The pitfalls of multilateral pragmatism
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When the merits of free trade and continued trade liberalization are being seriously challenged, an idea hamster is always welcome if he or she offers new insights. “We are beginning to turn the corner into what could be one of the most exciting periods in the history of the multilateral trading system,” US trade representative Michael Froman said during a lecture at the Centre for Trade and Economic Integration of The Graduate Institute in Geneva on 17 October. “There is a fairly broad consensus that we need pragmatic multilateralism, one which recognizes that the world has changed significantly in the last two decades, that some developing countries (China, India, Brazil, South Africa and Indonesia) have become globally competitive emerging markets, leading economies, and with that increasing role in the global economy comes increasing responsibilities.”
Revitalization of the global trading system, Froman suggested, depends on how quickly members of the World Trade Organization (WTO) pursue “multilateral pragmatism”—targeting multilateral outcomes where consensus is possible but seeking plurilateral (countries in the coalition of the willing) solutions where divisions persist. The US, he suggested, is ready to pursue high-standard agreements at the multilateral level instead of agreements based on the lowest common denominator. He mentioned several issues ranging from US President Barack Obama’s decision to go beyond the Doha trade negotiations to explore fresh and new approaches to trade, and criticism of countries when they fail to implement rules. China’s trade-distorting farm subsidies to the tune of $100 billion that go beyond its WTO limits is a major problem, Froman said.
The US trade representative showered praise on “Amina Mohamed (Kenya’s cabinet secretary) and Roberto Azevedo (WTO’s director general) for shepherding that process” at the WTO’s 10th ministerial meeting in Nairobi—“which represented a critical turning point in the history of the WTO”.
Pragmatic multilateralism enabled the Trade Facilitation Agreement at the Bali ministerial meeting in December 2013, agricultural export subsidies and a range of issues at Nairobi. “The record of compliance (by members) with the WTO requirements for transparency and disclosure is nothing short of abysmal,” Froman said, while mentioning Washington’s active participation in the WTO dispute settlement process.
The top US trade official made a strong case for addressing issues in e-commerce, small and medium enterprises, and fisheries subsidies. The WTO’s 11th ministerial meeting next year in Buenos Aires, he said, will “require putting ideology to the side and being pragmatic—stepping away from rigid notions of who is a developing country and what are their responsibilities, and focusing less on antiquated snapshot of the past than on the challenges of the present and the opportunities of the future”.
Froman’s illuminating lecture expectedly provoked several questions at the meeting. Chinese trade envoy Yu Jianhua pointed out that Beijing provides less than $100 as subsidy per farmer annually while the US provides more than $20,000 per farmer annually. Froman was posed other questions, such as when the US will comply with the WTO’s dispute settlement rulings in half-a-dozen cases in which Washington has not implemented the rulings for more than 10 years, and whether the US is ready to address more than $150 billion of subsidies that it provides in the Green Box (exempted from WTO rules), which cause trade distortions, according to several studies.
Froman chose to sidestep Washington’s lack of compliance with the WTO’s dispute settlement body rulings while suggesting that Green Box subsidies are allowed under the Uruguay Round rules. When a journalist pointed out that the question on compliance with WTO rulings had not been answered, he admitted that the US is not “perfect” in complying with rulings in some cases.
Indeed, when the history of the Doha trade negotiations is written, there will be several interesting accounts of the role played by key members. But only one member will hog the limelight for wrecking the Doha negotiations after launching them along with the European Union and other industrialized and some developing nations immediately after the 9/11 terrorist attacks.
That member was not prepared to reduce its trade-distorting farm support, which wreaked havoc on millions of cotton farmers in four West African and terrorist-infested countries—Mali, Chad, Benin and Burkina Faso. That member left the Doha project and opted for the Trans-Pacific Partnership agreement in 2008 because it could avoid reducing its trade-distorting farm subsidies while securing maximum market access for its agricultural and livestock products such as beef, rice and other items in the Japanese and other markets.
That member also blocked negotiations on harmonization of non-preferential rules of origin since 1998, and thereby, denying the benefits of the so-called Trade Facilitation Agreement.
Significantly, the day after Froman delivered the lecture on “multilateral pragmatism” and extolled the benefits of e-commerce, the African countries spoke their mind. “With over 68% of people in Sub-Saharan Africa living without electricity and one in five people using the Internet, the facts and figures paint a stark picture of where Africa stands,” said Morocco on behalf of 54 African countries at the dedicated session on e-commerce at the WTO on 18 October.
“The digital divide and infrastructure deficit indicate that most of Sub-Saharan Africa, which is comprised mostly of LDCs (least-developed countries) is not e-commerce ready,” Morocco said.
Indeed, this is the case with other developing countries in Asia and South America, too.
Therefore, multilateral pragmatism can neither be a one-way street, nor embrace a one-size-fits-all approach.