Monday,20 August, 2018
Current issue | Issue 1278, (14 - 20 January 2016)
Monday,20 August, 2018
Issue 1278, (14 - 20 January 2016)

Ahram Weekly

Assessing the WTO

The outcome of the WTO 10th Ministerial Conference in Nairobi was disappointing for Egypt, writes Magda Shahin

Al-Ahram Weekly

The results of the World Trade Organisation (WTO) 10th Ministerial Conference held in Nairobi last month were disappointing for Egypt, even though the conference was hailed as a success by negotiators and by Roberto Azevedo, the Brazilian director-general of the WTO.

The disappointment was due to the conjunction of the meagre results of the conference and the high expectations that the 20-year-old organisation would become stronger, completing the triangle of the Bretton Woods institutions of the World Bank and the International Monetary Fund.

The poor outcome of the conference put many at a loss as to the role of the WTO and its future direction. Following the adoption of the UN Sustainable Development Goals (SDGs) for 2030 last year, and the successful adoption of a universal climate deal at the Paris Conference earlier in December, the WTO Ministerial Conference, held from 15-19 December, bodes ill for the future of multilateral trade negotiations.

The conference lowered the bar of trade negotiations in the future and dampened the high hopes of developing countries to become a genuine part of global governance on trade. The WTO had been seen as the only channel emerging countries have for fair and democratic international trade governance, as the organisation’s voting system, relying on a one country, one vote system, is unlike that of the Bretton Woods institutions where it is more a case of one dollar, one-vote.

The declaration that concluded the conference did not attempt to hide the wide gap between the organisation’s members on a number of issues. It was transparent enough to bring them to the fore, leaving the WTO to continue to struggle with its future prospects.

Deep divergences remain on the ill-fated Doha Development Agenda, whose obituary was surely written at the conference. Furthermore, the role of the WTO as a negotiating forum, which so many countries had taken pride in, has been put into question as a result of the ongoing parallel negotiations on mega-regional trade deals.

The failure to come up with meaningful consensual resolutions in favour of development and developing countries, even by camouflaging them with so-called constructive ambiguity, has made emerging economies and countries like Egypt ask openly what the organisation now holds for them.

The conference took the easy way out by favouring the least-developed countries at the expense of the developing countries, not coming up with any tangible outcomes in support of the latter.

Much weight, however, was given by the conference to concepts the WTO had earlier tried hard to circumvent and avoid. The conference cemented what are known as plurilateral agreements, much criticised as being agreements encompassing a selected group of countries that are willing to join, while leaving others out in the cold.

Such an agreement was reached in the area of information technology between some 50 countries, with the tariff cuts agreed on by the participants set to be extended to the full membership of the global trade body.

The agreement does not bode well for Egypt, together with other like-minded countries, since these are more interested in technical assistance or integration into production chains. An agreement on tariff cuts on IT products, hardly produced in developing countries, is an agreement that sidesteps them and is of little relevance to them.

Instead, the major beneficiaries are the Asian countries. It is hard not to believe that the agreement was brought to the WTO for purely cosmetic reasons, in order to enrich the outcome of the conference and be hailed as an achievement of great significance, when it was negotiated extensively in the framework of the Trans-Pacific Partnership (TPP) between the US and the Asian-Pacific countries outside the framework of the WTO.

 Another failure of the conference was its submissive position on mega-regional agreements, which have effectively robbed the WTO of its leverage. These agreements are designed to negotiate rules and standards and then impose them on the entire international trading system without the WTO membership having a say in the process.

 The only thing that the conference was able to achieve in this regard was to introduce language reaffirming “the need to ensure that regional trade agreements remain complementary to, not a substitute for, the multilateral trading system,” while giving room for the relevant WTO committee to negotiate the “systemic implications” of such regional agreements that negatively affect the multilateral system.

This is the beginning of the end for the WTO, bearing in mind that for the last 50 years or so the international community has failed to assess the effects of regional agreements on the multilateral trading system. No one can expect any serious negotiations within the WTO on this matter, which divides the entire trading community into supporters and enemies.

The Nairobi conference culminated in the adoption of the Nairobi Package, a series of six ministerial decisions on agriculture, cotton and issues related to least-developed countries (LDCs), all of which benefit the poorest members of the organisation.

Egypt and the middle-income countries are not in the scope of the Nairobi Package, except for the fact that Egypt, among the group of LDCs and net food-importing developing countries, is to be granted the right to impose export subsidies until 2030. This was the only benefit Egypt was able to extract from the conference as a food-importing country, contrary to other developing countries that are supposed to eliminate export subsidies by 2018 and developed countries right away.

But one may ask how much this achievement is worth and why Egypt would want to continue subsidising its agricultural exports given its constant budget deficit. The subsidies amount to doping Egypt’s agricultural exporters and transferring national resources to foreign consumers. This is a poor bargain indeed.

In addition, Egypt will no longer be entitled to generous food aid, as the Nairobi Package includes new language on this that would commit WTO members to refrain from providing in-kind food aid where this might cause an adverse effect on local or regional production of the same or substitute products.

Last but not least, regarding the decision made on cotton, Egypt has come out empty-handed here too. This decision is confined only to market access for cotton from LDCs, which are given duty-free and quota-free access to the markets of developed countries from 1 January 2016.

As for the part about reducing domestic support in the US to allow for more competition on the international market, this came out as blurred and toothless and only asking for more efforts to be made. The US continues to maintain its support for its domestic producers, while acknowledging that more efforts towards reform need to be made.

US diplomacy has squarely won this round. The WTO has been disarmed and is now on its knees. It is all the more clear that the WTO is now being totally sidelined in global governance and decisions struck elsewhere, for example at the G-7 or in the newly formed mega-regionals.

It is unfortunate that the BRICS (Brazil, Russia, India, China and Russia) and the middle-income countries are the main losers of the Nairobi deal. The developing countries have neither learned their lesson nor acquired negotiation skills. The developed countries succeeded in luring the LDCs, on the one hand, and absorbing the Asian-Pacific countries, on the other. The Nairobi deal was struck with the LDCs at the expense of the developing countries.

Similarly, the TPP has successfully manipulated the Asian-Pacific countries, which were happy to conclude a free-trade agreement with the US. These countries also aspire to benefit from the Trans-Atlantic Trade and Investment Partnership between the US and the EU and consequently have favourable access to European markets. Countries like Egypt will have to exert extra efforts to abide by the new standards negotiated outside of the WTO.

One thing for sure is that the US has achieved in its trade diplomacy with the WTO what it had failed to achieve politically: cementing its presence in Asia. As was underlined by this conference, Asia has become a natural extension of the US and European trade domains.

The writer is a professor of practice and director of the Prince Al-Waleed bin Talal Centre for American Studies and Research at the School of Global Affairs and Public Policy at the American University in Cairo.

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