What Lies at the End of the Road?
Updated at 1387216165

This post is the first in a series of expert opinion pieces on the conclusion of the Bali package.
By David Laborde and Luca Salvatici

The 9th Ministerial Conference of the WTO started with a general feeling that a lot was at stake. Several participants, including the WTO DG, expressed their fear that a “no deal” in Bali would be a fatal blow for the institution. The sense of urgency may have been deliberately exaggerated in order to facilitate an agreement, but the shadows of several regional mega-trade agreements under negotiation (US-Asia with the TPP, EU-US) loomed large.

In a recent post, Eugenio Diaz-Bonilla commented on India’s desire to protect its (and the other developing countries’) right to use large-scale public stockholding policies. In Bali, India continued to take a tough stance on the issue, arguing for a long-term guarantee that no complaint will be lodged with the WTO until a permanent situation to the public stock holding issue is found – in other words, a peace clause without an end date. This issue dominated the negotiations, mostly centering on India and the US.

Finally, the US gave in to India’s request and a deal was concluded, notwithstanding an eleventh hour attempt by five Latin American countries (Bolivia, Cuba, Ecuador, Nicaragua, and Venezuela) to gain further concessions by withholding their consent. While the Bali package may be more a pledge for a better future than a concrete deal, it should be acknowledged that it is the first global deal agreed upon since the WTO’s creation in 1995.

The economic benefits mentioned in the press – with some estimates claiming that it would add $1 trillion to the world’s income and could create up to 18 million jobs in developing countries (such as this article from the International Chamber of Commerce) – are largely overstated. These benefits would accrue from the trade facilitation component of the package, which is expected to lower costs and prices for both firms and consumers, but the estimates are based on a potential scenario that is much richer, deeper, and more concrete than the Bali package. Moreover, it is worth recalling that, even if trade facilitation does not require the reallocation of resources to reap potential economic gains, as in the case of trade liberalization (e.g., lowering tariffs), there are some up-front investment costs that would have to be incurred in order to obtain any benefits.

More generally, it is not clear what the legal binding value of the Trade Facilitation framework will be, since it also includes language saying that developing countries will not be required to implement the commitments unless they receive the technical assistance needed to do so. Even if the amount of trade assistance currently available through the international development community would allow developing WTO members to meet their TFA obligations (Martin and Mattoo, 2011), commitments may need to be made on a “best endeavor” basis. This would nullify many of the agreement’s potential benefits, since “best endeavor” often results in non-implementation.

The package also includes a host of other issues, such as provisions regarding least developed countries (including cotton, rules of origin, and duty-free quota-free) and a political commitment to reduce export subsidies in agriculture. Still, these represent just a fraction of the outstanding issues in the Doha Round negotiations, and it is not clear if we are ever going to complete them.

In any case, the Bali outcome may have a much greater systemic value: that of reinstating confidence in the WTO’s negotiating abilities, showing that members are still committed to the multilateral process. This is good news since the focus had already begun to shift from the WTO to regional agreements, and since if the WTO’s negotiating role falls into abeyance, its Members are also less likely to respect its “judicial” function - the Dispute Settlement Mechanism.

It is also important that crucial players, such as the US, refrained from asking for a ‘clean slate’ and accepted that past efforts are to be considered a solid base of negotiations. The fact that US negotiators proved their commitment to delivering is especially important given that the US government still lacks the authority to send any negotiated trade agreement to Congress for a straight up-or-down vote, eliminating the possibility of filibustering or amendments by lawmakers (the so-called “fast track”). This, together with the definition of a tight 2014 work program for committees and negotiating groups in the Geneva, may hold some promise for the future of the Doha Round.

All in all, we think that the most important lesson learned in Bali is that there are valuable agreements within reach, and it does not make sense to miss them in order to comply with the principle of the “single undertaking” – that is, that nothing in the Round is agreed until everything is agreed. It may be that we can still take the low-hanging fruits without abandoning the other issues, but looking at the road ahead, the WTO should be quite happy to continue providing other “packages” like the one delivered in Bali.

References
Martin, W., and A. Mattoo. 2011. Unfinished Business: The WTO’s Doha Agenda. London: CEPR and World Bank.