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Date: 2017-09-06

XI WTO Ministerial Conference, Buenos Aires

What results can we expect?

Juan_Andres_Nava

 Lic. Juan Andrés Nava

The 11th Ministerial Conference of the World Trade Organization (WTO) whose main function – as the supreme body of the WTO – is to take important decisions to liberalize trade, will take place in Buenos Aires, Argentina, from 10 to 13 December.

While Members have not yet defined the agenda of issues to be addressed during the meeting, there are many and varied views on what results can be achieved and how. In this sense, there is an unavoidable reality shared by all that marks the starting point of any analysis: Buenos Aires will finish burying the Doha Round as it is known, and will follow in the footsteps of Nairobi (10th Ministerial Conference) in the search for Agreements on specific issues that contribute to the development of a fairer and more integrated multilateral trading system.

The failure of Doha can hardly be considered a surprise, for several reasons. Launched with a high degree of ambition under the umbrella of the “Development Agenda”, the Round suffered from the start a negotiation program full of unrealistic issues and deadlines, lack of transparency in order to determine what was on the table and which would be consolidated in the schedules of commitments, and all this under a model of “single undertaking” (nothing is agreed until everything is agreed) conceived as its main strength that in the end was its main obstacle and weakness. Members never agreed on the definition and role of development in the context of a complex negotiation, highlighting among the issues that marked the impossibility of advancing the Round the agriculture negotiations.

Despite a relative declining weight in world trade, agriculture remains the most important and controversial negotiating theme of the WTO. Protectionism remains abundant – and increasingly creative – in the sector, and restrictions on market access combined with inconsistent internal policies among the major economic powers have created a knot that is still unattainable.

Although less than four months to the Ministerial Conference the specific topics to be negotiated and, more importantly, the level of ambition that will be printed are to be known, considering the working documents presented in Geneva, the statements of the different negotiating committee chairs, and specific negotiating mandates from the last two Ministerials (Bali 2013 and Nairobi 2015), it is possible to make a guiding list on the main issues to be addressed in Buenos Aires.

In agriculture, highlighting once again the enormous difficulty observed in advancing the negotiations, a “gradualist” vision has been adopted regarding the achievement of results that can be expected in this sector, based on a cumulative approach. In other words, great progress is not expected, at least in the short term, but concrete results in specific areas of the negotiation.

In this regard, there are three central axes that will surely be addressed in Buenos Aires:

A Special Safeguard Mechanism for Developing Country Members (MSE) As established in Nairobi (CM 10), developing country Members will have the right to resort to a special safeguard mechanism (MSE) to allow the temporary increase of tariffs based in activations by volume and price of imports. It is expected that in Buenos Aires members negotiate precise provisions on the operation of the MSE, as well as the triggers and remedies.

 

The Constitution of public stocks for purposes of food security. WTO members are reaffirming their commitment to negotiate a “permanent solution” for public stocks of food for food security purposes. Buenos Aires is expected to address government food purchases at administered prices above market prices.

 

Substantial reduction of trade-distorting subsidies to production. To date there are distinct positions on the subject, many of them antagonistic, but in turn there is some consensus on the need to obtain a concrete result in this subject. Unfortunately, none of the proposals on the table seek to reduce the subsidies actually applied, at best a reduction of “water” and the margins of economic policy are sought. A renewed commitment to specific disciplines to eliminate or reduce domestic support that distorts the cotton market is also expected.

 

Also, although it does not form part of the three pillars of the negotiation, it is possible that in Buenos Aires the concern of several importing Members will be addressed, and different proposals will be discussed to strengthen the disciplines and improve the transparency of export restrictions for food. Increasing scrutiny of the issue has been taking place in Geneva to ensure that any restrictions that are implemented are in accordance with applicable WTO regulations.

 

In terms of Services, the negotiations in Geneva determined the prioritization of three themes: market access, electronic commerce and national regulation. It is estimated that all will be negotiated in Buenos Aires, but the most advanced is the last one, based on the elaboration of the necessary disciplines to ensure that the requirements and procedures in terms of licenses and qualifications do not constitute unnecessary obstacles to the commerce of this sector. It should also be mentioned that at the last meeting of the Council on Trade in Services, some Members raised concerns regarding cybersecurity, tourism, transport, finance and distribution.

