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Officials Warn of Potential Failure at December WTO Ministerial

Monday, April 15, 2013
By Shawn McCausland
Sandler, Travis & Rosenberg Trade Report

World Trade Organization Director-General Pascal Lamy and senior U.S. and European Union trade officials have warned that absent significant changes there is little chance of concluding an agreement this year on trade facilitation, agriculture and lesser-developed country issues. WTO members are working to finalize this agreement at a ministerial meeting to be held in Bali in December.

With the world economy remaining “in a fragile situation”, Lamy said, the stakes for this year’s ministerial meeting “are high,” but negotiations to date have yielded only “limited progress on substance” despite “a lot of activity.” He suggested that there has not been sufficiently close cooperation between relevant ministries at the national level concerning the trade facilitation agreement, which “will extend well beyond the traditional areas of responsibility of ministries of trade and commerce, both in terms of disciplines on border management and in terms of the new approach members are designing to link development assistance with implementation.” On agriculture, there are “very significant divergences” on food security and food aid, a proposal on the administration of tariff-rate quotas is still being explored, and comments are being gathered on two studies on export competition and export restrictions. There is also “an urgent need to re-double our efforts and close the gaps in what are key elements of the developmental component of our ongoing work.”

“The stark reality,” Lay said, “is that the current pace of work is largely insufficient” to yield an agreement in December. “This means that without rapid acceleration and real negotiations, it is highly probable that you will not see the deliverables you desire in Bali.” Moreover, members need “a change in mind-set” that will enable them to move from “discussing issues to negotiating to closing gaps.” He called for all WTO members to “refrain from throwing bricks at each other” and to instead take “a hard look at where flexibilities can be found” because “written proposals, language and textual suggestions around which to build consensus have to begin to emerge very soon.” He concluded that “the odds are not bright today” but are “still good enough to warrant a major effort.”

U.S. Ambassador to the WTO Michael Punke offered a similarly blunt assessment. “There is an urgent need for a serious course correction,” he said, because the current situation is “grim.” On trade facilitation, despite “scores of meetings in every imaginable geometry,” members have not even been able to agree on “fundamental concepts” such as whether a final agreement will be binding. Punke added that the situation with respect to agriculture is “even more dire,” asserting that the U.S. “cannot support” a proposal on food security because it “represents a step back from existing Uruguay Round disciplines [by] creating a new loophole for potentially unlimited trade-distorting subsidies” that “will be available only to a few emerging economies with the cash to use it.” He criticized efforts by some members in the development negotiations to “establish a permanent mechanism to renegotiate binding WTO rules, which is simply not acceptable in a rules-based system.”

Punke also warned of the larger effect of a failure to conclude an agreement in Bali. He pointed out that the WTO “has failed to deliver a negotiated, market-opening result in its almost two decades of existence” and said that if the current initiative does not succeed “the signal that we will send, in a world full of fruitful trade negotiations, is that the WTO is the one place where trade negotiations don’t succeed.” He therefore exhorted member countries not to “sit idly by as the WTO’s negotiating function hurtles toward irrelevance” and offered that “we still have time, though only just barely” to address the crisis.

EU Ambassador to the WTO Angelos Pangratis agreed that the WTO is “at a crossroads” and that the effort to conclude an agreement this year “has profound relevance for the long-term integrity of the multilateral trading system.” If WTO members “are unable to reach agreement on such basic issues” as those under consideration, Pangratis said, “then we will really convince the outside world that multilateral negotiations are doomed to failure for a long time.” He opined that the most work remains to be done on trade facilitation but added that all three issues need to reach “a comparable and sufficiently developed level of technical maturity.”

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