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WTO’s baby steps at Bali a big deal

by Pankaj Ghemawat 13. January 2014 03:09

Run the clock back on the last four rounds of global trade negotiations – arguably the four most ambitious ones attempted. The Kennedy Round in 1967 was followed by the conclusion of the Tokyo Round 12 years later, and the conclusion of the Uruguay Round another 15 years on.  Now, after 19 more years, we have not quite the conclusion to the Doha Round, but the Bali Package: a shrunken version of the ambitious original agenda. So, should we cheer about the agreement reached last month? Yes! For four reasons.

There is still a road to Doha. The world agreed to keep working toward global trade liberalization instead of refocusing entirely on regional and bilateral accords.  The most consistent critique of the Bali Package so far – that it simply kicked the can down the road on all the difficult issues – misses the point that without it, there wouldn’t be any kind of road to Doha. And as one WTO negotiator pointed out, it would be well into the 2020s before we might expect to see the conclusion of another global trade deal.

The baby can walk! Doha was the first trade round orchestrated by the World Trade Organization. All prior ones were conducted under the General Agreement on Tariffs and Trade – a stopgap arrangement reflecting the collapse of postwar plans to set up an International Trade Organization alongside the IMF and the World Bank. Without some kind of agreement at Bali, the WTO’s own future would have been in peril. It now has some credibility to continue to push the broader Doha agenda.

The steps already taken are important. In particular, the part of the Bali Package focused on trade facilitation promises real economic benefits if it is implemented well, potentially even larger than the $1 trillion typically attached to it. Cross-border trade is still subject to a lot of transaction costs. A 10 to 15 percent reduction in trade costs would be very large compared to the margins on which many exporters operate.

So is their potential psychological impact. Despite the gloom they engendered, the latest IMF forecasts still see the world growing faster between 2012 and 2018 than in the 1980s, the 1990s or the first decade of this century (largely thanks to emerging economies).  The big threat seems, therefore, to be not poor fundamentals but policy fumbles – e.g., the new round of budgetary squalls in the United States, or continued dithering in the Eurozone. Amidst all this, the Bali Package is a confidence-builder, especially since global trade’s post-crisis recovery stalled in 2012.

Beyond the cheering, Bali also exemplifies a set of lessons – and a worry – for future efforts at global policy coordination, particularly in relation to trade.

As documented in our Depth Index of Globalization 2013 released in November, trade is the international interaction that has so far experienced the biggest shift from advanced to emerging economies. Emerging economies already trade as much, relative to their GDPs, as advanced economies, while advanced economies remain four to five times as globalized with respect to capital and people flows. The effects: all the absolute growth in international trade since 2008 has involved emerging economies at one or both ends of the transaction. Emerging economies will require real representation in trade deals in particular. A corollary: get used to what the WTO calls “Special and Differential Treatment” for developing countries.

As these partners continue to gain prominence, there are concerns about the ability to find global consensus – small squabbles can lead to discussions falling apart entirely. This begs the question: might a “G20-plus” approach be sufficiently inclusive and less unwieldy than deal-making among 159 countries, as UNCTAD Secretary General Supachai Panitchpakdi once suggested? That might help turn baby steps into sustained forward movement.


General | Globalization


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