WTO Ministerial: A Time for Reflection in Nairobi on the Future of Global Trade

10 December 2015

Within a matter of days, trade ministers will gather together in the Kenyan capital city of Nairobi for the WTO’s Tenth Ministerial Conference, marking the first time that the global trade body’s highest-level meeting will be held in sub-Saharan Africa.

The occasion will also allow for a celebration of the WTO’s 20th anniversary, as well as giving ministers a chance to agree on a possible set of deliverables from the areas of agriculture, development and least developed country issues, and “rules,” as well as chart the course of the international organisation’s future work – particularly regarding the Doha Round and so-called new issues.

Beyond the fanfare, however, is the worry that months of preparations and negotiations may all be for naught. Headed into this year’s ministerial, disagreements among WTO members both over the content of various specific deliverables – as well as how to address the organisation’s future negotiating work – remained unresolved, leaving ministers with some very difficult decisions to make in the days ahead, as well as in the months and years to come.

Meanwhile, the structure of trade governance is changing rapidly, leaving questions over how - and if - the global trade club will be able to respond and appropriately adapt.

As the world turns, what role for WTO?

The Doha Round negotiations just hit the 14-year mark last month, having been launched in the Qatari capital in November 2001. At that stage, WTO members were aiming to wrap up this new round of negotiations – designed to have development at its core – by January 2005.

The years since, however, have taught WTO members a strikingly different lesson with multiple high-profile failures and stalls in the negotiations. The adjectives and metaphors used to describe the Doha talks in recent years have now become familiar in their negativity: the Round is struggling, stalled, moribund, a zombie, or just plain dead. The inability to update global trade rules has, in turn, fuelled fears that the challenges of the Doha Round would eventually drive the organisation into irrelevance, unable to adapt to changing realities.

Whether the original Doha mandate fully addresses the needs of the world of today - versus that of 2001 - is another question being raised in some trade circles. Abandoning it, however, has been referred to as untenable by others.

Global trade realities have indeed altered significantly in the WTO’s 20 year history. The WTO has gone from the 128 signatories of the General Agreement onTariffs and Trade (GATT) in 1994 to 162 members, with Kazakhstan the latest to enter the organisation on 30 November of this year.

China, which joined the WTO in 2001, has now become the world’s largest exporter. Developing countries, particularly emerging economies such as Brazil, Russia, India, China, and South Africa, are playing an ever-greater role in world merchandise trade, according to this year’s edition of the WTO’s International Trade Statistics.

Regional and bilateral trade deals are also on the rise, with 619 being notified to the international organisation as of this month, with over 400 of these in force. “Mega-regional” pacts, such as the recently-concluded Trans-Pacific Partnership (TPP) negotiations, have drawn particular notice for their potential commercial impacts and their forays into areas not traditionally dealt with in trade deals.

Average applied tariffs, meanwhile, have dropped in half– from 15 percent in 1995 to less than eight percent today. Trade volumes have doubled, though recent years have shown worrying signs of slowing trade growth in the wake of the global financial crisis. Meanwhile, the digital economy has taken off, with electronic commerce being credited for slashing trade costs and boosting cross-border trade, thanks to the advent of new technologies and the internet.

As the global economy continues to evolve, the Doha Round, otherwise known as the Doha Development Agenda or DDA, has meanwhile showed comparatively little progress, with some critics calling it a drag on the organisation’s work, reputation, and potential while criticising the scope of its mandate as either too broad to yield an outcome or too narrow to address the rapidly-changing trade scene.

As a result, the global trade body as a whole has repeatedly been said to be arriving at a crossroads, despite the fact that the organisation’s other key pillars – trade monitoring and the work of the WTO’s regular bodies, as well as the dispute settlement system – have been widely applauded for their success.

Trade monitoring, for example, played a significant role during and after the 2008 financial crisis in boosting transparency on the trade policy measures being taken by WTO members, while in the area of dispute settlement the global trade body hit a notable milestone in November with its 500th dispute.

However, questions on how to build upon and improve the work of these other pillars, have been raised. The pace of notifications by members across various areas has proven slower than what was originally envisioned. The dispute settlement system, for its part, has essentially been a victim of its own success, now facing a caseload that in both number and complexity calls for more resources than what are currently available, leading to significant delays. This is now the subject of discussions between the membership and WTO officials on how to address such challenges.

Even so, the pace of the Doha Round negotiations still seem to capture the bulk of the headlines when it comes to the WTO – as well as the harshest scrutiny.

