The World Trade Organisation (WTO) has arguably accomplished more in the past two years that it has done in the past decade.
Ever since the 2013 Bali package strived to salvage whatever it could from the Doha round, the WTO has negotiated some key agreements significantly removing barriers to trade – including the adoption of the trade facilitation agreement (TFA) last November. This year’s Tenth Ministerial Conference in Nairobi – the first one held in an African country – tackled three more issues: agricultural export subsidies, tariffs on IT products, and enlarged membership.
“Two years ago in Bali we did something that the WTO had never done before — we delivered major, multilaterally-negotiated outcomes,” says WTO’s director general, Roberto Azevêdo. “This week, here in Nairobi, we saw those same qualities at work. And today, once again, we delivered.”
Agricultural export subsidies ban
Nairobi’s biggest agreement relates to the phasing out of export subsidies for agricultural products. Developed countries have agreed to remove export subsidies on most products immediately, and developing countries have committed to do so by 2018. Each member country has an individually binding schedule outlaying the volume and budgetary commitment per group of products. Developing countries also retain flexibility in covering marketing and transportation costs for agriculture exports until the end of 2023.
“WTO members — especially developing countries — have consistently demanded action on this issue due to the enormous distorting potential of these subsidies for domestic production and trade,” explains Azevêdo.
The agreement also encompasses rules to prevent other policies disguised as subsidies. According to a WTO statement, these include terms to limit the benefits of financing support to agriculture exporters, rules on state enterprises engaging in agriculture trade, and disciplines to ensure that food aid does not negatively affect domestic production.
A ministerial decision focusing on cotton trade was also part of the agricultural measures discussed. Cotton from the least developed countries will be given duty-free and quota-free access to the markets of developed countries — and to some developing countries willing to give it — from January 1, 2016. Cotton is also one of the products that will be prohibited from receiving export subsidies.
IT tariff agreement
The Nairobi conference has also seen progress made on the timeline for tariff abolition of a list of 201 IT products which was agreed upon by 53 member countries in July. For every product on the list, the information technology agreement (ITA) participants have negotiated the level of reductions and over how many years it will fully eliminate the tariffs.
According to the WTO, the ITA will eliminate tariffs on approximately US$1.3tn of annual global exports of information and communications technology products. Approximately 65% of tariff lines are expected to be eliminated in the next six months. Most of the remaining tariff lines will be completely phased out in four stages over three years, meaning that by 2019 almost all imports of the relevant products will be duty-free, accounting for about 10% of global trade.
“The WTO’s deal to expand the ITA is great news for businesses that export or import electrical products. Trade in information and communications technology goods has thrived in the liberalised environment provided by the first iteration of the ITA back in 1996,” comments Stuart Tait, global head of trade and receivables finance at HSBC.
This is the first major tariff-cutting deal taking place at the WTO in 18 years. The ITA was first signed in 1996, but as technology developed, it became clear that the list of products needed updating. Negotiations to expand the agreement coverage have been ongoing since 2012.
Liberia had been working incessantly to fast-track the application made in 2007 in an effort to boost the country’s growth and development and post-Ebola recovery plans. It has until June 15, 2016, to ratify the membership deal and will be declared a fully-fledged member 30 days after notifying the ratification to the WTO director general.
Classified as a least-developed country like Liberia, Afghanistan was also welcomed into the organisation, completing a membership application that started in 2004. “Afghanistan’s WTO accession is a clear sign for all the world to see that the country is building a business-friendly environment. I am confident that WTO membership will contribute to establishing a firm foundation for Afghanistan’s future development and prosperity,” says Azevêdo.
Mohammad Khan Rahmani, Afghanistan’s first deputy chief executive, believes that WTO membership will contribute to the country’s development, reducing extremism and fostering regional peace and security. “Trade-led growth will create new economic opportunities and jobs, especially for women; it will reduce poverty, and increase prosperity,” he says.
Iran has taken the ministerial conference as a chance to put forward its membership application. “We are taking the next step towards integrating more deeply into the global economy […] Finalising WTO membership is a priority for the Iranian government. As the largest non-member economy in the world, our full membership will be win-win for all and a significant step towards creating a truly universal organisation,” Iran’s industry minister Mohammad Reza Nematzadeh told the delegates.
The WTO ends its ministerial conference enlarged and invigorated by the progress made, but the years ahead remain challenging. The 2001 Doha round’s priorities are fading, while the 2013 Bali package has yet to reach the necessary 108 member countries ratifications that would enable its implementation. Bickering between developed and developing countries regarding free trade versus protectionism remain unsolved. At the conference’s closing ceremony, Azevêdo summed up the issue at hand: “The world must decide what path this organisation should take.”