Running down that hill: A trade negotiator’s anxiety

1 June 2016

Life as a trade negotiator can be frustrating for many reasons. One of the main sources for this frustration is the contrast between the often glacial pace of multilateral trade negotiations, and the lightning speed with which actual trade in the real world develops.

I recently saw the classic Buster Keaton movie “Seven Chances”. This movie contains one of the most famous chase scenes in movie history. Keaton is trying to escape a large posse of wannabe brides (long story…), and at one stage he is running down a hill but, as he’s running, he accidentally sets a huge number of boulders in motion. As a result, he must desperately combine escaping his pursuers and avoiding the giant boulders at the same time.

It’s a hilarious scene but, in some ways, it reminded me of work (the boulders, not the brides). We try to make progress in our negotiations within the WTO but, at the same time, we are being bombarded with all of these new issues, perspectives and developments. Since we don’t agree on how we should tackle them, we tend to avoid them instead. This strategy is often questioned – with good reason – by the business community.

One of the biggest boulders currently on the move is 3D Printing (3DP). It is the subject of a recent report by the National Board of Trade, “Trade Regulation in a 3D Printed World – A Primer“. This report should be mandatory reading for all trade negotiators. It will not ease your anxiety – far from it – but it explains in a lucid and coherent manner what 3DP might mean for future trade and what role the WTO might play. As you start hyperventilating at the thought of everything that is going to change, the report works much like a friend, taking your hand, asking you to calm down, to take a few deep breaths and try to look rationally at this.

Many conclusions can be drawn from the report and some of them can, at first glance, even seem contradictory. On the one hand, 3DP is a new animal altogether. The line between producer and consumer is blurred; the long and complex Global Value Chains (GVCs) that we have studied so hard for the last decade or so are suddenly extremely short and simple; scale production is no longer connected to price; everything is customisable; and so on. And it must be a nightmare for an Intellectual Property lawyer.

At the same time the report shows that actually most of the WTO legal framework is still relevant. WTO rules are technologically neutral and, in general, the GATS still applies, as do other WTO agreements (GATT, TRIPS, etc). There are gaps that will have to be addressed, including the fact that the cross border element is partly eliminated; the principle of “like” products needs to be clarified; and data transfers will be even more fundamental. But the report points towards revising the rule book, not re-writing it.

However, one of the main takeaways from the report for me is not connected specifically with 3DP. Rather it serves as a very educational example of what we have now learned to call “servicification”.

Under the umbrella of the E15Initiative, several very interesting papers were written on services. Many of the ideas and proposals were conveniently summarised in the synthesis paper “Rethinking Services in a Changing World“. There is a lot of food for thought presented here. Some of it is both concrete and achievable, while some proposals might fall more into the “wishful thinking” box (though it is important that we revisit this box from time to time. After all, in the early days of the DDA, proposals to eliminate export subsidies in agriculture were dismissed as “wishful thinking”).

My firm belief is that the proposals collected under the heading “Towards Greater Compatibility Between Rules Governing Goods and Services” are the most important of all. It might not be the catchiest headline you’ve ever read, but its message is critical. The division between goods and services in trade today is increasingly artificial (which is equally true for investments), namely the servicification of trade and investments means that goods and services are interlinked. The level of the linkages can vary from complementary to completely merged, but they are almost always there.

For 3DP this is relatively easily illustrated since the GVCs tend to be shorter and more transparent. The basic issue, slightly simplified, boils down to this: if your regulations related to the software needed for 3DP are not compatible with the tariffs and regulations you have for the raw material needed, you have a serious problem. Add complimentary services such as support, electronic payments, etc. and you can have a real mess on your hands.

The E15 paper presents several helpful options to deal with this issue. One recommendation is to increase efforts on the analytical side since there is still a lack of understanding and awareness about this issue. Another policy option is to create some sort of mechanism in the WTO to deal with the parallelism between rule sets affecting goods and services.

Personally I don’t believe that it is realistic to hope for a more holistic way of organising our negotiations within the WTO. We are likely to be stuck with a committee structure that mirrors the existing WTO agreements for the foreseeable future. But that does not mean that we can’t deal with the issue itself. Maybe it can be done within the existing structure; maybe that structure should be complemented with a new mechanism of some sort. The important thing is that this discussion needs to take place. It has already started in some of the bilateral and regional trade negotiations that are currently taking place, but servicification is a perfect example of an issue that needs a multilateral approach. It is global in scale and scope and it is certainly not an issue for developed countries only.

A more holistic way of negotiating trade is not going to make life easier for trade negotiators, but it will substantially increase relevance, credibility and operationalisation. We can’t avoid all the boulders forever.

Daniel Blockert is the Swedish Ambassador and Permanent Representative to the WTO.