Will the WTO Bali conference advance the Doha Round and Asia?

Matthias Helble, Ganeshan Wignaraja 13 November 2013

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Trade negotiators from Asia and elsewhere are locked in intense negotiations to lay the platform for a Doha trade deal at the WTO Ministerial Conference in Bali, Indonesia, 3–6 December 2013. A new WTO Director-General, a ministerial venue in an influential Asian country, the risk of eroding WTO credibility, and the advent of mega-regional trade agreements have all enthused and motivated trade negotiators. This article assesses what the Bali Ministerial Conference might reasonably deliver, and how this may advance the Doha Round and Asia’s trade.

What should the Bali Ministerial Conference achieve?

The WTO Doha Development Round was launched in December 2001 to improve the international trading system by further lowering trade barriers and by revising certain trade rules. Projections using computable general equilibrium models suggest that a comprehensive Doha deal would bring world income gains in excess of $280 billion, with notable gains for Asian countries (Hufbauer, Schott, and Wong 2010). The ambitious work program covered around 20 areas of trade, and negotiations made progress until December 2008, when the trade talks stalled over a discord between the US and India over agriculture (Bhagwati and Sutherland 2011, Baldwin and Evenett 2011). Since then, interest among WTO members in the multilateral route for trade liberalisation has gradually waned. Many countries – including some in Asia – chose to sign regional trade agreements to reduce trade barriers and improve trade rules (Plummer 2012).

After unsuccessful attempts to re-launch the negotiations at the WTO Ministerial Conferences in 2009 and 2011, the meeting in Bali represents another opportunity to bring WTO members back to the negotiation table. The new WTO Director-General Roberto Azevedo might provide fresh impetus – convincing Members that multilateral trade liberalisation is not only the best option, but also remains doable. In the most optimistic scenario, the Bali Conference would thus be the starting point for renewed interest in the Doha Round, and mark a restarting of multilateral trade negotiations (Banerjee 2013).

What might the Bali Ministerial Conference achieve?

Current negotiations in Geneva to prepare for the Bali Conference are intense, and WTO Members are apparently converging around three key deliverables for Bali:

  • First, the G20 group of developing countries has made a proposal to change the tariff-quota administration.

The basic idea is to modify the rules about how quotas can be distributed, in order to prevent the allocation method from constituting a trade barrier. An agreement would thus increase transparency and facilitate market access for quota-restricted products. At present, there is an apparent consensus among WTO Members around the issue of improving information-sharing. However, there is ongoing debate about how disciplines should be tightened, and what sort of special treatment should be granted for developing countries.

  • The second key deliverable for Bali is trade facilitation.

Pushed hard by developed countries – especially the US and EU – the text aims at accelerating cross-border trade entries by increasing transparency, harmonising customs procedures, and improving trade infrastructure. The main sticking point is on how to balance the obligations of developing countries and the assistance granted to them. In this context, at the annual IMF/World Bank meetings in Washington in mid-October 2013, the IMF, the World Bank and the regional development banks (including the Asian Development Bank) announced that they would cooperate with the WTO to ensure that developing countries would receive assistance to meet the new trade facilitation commitments.

  • The third issue that is at the heart of the current negotiations in Geneva is a proposal introduced by the G33 group of developing countries on stock holdings for food security.

The proposal suggests that governments in developing countries would be allowed to purchase unlimited food at government-set prices (not market prices) with the objective of stocking it for food security purposes, without this being considered as trade-distorting domestic support. The strongest supporters of this proposal are large Asian countries – namely China, India, and the Philippines – which all have food security schemes in place for the poor. Since it seems to be difficult to agree on amending the Agreement on Agriculture by December, WTO members lean towards agreeing on a so-called peace clause, which would give developing countries a temporary waiver from being challenged under the Agreement.

What does this possible outcome mean for Asia?

Agreeing on the above-listed deliverables at Bali will likely reduce trade barriers and improve trade prospects for Asian countries. It is, however, difficult to predict the nature and magnitude of these improvements.

