A New Awakening? The WTO and Star Wars

Last week two beloved institutions attempted to hit the reset button.  Both institutions started strong, capturing a certain kind of magic that included hope and optimism.  Both appeared to have taken wrong turns in mid-life that left many feeling alienated or just uninterested.  The weekend represented a new “toss of the dice” to rekindle the agenda for the future. 

It is likely too soon to tell how successfully both institutions managed their reboot. The early measures showed one group dominating headlines and generating staggering sums of money.  The other barely rated a mention in leading newspapers and websites. 

The franchise hauling in revenue, of course, is Star Wars.  The launch of The New Awakening  generated more than $500 million in ticket sales in the opening weekend. 

By contrast, the World Trade Organization (WTO) held a ministerial last week in Nairobi, Kenya, that limped to a finish line after a delay.  The biggest story from the event was something that did not happen—the final ministerial statement did not reaffirm the importance of the Doha Development Agenda (DDA).

Early signs may ultimately be misleading, of course.  The new Star Wars picture may rapidly vanish from public view, particularly with a planned zillion more sequels in the pipeline.  The WTO might take advantage of opportunities created by quietly killing off a plot line that was advancing nowhere.

The parallels between the two were striking.  Without spoiling too much of the plot, consider:

The latest Star Wars movie was not so much a refresh of the original than a remake of the 1977 movie (with a dash of the next two films thrown in).  It begins with a teenager wearing what appears to be linen struggling to eke out an existence on a barren desert planet.  Into this situation, insert one squat, round droid that becomes attached to our teenage hero. 

This droid is—wait for it—carrying a vital set of plans that are critical to the survival of a ragtag resistance force.  But the evil Dark Side knows that the droid is present and destroys the village.  Our teenage hero shows off an impressive range of skills, narrowly escapes with the droid and the plans, and is thrust into a galactic battle to save humanity. 

How does our hero escape the village carnage?  In a beloved spacecraft that, despite the passage of time and a complete lack of use for decades, still manages to leap off the ground and outrun all the existing aircraft (which are, strangely, also using exactly the same models and technology as before).   It flies to planets that are either all green and lush with trees or all snowy white and angular. 

Without giving away the limited plot of the movie, the adversary is using EXACTLY the same primary weapon that our ragtag group of heroes have faced twice before with eerily similar weaknesses.

The WTO has been stuck in a similar time warp.  The Doha Development Agenda (DDA) was first outlined decades ago.  It was launched with much fanfare in November 2001 in Doha, Qatar. 

The DDA represented a new hope.  Following the success of the Uruguay Round negotiations, the new WTO institution had a mandate to pursue trade agreements that went beyond tariff cutting for goods.  The very methods used to reach agreement would be new, with regular consultations that included every member. 

But as years turned to decades, the DDA remained stagnant.  The negotiating methods proved difficult to manage as the number of members soared to over 160 and the diversity of membership increased. 

The agenda got stuck in amber.  Basically, every time the organization might have tried something new, it got sent back to a desert planet to scavenge for spare parts.  Some members argued that nothing new could be attempted without first fixing old issues.  Given that every member has an effective veto over the actions of the army, the entire machinery ground to a halt. 

Technology, time and attention moved on while officials argued over tariff cutting formulas for agricultural goods.  This is not to argue that tariff cuts or agriculture are not important, but it is a bit like relying on a 40 year old spacecraft to outrun new competitors. 

The battle lines in the WTO got ever more complicated, as members organized themselves in various and proliferating groupings.  Perhaps the WTO could have used a droid with a map, or even a fragment of a map, to keep the effort on track.  Unlike Star Wars, WTO members cannot count on a villain wearing helpful black cape and face mask made from a trashcan.  Members probably could not agree on what adversary they are even trying to fight. 

