If you want proof that multilateralism is limping and hobbling, all you have to do is look at the latest ministerial of the World Trade Organization (WTO) held last month.
The talks ended without any consensus over a global trade deal, adding yet another episode to years of paused global trade agreements. It also amplified widening and irreconcilable gaps between the trade ambitions of rich countries and the developing world.
The stalemate closely follows the spectacle of another colossal multilateral failure: the United Nations’ impotent response to Israel’s genocidal war against Palestinians in Gaza and its ineffectual intervention in the pointless US-Israel war against Iran. This collapse of the global multilateral framework unfortunately presents greater risks for developing and poor nations.
The stalled WTO ministerial acted as a reminder once again of how rich nations have consistently sought to dominate global institutions and refashion global rules to the detriment of the developing and poor. Two examples from the latest failed ministerial highlight this anomaly.
The first was Brazil’s refusal to allow an extension of the duty-free electronic-commerce regime, which also found support from Turkey. Since the WTO system is based on consensus, Brazil’s refusal to sign on the dotted line led to the ministerial collapse.
The tariff moratorium on all electronic commerce transactions for goods and services has been in place since 1998, with exemptions renewed every two years.
US lead trade negotiator Jamieson Greer pushed the envelope this year by demanding a permanent customs duty exemption for all manner of e-commerce. Brazil counter argued that such a regime could adversely impact the digital sovereignty and policy space of smaller nations.
There is a US domestic political angle here that is worth considering.
The visible presence of multiple tech company leaders at Donald Trump’s swearing-in suggested a mutually profitable relationship. In return for their key role in supporting his campaign, one of Trump’s first presidential actions was to reverse a global tax deal that sought to rein in tax evasion by multinational corporations, especially tech companies; these companies usually scramble accounts to avoid paying taxes in countries of operations and book profits in low-tax jurisdictions.
Any ‘permanent’ deal to make e-commerce transactions exempt from duties is likely to benefit these companies and deprive developing countries of legitimate revenues.
The second instance was India opposing China’s proposed Investment Facilitation for Development (IFD) agreement. The IFD proposes to install a global legal framework that ties members to cross-border investment rules and procedures.
A draft agreement was finalized through a plurilateral arrangement under which 128 members, out of WTO’s roster of 166, approved the pact. India contended that the draft agreement should have been first discussed at the WTO, in keeping with the institution’s spirit of consensus, rather than a plurilateral agreement being presented as a fait accompli.
It was also felt that such an agreement would reinforce and formalize an iniquitous regime of rich rule-makers and poor rule-takers.
It is difficult to ignore the politics undergirding the IFD debacle. At a broader level, civil society organizations have criticized the agreement because it overwhelmingly burdens poor and developing countries with the onus of implementation, regardless of their institutional capacity and without any corresponding responsibilities outlined for the investing states.
At a more granular level, experts have pointed out that India’s objection is primarily focused on limiting the enormous gains that the agreement delivers for China’s Belt-Road Initiative (BRI), with a large number of the plurilateral signatories already BRI members.
India’s principled objection also points to a larger structural deficit in the multilateral trade body. A concerted sabotage of the Doha round of talks on food security by rich nations—with some support from the past WTO leadership—has left many unresolved issues on the table, some of which have significant consequences for citizens in poor and developing nations.
Successive ministerials with food security on the agenda have seen rich countries filibuster and eclipse the agenda with some new item every time, such as trade facilitation during the December 2013 Bali ministerial. India has repeatedly clashed with advanced nations over norms for public stockholding of foodgrains, but a permanent solution continues to elude members.
India has been using the peace clause, which allows developing nations to breach the public stockholding ceiling without any legal repercussions. This was, however, a temporary arrangement and India’s attempts to forge a permanent solution at every ministerial have met with renewed stonewalling.
The Western narrative of trade reform which overlooked a fundamental normative approach to combining trade with development, had ironically found many supporters in India. Hopefully, their opinions would have now shifted after the America’s unilateral tariffs and systematic choking of the WTO’s dispute settlement system.
A recent opinion piece in The Wall Street Journal pithily described US trade policy: “You can’t complain about the rules of the game after you stop playing and strangle the referee.”
The author is a senior journalist and author of ‘Slip, Stitch and Stumble: The Untold Story of India’s Financial Sector Reforms’ @rajrishisinghal