From Bali, with smiles

In international affairs what is considered as impossible sometimes happens but this was not expected of the ninth ministerial meeting of the World Trade Organisation (WTO) that was held in Bali, Indonesia last week. The meeting had such a track record of failures in the past that not even the most starry-eyed optimist set a great store by it. When the extended meeting ended with an agreement it was too good to be true. Some event compared the historic breakthrough with 'Black Swan', an event of low predictability with great impact.

The ninth ministerial-level summit of WTO was held in Bali with potential make-or-break implications for the body's global role. On the agenda were key trade issues that could lead to modest agreement keeping alive hopes that stumbling 12-year-old effort to slash international trade barriers would continue. In an opinion piece in the Wall Street Journal, WTO chief Roberto Azevedo billed the gathering of 159 (now 160) member countries as "the most important WTO meeting in years". He wrote, "At stake is not only a package of measures to boost the global economy but also the role of WTO and the multilateral trading system in global economic governance."

'The package of measures' referred to by the WTO chief was the Doha Round which seeks to overhaul the world trading system by setting a global framework of rules and tearing down trade barriers. According to various estimate the package could create tens of millions of jobs and $ 1.0 trillion in new economic activity. But protectionist disputes between rich and poor countries as well as WTO's insistence that any accord be unanimous made a deal elusive. Retreating from Doha's lofty and ambitious aims, the WTO put forward a limited 'Bali package' on a limited number of key issues. It was hoped that an agreement on that package would keep the Doha Round on life-support for a later agreement. These key issues are agricultural subsidies, simplification of customs procedures (trade facilitation) and measures to aid least-developed countries (LDCs).

Demand for withdrawal of subsidies in agriculture has been opposed in the past by developed countries and favoured by developing and least-developed countries. But this year the issue was complicated by India's insistence that it be allowed to offer subsidies to its millions of farmers to keep food prices down. Until now India chose to sit on the fence over the issue. But the passing of the food security act in India changed that attitude.

In addition to the disagreement over several issues among the three groups of member countries many now see the troubled WTO effort threatened by alternative regional packs between major trading nations including the 12-nation Trans Pacific Partnership (TPP) sponsored by America. A similar trading group is in the offing with America and the European Union countries as members. Though these offer no substitute for global agreements and global rules as the Doha Round aspires, a momentum built up for regional trade agreements which are favoured, notably, by developed countries.

Success at Bali conference was important from the point of view of globalisation of trading efforts as opposed to their fragmentation into regional manifestations.

Bangladesh went to Bali with proposals for agreement in four areas : (a) simplifying trade through customs procedures or trade facilitation, (b) giving support to agriculture of developing and least developed countries, (c) allowing quota-free and duty-free exports of LDCs, and (d) waiver of rules of origin condition for raw materials of export goods of LDCs. Bangladesh shares most of these issues with other LDCs and has overlapping interest over one or two of these with members of the developing bloc.

Discussion of the agenda items at Bali started on a sombre note. All eyes were riveted on India and America whose stand on agricultural subsidy threatened to break the negotiation from the outset, spelling the end to the Doha Round. India insisted on its right to underwrite the food security programme that had been launched recently in the country providing for subsidy to food growers. This was vehemently opposed by America on the ground that surplus foodgrain from India would flood the international market. As if this was not enough of a nightmare, Cuba along with some Latin American countries wanted WTO to call for the lifting of the trade embargo imposed by America 53 years ago. As decisions in WTO meeting has to be based on consensus, veto by India, America and Cuba seemed to seal the fate of the ninth ministerial conference. Sensing that failure to agree in Bali could mean an end to the Doha Round and free trade, negotiators worked desperately to save the conference. Working beyond the scheduled deadline the negotiators managed to break the logjam on the basis of a compromise that satisfied both India and America over the subsidy issue. The agreement reached lets India and other developing countries to continue to subsidise foodgrains to ensure food security without having to worry about actions against them for violation of WTO rules as long as the practice does not distort trade in foodgrains. The waiver will last for four years and, if necessary, can be continued even further.

With the major hurdle removed the ministerial conference found it relatively easier to agree on other issues included in the agenda. Trade facilitation was agreed on without much hiccup, ensuring simplification of custom procedures which will generate $ 1 trillion worth of economic activity and 21 million jobs if properly implemented.  The catch word here is of course, 'if properly implemented'.

The 'Bali package' also includes 'LDC package' which provides for duty-free and quota-free access for products for the world's poorest countries until the next ministerial meeting of WTO when a final decision will be taken. Though not fully satisfied the LDCs took this decision as a vindication of their demand. To their satisfaction it was agreed to simplify the rules of origin applied to raw materials used in export products. The watered-down rules will make it easier for the 49 countries in the group to identify products as their own and qualify for preferential treatment. The 'LDC package' also allows LDCs' preferential access to richer countries' services sectors and improved market access for their cotton products.

The Bali package does not mean the Doha Round has been completed. But the agreement in Bali is an important stepping stone towards its fulfilment. The WTO should now work on a road map for reviving the Doha Round.

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