Photo: AFP
Photo: AFP

Corrosion of WTO’S mandate

WTO has done well as custodian of the multilateral trading system, but there have been a few 'corrosive' developments, as well as positive ones

“This is a very auspicious moment," says Roberto Carvalho de Azevêdo, as the World Trade Organization (WTO) celebrates its 20th anniversary. After being Brazil’s trade envoy to WTO, Azevêdo took over the reins at the trade body 19 months ago. The successful conclusion of WTO’s ninth ministerial conference at Bali, Indonesia, in December 2013, three months after he assumed office as director general, got his innings off to a positive start. “After an 18-year drought, Bali proved that the WTO can deliver negotiated outcomes," Azevêdo had said proudly, after the conclusion of the meeting on the shores of the Indian Ocean.

A binding agreement on trade facilitation to harmonize customs procedures across the world along with eight “best endeavor outcomes" (promising to do the best) in agriculture and development for the developing and least-developed countries raised a glimmer of hope that the Doha Development Agenda (DDA) negotiations can be turned around. DDA negotiations were launched in 2001 to enable the developing and poorest countries to integrate into the global trading system.

“2015 is going to be the year of great significance to the multilateral trading system," Azevêdo declared, at an unusual briefing convened by the Association of Correspondents of the United Nations in Geneva last week. Members, he said, are busy implementing all the results of the Bali package as well as working on the post-Bali work programme to conclude the DDA negotiations at the tenth ministerial conference in Nairobi, Kenya, later this year. He described the current phase of work among members as a “solution-finding mode" for addressing the difficult issues in agriculture and industrial goods. “As far as substance is concerned," he acknowledged, “we have challenges in the domestic support and market access pillars (of the Doha Agriculture dossier)."

WTO’s Dispute Settlement Body is functioning well and poised to hit the 500-mark for adjudicating trade disputes. Twenty-three new members, including countries torn by the war on terror such as Iraq and Afghanistan, are currently negotiating to join the trade body. All in all, WTO has done well as a global custodian of the multilateral trading system over the last score of years.

But a dispassionate assessment would, however, suggest a few “corrosive" developments, as well as positive ones. The biggest positive development was China joining WTO in December 2001. “The high watermark of multilateralism is marked by the accession of China to the WTO after the success of the Uruguay Round (which led to the establishment of WTO in 1995)," said a Western trade analyst. But since then, “there is a slow retreat from multilateralism—it is not a disaster yet but a source of considerable anxiety". WTO has essentially “plateaued" after China’s accession and if anything, its overall performance is a “C-minus", according to the analyst, who spoke on condition of anonymity.

The dispute settlement system, which is touted as a jewel in WTO’s crown, has functioned well despite some major resourcing problems. From brooms to aircraft, bananas to cotton subsidies, the controversial US zeroing methodology in anti-dumping trade spats (a calculation device used by the US to establish anti-dumping duty) to Havana rum trademark cases, and the removal of quantitative restrictions to shrimp-turtle trade frictions, almost every issue has been adjudicated. Of course, the US has the distinction of not complying with major rulings for over 10 years.

Azevêdo maintained that the dispute settlement system has worked well in 90% of the cases. But it is the non-implementation of the 10% of cases that could prove corrosive in the coming years, as it had happened with the wheat flour and pasta cases after the Tokyo Round subsidies code of 1973-79. Clearly, “one swallow doesn’t make a summer", said another legal analyst, suggesting that non-implementation implies that a trading elephant can simply buy its way out instead of implementing the rules.

Besides, “what is emerging, however, is a palimpsest of legal regimes: private arbitration, investment treaties, bilateral, regional, and multilateral agreements", said former WTO appellate judge David Unterhalter. “In this ever-shifting space, the project of multilateralism is not assured… If the WTO was to become but a historical commitment to a foundational set of rights and obligations, then the institution will wither, and with it, the system of dispute settlement," Unterhalter suggested in his farewell speech last year.

When it comes to the Doha negotiations, it is one of the great ironies that those who launched the round—the US, the European Union (EU) and other industrialized countries such as Norway and Japan—are not prepared to live with the mandate they had agreed to, on the grounds that the realities have changed.

Now, after 14 years of spasmodic negotiations, all the previously agreed decisions—the 2001 Doha agreement, the 2004 July framework agreement and the 2005 Hong Kong Ministerial Declaration—as well as the December 2008 draft modalities are set aside to enable one or two members to have their way. Significantly, “the December 2008 draft modalities (in agriculture) are the basis for negotiations and represent the end-game in terms of the landing zones of ambition", Azevêdo wrote three years ago, in his previous avatar as Brazil’s trade envoy.

But, in a burst of energy to conclude the Doha Round at the tenth ministerial conference, attempts are now being made to find out what one major industrialized country can live with in the disciplines for agricultural domestic subsidies. It is always credible to arrive at compromises by involving all key entities in the room—as the author of the last revised draft agriculture modalities, ambassador Crawford Falconer of New Zealand, did in 2008. (Falconer had arrived at those modalities after an intensive phase of negotiations with the four major members—the US, the EU, India and Brazil, which was then represented by Azevêdo.) Otherwise, there will be serious questions on the “integrity" and “credibility" of a process that produces a half-baked, gerrymandered outcome to put the Doha Round to bed. That would be a shameful and quiet burial in the night of a poor person in poverty. History would not be kind!

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