WTO struggles for Bali summit trade agreement

Negotiators in Geneva are under mounting pressure to finalize a deal ahead of a WTO summit seen as a make or break moment for the body that oversees the rules of global commerce.

WTO struggles for Bali summit trade agreement
Photo: WTO

Roberto Azevedo, who took over as WTO director general in September, has vowed to spare no effort during last-ditch talks at its Geneva base, as diplomats struggle to craft a draft accord to ease barriers to global commerce.
The World Trade Organization’s 159 member economies are locked in what officials dub a “meat-grinder”, striving to bridge differences between rich countries, emerging powers and the world’s poorest nations over the concessions needed to yield a deal for a ministerial summit on December 3rd-6th on the Indonesian island of Bali.
“It is all or nothing now. We must tie the package up once and for all in the next few days,” Azevedo, Brazil’s former WTO envoy, told negotiators on Tuesday.
The WTO’s ruling body, the General Council, is scheduled on November 21st to decide whether it can put a deal on the table in Bali.
Trade sources said there is little prospect for real negotiation in Bali itself to seal a deal.
The summit is seen as perhaps the last chance to revive the WTO’s so-called “Doha Round” of talks, launched in 2001 in Qatar.
The round’s goal is to craft a wide-ranging global accord on opening markets and removing trade barriers, in order to harness international commerce to develop poorer economies.
WTO rules require such deals to be unanimous, but bitter differences over the necessary give and take have sparked clashes notably between China, the European Union, India and the United States, leaving the talks stalled for years and leading many countries to shift focus to bilateral and regional deals.
“I think the risk of failure is still present,” warned Azevedo, whose predecessor, Frenchman and former EU trade chief Pascal Lamy, was unable to secure a deal during eight years in charge of the WTO.
No results in Bali would mean no serious WTO negotiations for a long time, trade sources said, underlining that regional deals tend to involve rich countries or emerging powers, sidelining the poorest nations.

 ‘Either they hit the wall or pole-vault it’

“Since launching the round 12 years ago, the WTO has never met a deadline it liked,” Sergio Marchi, Canada’s former trade minister and former WTO envoy, told AFP.

“Now, the gig is up in terms of credibility,” Marchi said.

“Bali is the wall — either they hit it head-on, or pole-vault it,” he said.

“The public and business community are tired of the ongoing treadmill process. In Bali, I believe the WTO owes them clarity and candour,” Marchi said.

“Either agree on a substantive outcome or declare that the current Doha deal, as constructed, is dead.”
Negotiators have long written off the chances of Bali offering major Doha Round headway, and have sought lower-level accords that could be fed into the wider package later.
One is on “trade facilitation”, the crux of which is simplifying customs procedures, a move forecast to cut trading costs by 10 percent for rich nations and around 14 percent for the developing world.
Negotiators in Geneva managed Sunday to settle rules for cooperation between WTO members’ customs services.
“It is not perfect, but the core of an agreement is there,” said Azevedo, though “there remain some very hard nuts to crack”.
He said the “biggest iceberg” was the time-lag developing countries would get to smooth their customs rules, and the technical assistance they could expect from rich countries and international lenders such as the World Bank in order to do so.
Another division is over “food security”, pushed by India, under which developing countries want to be allowed to subsidize grain stockpiling to help low-income farmers and consumers.
India and like-minded nations argue that protecting the poor trumps rules on weaning WTO members off subsidies.
Critics, however, say there is a risk that despite stated noble intentions, stockpiles could leak onto the domestic or international market, skewing global farm commerce.
Other issues to be hammered out include “export competition”, or government financial incentives for exporters.
Developing countries want rich nations to make a firm commitment in Bali to slash payouts, seen as giving the wealthy world an unfair advantage in global trade.
“A big question mark hangs over this issue,” said Azevedo.
Officials underlined that the US, EU and Japan see it as a bargaining chip to be used down the path to a Doha Round deal.
Another major area of dispute are so-called “tariff quotas”.
Quota administration is highly technical, but has huge impact on trade, as it decides whether a product exported from one country can gain access to the market of another country at a lower, within-quota tariff.
“It’s very difficult to find middle ground when you have black and white, yes or no,” said a trade source.

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WTO slashes global growth forecast for 2015

Sluggish economies and global conflicts are taking their toll on world commerce, the Geneva-based World Trade Organization said on Tuesday as it slashed its trade growth outlook for 2015.

WTO slashes global growth forecast for 2015
WTO headquarters in Geneva. Photo: WTO

"For trade growth it is important that you have certain elements present in the global economy (including) stability, predictability, and those things are not there right now," WTO chief Roberto Azevedo told reporters in Geneva.
With economies around the world still struggling to fully recover from the 2008 financial crisis, and with conflicts flaring in places like Ukraine and the Middle East, global trade is expanding far more slowly than anticipated a year ago.
The Ebola outbreak in west Africa, unusually harsh winter weather in the United States and collapsing world oil prices are also taking their toll, as are strong exchange rate fluctuations, Azevedo said.
"All of these things have effects, sometimes destabilising effects," Azevedo said.
On Tuesday, WTO said preliminary estimates showed global trade had expanded just 2.8 percent last year and was expected to swell only 3.3 percent this year.
A year ago, the WTO was singing a different tune.
Last April, it had forecast that trade would expand 4.6 percent in 2014 and 5.8 percent this year.
But it downgraded those predictions in September, to 3.1 percent and four percent respectively, before slashing them further on Tuesday.
"Trade growth has been disappointing in recent years due largely to prolonged sluggish growth in GDP following the financial crisis," Azevedo said.
"Looking forward, we expect trade to continue its slow recovery, but with economic growth still fragile and continued geopolitical tensions, this trend could easily be undermined," he warned.
Last year was the third consecutive year in which trade grew less than three percent, WTO said in a statement.
In fact, trade growth averaged just 2.4 percent between 2012 and 2014 — the slowest rate on record for a three-year period when trade was expanding.
Trade growth is expected to pick up in 2016 with an expansion of four percent, it said, warning though that going forward, trade growth looks set to remain well below the annual average of 5.1 percent seen since 1990.

Slow recovery

"We are cautiously forecasting that trade will continue its slow recovery," Azevedo told reporters.
WTO acknowledged though that "risks to the trade forecasts are mostly on the downside."
Trade is a key measure of the health of the global economy, which it both stimulates and reflects.
But Azevedo warned Tuesday that a systemic shift might be under way and that trade expansion would no longer far outstrip overall economic growth as it has largely done for decades.
"The rough two-to-one relationship that prevailed for many years between world trade growth and world GDP growth appears to have broken down," WTO said.
The organization noted that "the 2.8 percent rise in world trade in 2014 barely exceeded the increase in world GDP for the year, and forecasts for trade growth in 2015 and 2016 only surpass expected output growth by a small margin."
Azevedo said that the 2015 forecast was based on an assumption that global GDP would expand by nearly three percent, while the 2016 forecast depended on economic growth reaching over three percent.
The International Monetary Fund announced later Tuesday that it expects to see global growth at a tepid 3.5 percent this year, and 3.8 percent next year.
WTO meanwhile said developing countries were expected to see exports rise 3.6 percent this year, while their imports were set to jump 3.7 percent.
In developed countries, exports and imports were set to rise just 3.2 percent, it said.
Asia was expected to have the strongest export rise at five percent, followed by North America at 4.5 percent.
The weakest export growth this year is predicted to come in South America with just 0.2 percent.