December 11, 2013
Dr Kamal Monnoo
Finally, there is some good news on the developments at the WTO (World Trade Organization) front. Last weekend in Bali, Indonesia, all member states’ commerce ministers reached a landmark global agreement on commerce, which incidentally makes it the first and the only consensus accord struck by the WTO since its founding back in 1995. The pact includes commitments to facilitate trade by simplifying customs procedures and limiting agriculture subsidies, and unleashing policies to aid least-developed countries. According to the estimates from a report compiled by the Washington based Peterson Institute for International Economics, the new customs measures could create an additional US $1 trillion in economic activity and up to 21 million fresh jobs provided the agreement is followed in letter and in spirit by the WTO member states.
This is indeed a very good and a positive development in Pakistan’s context as well. As we know that for any nation (especially us) when devising a trading strategy, it is imperative that while contemplating economic moves and trade relationships within respective regions or on a bilateral level, it is at the same time also important to keep a close eye on what is happening to the trading patterns (in general) around the world. Keeping abreast with the global or the larger perspective in-turn helps in making the right bilateral and regional choices. However, up until now, if we look around us it is economic fear and insecurity that seems to be the order of the day – Not just in South Asia, but also in the most developed economies of the modern day world. The high moral ground that once drove the richer nations towards a commitment to make this world a better living place for all inhabitants, by providing equal opportunities through a WTO rule based framework of free and fair trading practices, suddenly seemed to have taken a serious dent, post financial crisis 2008. As the focus shifted more and more on internal economic challenges the tune of ‘inclusiveness’ moved further into the background. In not too distant a past what we were witnessing is rather self-focused statements like, “Without a solution to the Euro Zone crisis the world economy will be swept into a downward spiral of collapsing confidence, weaker growth, and fewer jobs. We all have to help them resolve their problems as we have a stake in their crisis” – Christine Lagarde & “We cannot let our industry down at a time when we need to create jobs at home. Inward before Outward” – Banners at the last Republican Party primaries, raising alarm bells about the very future of free trading practices in general and a visibly weakening foundation of WTO in particular. Ironically, the trouble brewed in the very quarters that once championed the cause of turning the world into a large ‘global village’ and romanticized about eradication of poverty through enhanced trade and equal opportunity!
Before this agreement, what we were seeing was in fact an atmosphere where the larger WTO membership appeared reconciled to the fact that the Doha Round will remain inconclusive for some time or at least till such time that a) the world economy is less turbulent, b) some significant members like the USA and EU are out of their present financial predicaments, c) previous priorities are reinforced, d) global issues and concerns are realigned and e) a global political climate is significantly recreated to once again instill the spirit of enhanced trade and inter-dependence within the world economies instead of the present tilt towards protectionism.
Moreover, criticism was often being hurled at the WTO related to the menace of prevalent global inflation, which at present is particularly hurting the poor nations. The argument stated, that firstly, under the garb of free trade and enhanced market access, the rich nations go on to capture the developing markets by granting disguised subsidies to home corporations, which then later on increase their selling prices to maximize internal profits and secondly, even the economically emerging countries (BRICS nations for example) also played their part in aiding global inflation by raising stakes in their over zealous pursuit of growth and enhanced market access. Result being: the present surge in global food and agricultural prices and particularly the spiraling price of oil.
It was this backdrop that jolted into action the diehard supporters of free and fair trade and a strategy by the WTO leadership was put forward in the form of what is now called as the Bali initiative. In essence, this initiative means that at a time when the Doha Round of the WTO had run into a virtual stalemate and there were increasing murmurs amongst member countries on even scrapping the very basis of these endlessly on-going Doha Talks, the contours of the whole process had to be tweaked (that is in the Bali round of talks) featuring a more toned down version of global free trade. The main argument in favor is that this tapered down low trajectory of consensus to be adopted to first at least break the current logjam on talks and once a common platform is established, to then use it to strive for more success in the years to come. With this historic accord on trade facilitation and other issues, the WTO has re-established its credibility as an indispensable forum for trade negotiations. Even the Bali consensus was not easy to achieve and the negotiations teetered repeatedly on the brink of collapse due to various differences. India – which aims to stockpile and subsidize grain for its millions of poor – had demanded that such measures be granted indefinite exemption from WTO challenge. The United States, which implements large farm supports of its own, and other European Union nations had said India’s grain policy could violate WTO limits on subsidies. A later hurdle emerged as four Latin American countries objected to the removal in the accord’s text of a reference to the US embargo on Cuba. Thankfully, compromise wording on all these objections smoothed over the hurdles in order to come up with a consensus draft.
Finally, what should now be the way forward for Pakistan? Given that the WTO has found a renewed relevance through the Bali agreement, our trade expansion endeavors, both regional and bilateral, should also be in sync with our overall trade aspirations in the global arena; it should be aligned with our goals for global trade under the ambit of WTO. This will help us avoid any possible disruptions in the future. In fact enhanced trade should be conducted on terms that: complement efforts towards pushing for harmonized global norms on free and fair trade, provide a level playing field and access to all members and builds a position that allows Pakistan to play a more assertive role in seeing continued success of the Bali initiative.
The writer is an entrepreneur and economic analyst.
Courtesy The DAWN