Saturday, December 14, 2013

Saving the multilateral trade system

Opinion article by: Juan Gonzalo Perez* (
International Business students at Universidad EAFIT, Medellin, Colombia

The General Agreement on Tariffs and Trade (GATT) was created during the Uruguay rounds in 1986 and later in 1995 became the World Trade Organization (WTO) and ever since the multilateral trade system has pursued a number of deals aiming to increase liberalization of trade. Its main functions include, administering WTO trade agreements, acting as a forum for trade negotiations, handling trade disputes, monitoring national trade policies, providing technical assistance and training to developing countries and cooperating with other international organizations.

Throughout its history the WTO has had many hitches getting all of the members to agree on the same issues. However, last week during the ninth ministerial conference in Bali, Indonesia, and after a tough week of negotiations they have finally come to a deal that will keep the WTO thriving. The agreement is a step forward towards trade facilitation and it is the first comprehensive agreement since the Doha Round in 2001. However, only a small set of limited measures have been agreed on. The most vital thing is that the WTO will still have a starring role in trade and the package managed to include the interest of least developed counties (LDCs), developing countries as well as developed countries.

The first issue in the agreement was trade facilitation. The agreement will allow member to trade goods more easily, reducing import and export bureaucracy and therefore allow countries to access more markets. It is estimated that the agreement will increase world trade in about 1 trillion dollars.

The second part of the deal reached was agricultural subsidies. This was the most complicated issue due to the fact that LDCs and developing countries stood up to defended their agricultural subsidies. India and the United States stalled in this issue because they were both trying to defend their own interest.

While the United States was concerned that subsidies will distort trade due to production surpluses, developing economies (Including India) were pushing for an ambitious trade facilitation agreement, including adequate safeguards to run their food security programs. LDCs had a four point agenda that included duty and quota free market access, operationalization of the waiver concerning preferential treatment to services and service suppliers of LDCs, preferential rules of origin and establishment of mechanism to monitor special and differential treatment.

Achieving such a deal was not easy and almost impossible due to the fact that in order for the agreement to pass it needed the consensus of the 159 members of the WTO. So when the negotiations were about to fail and with only few hours left to close the ministerial conference in Bali, both countries agreed to allow LDCs and developing countries to continue subsidizing their agricultural industries as long as they don't affect global trade.

In the short term, this agreement will bring the WTO back to play a role in global trade and it is a step forward towards trade liberalization. However, it is going to be long before the institution regains its authority, and if they want to stay relevant they need to do better in topics like investment, agriculture and services.

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