The first comprehensive free trade deal secured by the WTO has been met with a mixed response.
The Bali package, agreed at the 11th hour of negotiations this week, has been praised for pledging to improve trade facilitation, giving developing countries duty-free access to developed markets for 97% of goods and for allowing them to stockpile staple crops in order to improve food security. Supporters have claimed that it could add US$1tn to the global economy.
However, critics have latched onto the fact that much of the original Doha trade agenda was missing from the final agreement. So while it may make existing trade easier to conduct, it’s unlikely to drastically increase total world trade volumes.
Andrew Kenningham, global economist at Capital Economics, tells GTR that “contrary to many of the headlines, we think this weekend’s deal was a very modest achievement. The gains from trade facilitation are far less certain than they are from more traditional agreements to reduce tariffs or quotas”.
Some of the key issues not to have been addressed include the reduction of barriers to trade in manufactured goods, liberalisation of trade in services and unified rules around intellectual property.
Aline Doussin, a lawyer at DLA Piper and former WTO staffer, describes the Bali package as a “mini-deal”, but one which could prove positive for the multilateral system.
She explains to GTR: “I think the WTO needed a positive sign that it is still relevant. The whole idea of agreeing something from a political perspective is good, but it’s not enough. The next step is to agree on the more complex areas of negotiation that were set aside, including on treaty points, trade in industrial goods, etc.”
Doussin also claims that the agreement on trade facilitation, aimed at reducing the amount of red tape in clearing customs and therefore allowing trade to take place much quicker, is a significant achievement.
She continues: “On paper, if you talk to the common newspaper reader, they mightn’t realise how difficult it is for traders to trade with developing countries because of red tape, discrimination, problems with currency and so on – so it’s a big deal from a trade facilitation perspective. To what extent it will be fully-implemented then we will have to wait and see.”
WTO officials hailed the Bali agreement as “historic” and “landmark” and given the scale of the task at hand – having 159 member states at completely incongruous states of economic development agree on a global trade deal – it certainly represents an achievement in political terms.
The deal managed to get over the line despite opposition from some Latin American countries. Cuba led the dissenters, saying that the continuing US embargo on its exports flies in the face of any free trade agreement.
India, meanwhile, managed to hold on to subsidies for its agricultural sector, while the EU, Japan and the US have also refused to give up subsidies to the farming sector.
These issues are to be revisited in four years, with some saying that this basic agreement will buy the WTO – and the wider multilateral system – time to iron out the details further down the line.
Kenningham remains sceptical however, saying: “The fact that after 12 years of negotiations only such a limited agreement could be reached underlines that multilateral trade talks are all but dead. This is perhaps not surprising given that the WTO has 159 members, all of which have to agree to any deal, and that there are clearly political barriers to reaching an agreement on the most important areas.”