean region, which upward of eight billion people -- mainly in China, India, and Africa -- will call home. The US may not be in a position to influence trade the way it did. For the past 200 years, Britain, after the Industrial Revolution, and the US after the two world wars, fought for an open trading system to promote growth. None of the emerging countries have thus far shown that same commitment, even though they -- particularly China -- are increasingly setting the pace in world trade.”

In the meantime, studies should be made -- with a view to minimizing the trade distorting effects -- of domestic regulations that remain to operate beyond the pale of international trade agreements: burdensome language issues, inconsistent rules between one local government unit to another, and local corruption.

Finally, and this with the Philippines specifically in mind, the WTO should learn to assist countries get rid of smuggling. This has politically (illogical, I know) resulted in local citizenry’s distrust of international trade, as well as rendering inutile trade remedies such as anti-dumping or safeguards.