The first two issues – namely a reform of the quota administration and trade facilitation – should help to facilitate trade in Asia. However, several caveats need to be raised. First, only a small fraction of trade in the region is subject to quotas. Furthermore, the agreement would not abolish existing quotas, but merely make their administration more transparent and less burdensome.

With regards to trade facilitation, several developing Asian countries already have highly efficient customs. In the 2012 World Bank trade logistics performance index, six out of the top 30 performers were developing Asian economies – namely China, South Korea, Malaysia, Singapore, Hong Kong, and Taipei. Trade facilitation might therefore be more important for lower-income countries in Asia. The Bali package would reinforce existing efforts at the national and regional level to streamline customs and reduce red tape. The positive effects on trade will probably not materialise immediately, but rather in the medium-run. The main winners will be the lower-income countries around the world.

The trade effect of the third deliverable – namely introducing a waiver for disciplines on stock holdings for food security – is highly uncertain. Price-setting by governments and subsequent food stocking carries the risk of seriously distorting markets. In Asia, the main staple food that goes into food stocks is rice. Given the size of the rice market in Asian countries that might have recourse to the newly granted flexibilities, the rice market in the region might become heavily disrupted. Such an outcome would run counter to the initial idea of the Doha Development Agenda to create a more open, stable, and predictable trading environment.

Assessing post-Bali prospects

Even if the trade effects of the three deliverables only take effect in the medium- or long-run, agreeing on a small package in Bali would send the important signal that a multilateral agreement is still possible. It would thereby provide a strong incentive to resume negotiations of key parts of the Doha Development Agenda. Countries may thus redeploy their negotiation capacity from bilateral negotiations to the multilateral table.

The risk remains high, however, that no agreement will be reached at Bali, and that it will join the long list of failed Ministerial Conferences. Reflecting this scepticism, key WTO members seem to be opting to liberalise trade by negotiating so-called mega-regional trade agreements – including the Trans-Pacific Partnership, the Transatlantic Trade and Investment Partnership agreement, the Regional Comprehensive Economic Partnership, and the Pacific Alliance (Baldwin, Kawai, and Wignaraja 2013). The appealing option of mega-regionals raises doubts whether the deliverables described above provide sufficient incentives to forge a deal in Bali. Large countries might be unwilling to compromise, which would be to the detriment of countries that are not part of mega-regionals.

Hope has never fully vanished that the WTO Doha Round can be concluded, and neither has humour. Trade negotiators have often joked about 'Doha ha ha’. Let us hope that the 9th Ministerial Conference in Bali will not be remembered as ‘Bali(st) said, soonest mended.’

Disclaimer: The views expressed here are those of the authors and do not necessarily represent those of the institutions with which they are affiliated.

References

Baldwin, R and S Evenett (2011) (eds.), Why World Leaders Must Resist the False Promise of Another Doha Delay, London: CEPR.

Baldwin, R, M Kawai, and G Wignaraja (2013) (eds.), The Future of the World Trading System: Asian Perspectives, London: CEPR and ADBI.

Banerjee, C (2013), “WTO Bali Conference: A new hope for Doha Round”, The Economic Times, 7 October.

Bhagwati, J and P Sutherland (2011), “The Doha Round Setting a Deadline, Defining a Final Deal”, Final Report of the High level Trade Expert Group.

Hufbauer, Schott, and Wong (2010), “Figuring Out the Doha Round”, Policy Analyses in International Economics 91, Peterson Institute for International Economics.

Plummer, M (2012), “The Emerging Post-Doha Agenda and the New Regionalism in the Asia-Pacific”, ADBI Working Paper No. 384, Asian Development Bank Institute.

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Topics:  Global governance International trade

Tags:  WTO, trade, tariffs, Doha, Asia, trade facilitation, food security, Bali, tariff-quota administration

Economist, Economic Research and Regional Cooperation Department, Asian Development Bank

Director of Research of the Asian Development Bank Institute (ADBI)

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CEPR Policy Research