Since the Dark Side in Star Wars seems unable to create a new approach to weapons or spacecraft or immense battle weapons, the rebel alliance refought old battles.  Something similar happened in the WTO as officials spent endless hours circling exactly the same territory over and over again.  They could not advance any other element of the agenda until tariff discussions for agriculture were completely addressed. 

The WTO’s version of victory last week was not a satisfying massive implosion of a planet with an enveloping roar, but was instead the accession of Afghanistan and Liberia to the grouping.   A subset of 53 members reached agreement on an extension of product coverage for information technology products (ITA2). 

Also, members agreed to limit the use of export subsidies and credits for agriculture in non-legally binding ways.  This sounds like a major accomplishment, but actually likely applies to very few.  Members can still subsidize agriculture (and lots of other things), just not directly for the purpose of exporting agricultural goods to other WTO members.  

The most relevant paragraph and meaningful element of the final declaration from Nairobi reads:

30. We recognize that many Members reaffirm the Doha Development Agenda, and the Declarations and Decisions adopted at Doha and at the Ministerial Conferences held since then, and reaffirm their full commitment to conclude the DDA on that basis. Other Members do not reaffirm the Doha mandates, as they believe new approaches are necessary to achieve meaningful outcomes in multilateral negotiations. Members have different views on how to address the negotiations. We acknowledge the strong legal structure of this Organization.

This is not exactly a light saber thrust through the heart, but in diplomatic terms it shows that change is finally coming to the WTO.  What shape it will take is not yet clear, particularly as decisions still have to be taken by consensus.

If this were Hollywood, the WTO just set itself up for the next movie—will our rebel alliance manage to achieve compromise in the future?  Will the battle be rejoined a fourth time with the same type of evil master weapon?  Will the ragtag alliance simply fold, content to sit back and hear legal disputes based on violations of rules written back when Luke Skywalker was a younger man?  Will our heroes be outgunned by a newly organized Dark Side with cutting-edge technology? Or will the parties find new battlefields entirely?  Stay tuned.

***Talking Trade is a blog post written by Dr. Deborah Elms, Executive Director, Asian Trade Centre, Singapore***

Multilateral Trade at a Crossroads: 20 Years of the WTO

The World Trade Organization (WTO) is gearing up for a major ministerial meeting to take place in Nairobi, Kenya, at the end of this year.  The meeting will coincide with the 20th anniversary of the WTO. 

This ought to have been the occasion for a happy party and celebration.  It is not.  Officials are struggling to deliver even the tiniest package of positive outcomes and concrete results. 

This is a depressing outcome for an institution starting its third decade.  It matters too, particularly for the smallest, poorest and most vulnerable economies. 

Normally, for a ministerial meeting just six weeks away, members would have already agreed on the basic texts of the final declaration.  All outcomes would be mostly lined up and ready to go.  After all, the WTO is a bit like an ocean liner.  It takes time and considerable effort to get more than 160 member countries to agree on declarations and outcomes, even if the greatest will in the world exists to get these things done.

Unfortunately, political will is in terribly short supply in Geneva, as shown by the meager harvest of possible outcomes for Nairobi:

1.  Negotiations on the Doha Development Agenda (DDA) are at a complete standstill.  These global trade talks, launched in 2001, are supposed to address (at least) agricultural and services trade and help modernize the rulebook for the WTO. 

No one can say so publically, but these talks are dead.  The various partial “deals” that were on the table in the past are simply not going to be the basis for future negotiations.  Key players have moved on and will not accept a return to the past in 2016 and beyond.  Since the WTO is a consensus-based institution, the unwillingness of many to engage in an old agenda or use old frameworks for addressing issues effectively means the DDA is finished.

Where the institution goes from here is a good question.  Unfortunately, discussion of future pathways cannot begin in earnest until the existing approaches are firmly put to the side.  The topics may remain, but the mechanisms for achieving outcomes will have to change.

