FIRST SUCCESS OF THE WTO: THE BALI PACKAGE

INDONESIA-WTO-DIPLOMACY-COMMERCE-TRADE-ECONOMY

From left: Roberto Azevêdo, WTODirector-General and Gita Wirjawan, MC9 Chairman and Trade Minister, Republic of Indonesia on signing the Bali Package

Source: The Economist

For the first time since its inception in 1995, the WTO members rose to put their hands together for the successful conclusion of the Bali Package at its Ninth Ministerial Conference, the first multilateral trade agreement negotiated at the WTO. The Bali Package is not a proxy of beleaguered Doha round trade talks but rather it is an attempt to achieve some advancement on the Doha Development Agenda which aims at loosening trade barriers around the world, and thus facilitate development through increased global trade.

One of the most important features of the Bali Package was “trade facilitation”. Trade facilitation according to WTO is for cutting the red tape that slows the movement of goods and services across international borders. Such a move has been welcomed by businesses such as UPS who have to deal with plenty of checkpoints and restrictions in their operations. According to Pascal Lamy, the predecessor of General Roberto Azevêdo, a trade facilitation deal could give a $1 trillion boost to world economy. Though the developing nations are likely to gain the most from this deal due to more convoluted custom procedures than developed nations, there is no guarantee that the benefits would flow proportionately to developing countries. Also, poorer nations raised their concerns about being bound to rules that they might struggle to implement and demanded assistance for adopting new custom reforms.[1]

MDG :  WTO Ministerial Conference in Bali, Indonesia

Anand Sharma, Indian Trade Minister arriving at WTO conference in Bali, Indonesia

Source: The Guardian

Food security was considered one of the most crucial issues at the Bali’s meetings that alienated developing countries. On the one hand India contended that it ought to be allowed to pay its farmers higher than the market price for holding stocks of food, while other developing countries such as Thailand, Pakistan, and Uruguay argued that overpaid farmers in India could emasculate their own producers. The US also opposed and mentioned that India’s demands were against the spirit of the free trade talks. [2]

After the closed-door meetings a consensus was reached between countries wherein they agreed to a four-year peace clause, i.e. India’s food security measures won’t be challenged before December 2017. (The stockholding will be revisited after December 2017.) According to myjoyonline, an online multimedia group, this decision is the chink in the armor of the negotiation because data being used is derived from 1988 which does not adequately reflect the developing countries capacity as of today and therefore has little room for them to remain within agreed limits.

Measures were also taken for developing countries including preferential treatment for services provided by Least Developed Economies (LDCs). This will enhance LDCs involvement in global trade. However, there is no assurance that LDCs will be chosen. [3]

Tariff-rate quotas ensure that tariffs are lower on imports within the quota but high on imports exceeding those limits. This is essentially derived from the Uruguay Round and has not really made developing countries better-off. This has put onto the table for operationalization policies that were established earlier than the Doha Round and have been lost in the political negotiations of the Doha Round.

Accompanying rules of origin have been simplified which will guarantee that LDCs benefit from the preferential measures in case of products genuinely originating through them.

As evident from the chart below global trade agreements in the past haven’t made much of a difference to trade as a share of GDP.

graph blog

Source: Capital Economics

 

Policy makers will be hoping that post Bali things shall be different not only because it is WTO’s first real agreement but it actually helps all states particularly least developed nations who do not have much say in other multilateral frameworks.

 

Although the burden of complying to the Package may seem unfairly greater in case of developing countries as compared to developed nations, the waivers and preferential treatment to institute mechanisms that ensure quicker goods transit shall enable developing countries, particularly the least developed countries to increase their stake in the global economy rapidly than they could have independently.

 

The Bali Package is more rational and streamlined and with limited number of issues under discussion provides greater opportunity to developing nations to affect the outcome, thereby reducing the impetus to derail negotiations. The developing countries are likely to gain more from the Package in comparison to more restricted       and smaller partnerships such as Trans-Pacific Partnership in which developed nations brandish more power.

 

Indeed Bali Package is just a beginning for economic prosperity of the developed as well as developing nations.

 

References:

 

[1]& [2]http://www.economist.com/blogs/freeexchange/2013/12/world-trade-organisation

[3] http://www.wto.org/english/news_e/spra_e/spra7_e.htm

 

 

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