From post-Bali to post-Nairobi

After a series of high-profile collapses and setbacks, the 2013 ministerial conference in Bali, Indonesia, provided a brief reprieve from these criticisms: ministers were able to announce that they had successfully negotiated the first global trade agreement since the WTO opened its doors in 1995.

This new deal, known as the Trade Facilitation Agreement (TFA), would ease customs procedures in order to speed up trade flows, while providing developing countries with technical assistance and capacity-building in order to implement these commitments. It also achieved a notable first for WTO agreements, in that the commitments adopted by members would be linked to their capacity to implement them.

Estimates on the economic impact of the agreement have widely varied, with this year’s World Trade Report placing the annual increase in merchandise exports at US$1 trillion once in force. When that entry into force occurs, however, is yet unclear, with only 56 WTO members having ratified the agreement at press time – just under half of the number required.

A handful of other deliverables relating to agriculture and development were also announced in Bali, although these were mainly non-binding. Perhaps most notable of all, however, was a commitment by ministers to reinvigorate the Doha Round trade talks, specifically by developing a “clearly defined” post-Bali “work programme.” Ministers agreed to prioritise areas that did not yield binding outcomes at the time and directed members to resume exploring options within WTO committees and negotiating groups for those issues not addressed at the conference.

The results from Bali were widely heralded as a shot in the arm for the organisation. Now, two years later, the momentum from the 2013 ministerial has been replaced by frustration in many quarters, as trade negotiators have struggled to overcome their differences, both old and new.

Earlier this year, members had attempted to return to the toughest issues of the Doha Round – agriculture, non-agricultural market access (NAMA), services, and rules – as they worked to craft the work programme mandated in Bali. These efforts, however, were unsuccessful, after members were unable to resolve disagreement over issues such as whether to use the 2008 draft texts in agriculture and NAMA – and if so, to what extent – as well as what ambition to aim toward in time for a 31 July 2015 work programme deadline.

With such a troubled history and low expectations, what are the actual stakes for the upcoming Nairobi meeting? Will ministers be able to reach an outcome that can draw back the interest of those stakeholders who have largely written off the WTO’s negotiating function, or will the global trade body’s 162 members instead be entering uncharted waters, without a clear course to follow or significant deliverables to applaud?

Key in answering these questions, at least partially, is how members address in their planned “ministerial declaration” the Doha Round, the future work of the organisation, and so-called new issues that do not currently fall within the scope of the negotiations’ mandate.

Some major traders, such as the US, EU, and Japan, have been opposing specific language referring to the reaffirmation of the Doha ministerial declaration and subsequent ministerial outcome documents, as well as language regarding the continuation of the Doha Round, expressing an interest instead in discussing those same topics outside of that framework, together with exploring newer issues.

Meanwhile, various emerging economies and some developing countries, such as China, India, South Africa, Ecuador, Venezuela, and Indonesia, have publicly proposed language in the declaration that would include a reaffirmation of the Doha Round and the ministerial declarations and decisions taken since. Similar language has also been backed by the African Group.

New members, possible plurilateral outcomes

While most eyes will be on the multilateral discussions in Nairobi, some interesting signals could come from the “plurilateral” front. For one, a group of WTO members that has been working to expand the product coverage of the Information Technology Agreement (ITA) – a tariff-eliminating deal on various information and communication technology (ICT) goods – in order to bring it up to date with the times and commercial realities could be formally completed in Nairobi.

That group of members had already announced in July that they had reached agreement on a “product list” of over 200 goods to add to the ITA’s coverage. Since then, they have been negotiating to finalise the scheduling of the tariff phase-outs for these products, with a view to having an outcome ready to forward to ministers from that group in Nairobi.

Another tariff- cutting initiative, focusing specifically on environmental goods trade, has also been working toward reaching a finalised product list in the near-term, though sources indicate that this will not be ready in time for Nairobi and may instead be delivered at some stage in the coming year. This proposed pact, known as the Environmental Goods Agreement, was launched in the Swiss ski resort town of Davos in January 2014, with negotiations kicking off later that same year.

Two countries are also expected to be invited into the WTO during the Nairobi meeting, with both being least developed countries (LDCs). These are Afghanistan and Liberia, whose accession packages were approved ad referendum earlier this autumn.

The following set of briefings are designed to provide an overview of the negotiations that have taken place in Geneva, Switzerland, throughout 2015 in preparation for the Nairobi ministerial conference. These notes provide a brief recap of the relevant history of these negotiating areas, their respective mandates, and the state of play shortly prior to the ministerial.

 - The Bridges Reporting Team

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