 

The issue of Access to Non-Agricultural Markets (NAMA), which accounts for 90 per cent of global merchandise trade and includes everything from industrial manufactures to fuels, has not shown considerable progress in Geneva and the expected results for the Ministerial of Buenos Aires are meager. The exception is given by fisheries subsidies, where there may be scope for an agreement to ban certain forms of subsidies that contribute to overcapacity and overexploitation, as well as to eliminate subsidies that contribute to illegal, declared and unregulated fishing.

 

In view of the above, and in line with what was observed at the Bali (2013) and Nairobi (2015) Ministerial Conferences, it is likely that WTO Members will reach agreement on these issues in Buenos Aires. In particular, concrete results are expected in cotton, subsidies to fisheries and disciplines for subsidies to agricultural production. In parallel, “new issues” will be addressed, such as e-commerce, investment, small and medium-sized enterprises, and global value chains, but it would be very difficult if not impossible to venture a possible outcome.

 

The dangers of taking steps to the side

 

In the case of Costa Rica, since the launch of Doha in 2001, the country has signed and notified 14 regional and bilateral Free Trade Agreements covering most of its exports and imports, and regulate aspects of greater depth such as investment, competition, environment, intellectual property, health standards, public procurement, labor, etc. The country has traced and traveled its own path without depending on the meager reforms and modifications achieved in the WTO during the last 20 years.

 

Although the results of the Ministerial and the changes to the multilateral system may have a very limited impact on the country, it is important that Costa Rica – as a historical defender of the system and an active participant in the negotiations to liberalize trade – doesn’t accept in Buenos Aires an agreement to decline the concessions and disciplines currently in force.

 

It is considered that, even if there is a mandate, negotiators should be extremely cautious in setting disciplines for the new SSM and the establishment of public stocks for food security purposes. These two issues have taken years of negotiations in the WTO and the problems that made it impossible to reach an agreement remain.

 

Regarding the new special safeguard for developing countries, which would raise tariffs in the face of an increase in the volume and / or fall in import prices relative to a reference period, it should be noted that its origin and justification was based in the fear and potential risk generated by the liberalization and tariff reduction agreed in Doha. While this never occurred, the mechanism remains on the table.

 

Since the negotiating proposals of those countries promoting SSM contain highly distorting elements, such as the possibility of applying a remedy that exceeds bound tariffs and activation in the face of a minimum change in inter-annual trade variation, it is considered very important to ensure that this instrument will first apply if the importing country handles representative, recent, accurate and verifiable trade data. Activations should also be defined in such a way as to ensure that the SSM is an exceptional measure, which is used in exceptional circumstances resulting from a liberalization process. Finally, corrective measures should in no case exceed Uruguay’s bound tariffs. Contrary to the provisions of the Agreement on Safeguards, this mechanism will not require prior investigation in which the sudden increase in imports, injury and causation must be demonstrated. Otherwise, this would entail a unilateral modification of the lists without due compensation.

Costa Rica has defended and sponsored numerous proposals in the WTO that contemplate the above. Although a substantial part of its south-south trade is governed by free trade agreements, exports of bananas, pineapples, coffee, cassava, melons, watermelons, flowers, etc. to developing countries without an FTA could be seriously threatened.

The other issue of particular importance that could nullify or undermine benefits already agreed in WTO texts is in the proposed modification of public stocks for food security purposes. India intends that the large government purchases of rice at administered prices above market prices be exempt from questioning and action even though they constitute distortive subsidies that have not even been consolidated in their schedules of commitments. This type of system, at the scale of the most populous country in the world, will undoubtedly cause disruptions in international trade and markets, affecting producers in the rest of the world.

In summary, while the expected results of Buenos Aires a priori would seem discreet, they should once again be contextualized on the willingness of Members to address traditional aspects of trade in different and more flexible formats, as a necessary step to modernize and strengthen the WTO as a central institution in the global governance of trade in times of high protectionism and global uncertainty. Of course, this new approach to the “possible” will be made at the cost of a substantial loss of the levels of ambition with which the Development Round was conceived.

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