2.  With the main product stuck, officials are scrambling to cobble together anything positive.  Still on the table as a possible deliverable for Nairobi: a commitment to rule out export subsidies (or, put more crudely, to do anything related to agriculture).  The basic issue with reducing subsidies explicitly for the purpose of export is that almost no country provides such subsidies any longer.  It could be worthwhile to discuss export rules and restrictions, but an export subsidies commitment is going to have minimal implications for the global trade system.

3.  Promises on transparency.  There are lots of things that might usefully be done to increase transparency at the WTO, including full implementation of previous pledges to immediately provide information on new bilateral and regional trade agreements (FTAs).  However, whatever happens on transparency in areas like antidumping actions or fish subsidies or FTA notification requires willingness by members to actually be transparent and timely.  So far, the track record of members to abide by WTO transparency rules is not good—no matter what may happen in Nairobi.

4.  Measures to help Least Developed Countries (LDC)s.  Even here, members continue to disagree on what sort of promises might be usefully made to improve the prospects for LDC members in the WTO.  For example, negotiations on a services waiver have been difficult.  Granting duty-free, quota-free access remains controversial. A new dispute has erupted over extending a waiver on pharmaceutical patents for public health in LDC countries.

5.  In the absence of DDA progress, some WTO members would like to announce progress on other issues.  First up, the Trade Facilitation Agreement (TFA).  This agreement was signed with great fanfare at the last ministerial meeting in Bali in December 2013.  Unfortunately, movement towards implementation has been extremely slow. 

The 52nd country (Pakistan) stepped forward with its implementation commitments on October 27.  This sounds impressive, but do recall that the number is skewed upwards by 28 members of the EU who all accepted at once.  Two-thirds of total WTO members must agree to participate before the deal can start moving.  Getting substantial new members to sign on will be challenging with the limited time remaining before Nairobi.  Two years have already passed.

6.  Members want to announce movement on the Information Technology Agreement II (ITA2).  This is a plurilateral (meaning not all WTO members are involved in the negotiations) agreement designed to extend an existing plurilateral commitment on tariff-free coverage for technology goods.  While members did agree on a list of 201 products for inclusion on the list, they remain quite divided on the timing of tariff reductions.  Hence, the deal is really only partially finished.

7.  The Environmental Goods Agreement (EGA) has also received some positive coverage by the WTO.  This is another plurilateral agreement designed to make it easier for countries to trade in environmentally-friendly goods by lowering tariffs on specified products like wind turbines. 

Looking at the progress of these negotiations closely, however, not much of note can likely be announced at Nairobi.  Of the 665 products on the provisional list at the beginning of this month, member states disagreed about the placement of nearly 200, or almost 1/3, of the total number of items under consideration.   

8.  Another important plurilateral negotiation, Trade in Services Agreement (TiSA), is also not yet ready for unveiling in Kenya.  Negotiations are progressing, but too slowly to achieve results in a few weeks.

Even changes to the Secretariat that might be helpful in updating the institution are proving problematic.  For example, while the dispute settlement system is often described as the “crown jewel” of the WTO system, growing backlogs are tarnishing the crown.  Discussions of how to alleviate a staff shortage and adjust the system have been mostly languishing since 2013.

My own modest proposal to revamp the WTO’s website and extend outreach to new stakeholders with a better use of social media outlets was coolly received at a meeting in Singapore last week of Asian trade officials and Secretariat staff.  Such changes, it was suggested, could require buy-in from members and may also prove impossible given resource constraints. 

I would argue that an institution that cannot fix its own outdated website without encountering pushback and internal disagreement is not well-positioned to handle many of the toughest trade issues as it heads into a third decade of existence.

***Just in—Indonesia’s President Jokowi apparently told President Obama that Indonesia “will join” the Trans-Pacific Partnership (TPP).  The New York Times did not provide a timeline for this “eventual” commitment.  Bets anyone?

***Talking Trade is a blog post written by Dr. Deborah Elms, Executive Director, Asian Trade Centre, Singapore***