Trade negotiations – no big deal?

1 July 2016

The conventional wisdom in trade policy circles for some years now has been that the World Trade Organization (WTO) is incapable of moving ahead meaningfully on a modern trade negotiating agenda. It is too static and its membership too diverse. Multilateralism means paralysis.

The focus accordingly changed to “mega-regional” negotiations. Groups of more like-minded countries could get together and forge deeper relationships, breaking new ground in market access and rule-making in a way which was more relevant to modern business. These big trade deals would open up the way ahead.

There are now signs that this new path to building the future world trade order is more complicated than originally foreseen. Public opinion, particularly in developed countries, has turned against these large-scale deals, which are seen – erroneously or otherwise – as being driven by big business and political elites. Faced with accelerating globalisation driven by technology, many “ordinary people” feel a sense of alienation and insecurity.

Political rhetoric in western democracies is now beginning to reflect this backlash. In the short to medium term, the future of the Trans-Pacific Partnership (TPP) is uncertain. The Transatlantic Trade and Investment Partnership (TTIP) is increasingly controversial on both sides of the Atlantic. We do not yet know what the Trade in Services Agreement (TiSA) will look like in detail and how it will be received. Meanwhile, few expect the Regional Comprehensive Economic Partnership (RCEP) to be a truly ground-breaking agreement.

This is not to say that these deals are not worth pursuing. Quite the opposite. But these efforts need to be accompanied by a more balanced and inclusive approach to international trade policy. Many business organisations (such as the International Chamber of Commerce) repeatedly stress their continued preference for multilateral approaches.

In fact, the WTO has shown in recent years that it is capable of moving forward in trade negotiations. The Bali Trade Facilitation Agreement; the agreement reached at the last Ministerial Conference in Nairobi to eliminate agricultural export subsidies; and the revamped Information Technology Agreement (ITA) are the most recent significant examples.

But the WTO is always complex. The membership remains divided on the future agenda. The question now is, can the WTO build on the Bali and Nairobi momentum? Here are a few suggestions on the overall approach:

  • Avoid the Doha versus non-Doha debate; accept the reality that many Doha issues remain highly relevant while many other issues have been pending for too long.
  • Do not attempt to formalise a negotiating agenda or work programme. That is unnecessary. In-built informal WTO mechanisms will ensure that there is a balance in the subjects being processed.
  • Let the issues emerge from WTO Members. Those which have sufficient support will make it; others will not. In other words, “define by doing”.
  • Develop a framework narrative that can attract different constituencies and be inclusive. In this context, consider the concept of convergence on improved rules which will raise the incomes and living standards of all Members in line with the Sustainable Development Goals.
  • Look for areas for negotiate – both Doha and non-Doha – where there is space for reforms which do not cross domestic red lines.
  • Focus on commercial interest above ideology. More pragmatism is needed. This is particularly the case with regard to new non-Doha issues. There needs to be openness to non-committal exploratory work on potential major new subjects such as investment.
  • Consider slicing up the major stumbling blocks, such as agricultural domestic support and agricultural and industrial market access, and delivering small packages of results on a more regular basis. Incremental progress is better than waiting in vain for big deals.

A WTO operating along these lines could deliver gradual progress in trade negotiations across a range of issues in a way which is both meaningful to business and politically sustainable. WTO delegates have sometimes lamented a lack of business interest, but history shows that business does come back to focus on the WTO when it smells a deal. It would do the same with the prospect of a series of smaller deals. The inclusive nature of multilateralism can also, to some extent, defuse political opposition.

Manoeuvring the WTO onto this new track requires political leadership. Here, there may be a role for the G20 to play. G20 Leaders have, to their credit, paid a lot of attention in recent years to trade and the WTO. The institutionalisation of G20 Trade Ministers Meetings and the establishment by China, in its presidency role in 2016, of a Trade and Investment Working Group, indicate that this focus will continue. There are, it is true, concerns in some quarters about the inclusiveness, and thus the legitimacy, of the G20 but this should not constrain its ability to chart the general course ahead.

The very fact that G20 Leaders discuss international trade and the WTO is in itself hugely beneficial. However its membership is extremely diverse and it cannot be expected to micro-manage trade negotiations. Its limitations were exposed in its 2010 nugatory exhortation to “complete the end game” of the Doha Round.

Furthermore, the G20 has shown a propensity on occasion – for example at Brisbane in 2014 and Antalya in 2015 – to blame lack of movement in the WTO on institutional failings, as if the WTO were a broken machine that needs fixing. However, the WTO has demonstrated time and again that, whenever there is sufficient political will, it can devise effective solutions to reach trade deals. The creative architecture of the Trade Facilitation Agreement is the latest example. The fact is that it is very often substantive differences between major G20 countries which inhibit progress at the WTO.

These limitations are real but they need not prevent the G20 from setting the general tone and course of multilateral trade negotiations. The emphasis should be on medium- to long-term confidence building between G20 countries on international trade matters. Gradual convergence may even be fostered through techniques such as guidelines and best practices.

In present circumstances, with public opinion sceptical or even hostile to trade, the policy options available for using trade as an engine for growth and jobs are increasingly constrained. Incremental progress, multilaterally and inclusively through the WTO, is looking more attractive. The G20 can play a powerful role in setting the overall course and ensuring that the next WTO Ministerial Conference builds on the momentum of Bali and Nairobi.

Stuart Harbinson is an Independent Trade Policy Adviser.