New WTO chief has challenges to address

The hope that multilateralism is an effective way of addressing aspirations and concerns of developed and developing countries in the global economy has bounced back with the visit of WTO’s new director general (DG)  Roberto Azevedo to New Delhi recently.

In a world of disparity where developing countries are at receiving end, selection of Azevedo from Brazil as head of WTO generates hope and confidence among two-third of humanity and three-fourth of WTO members who belong to developing world.

Assuming the office of WTO, how much he can do to appease developing world and bring back the confidence of WTO to settle long pending issues of world trade negotiations is a monumental task, that he needs to address. What is the biggest challenge before him is to make multilateralism work because that is the only plank acceptable to all.

The rule based arrangements and institutional mechanism under the aegis of GATT and WTO have strengthened multilateralism and enabled them to bring down the tariff to a reasonable level, so as to allow world trade to flourish. Multilateralism thus restored confidence among countries since 1995 with the establishment of the WTO.

However, current round of multilateral trade negotiations under Doha since 2001 have not delivered expected benefits. Critical issues like negotiations in agriculture, NAMA and services still remain unresolved. Non-delivery of Doha benefits today raises doubt on the role of multilateralism. Therefore challenges for Azevedo to make multilateralism work are many and varied.

First, significant tariff reduction may have increased the quantum of global trade, but simultaneous rise in non-tariff barriers (NTBs) is equally decreasing the prospects of world trade. NTBs such as rules of origin, sanitary and phytosaniatry requirements, licensing, technical qualifications are  curtailing the export prospects of developing world. Current campaign by US and EU of non-meeting eco standards and green technology are further restricting developing countries’ integration with world market. Second, spectre of global financial crisis may be receding, but protectionist policies in industrialized countries and lack of trade finance are still in practice to curtail the export interests of developing countries.

Third, unfulfilled desire and expectations of least developed countries (LDCs) seem to question the functioning of international trade regime. LDCs feel the institutional make up of WTO, i.e., the procedural requirement is too costly and beyond their technical expertise. Fourth, sub-optimal achievement at Doha is further resulting in proliferation of regional trade agreements/trade blocs that slowly lead to decline of importance in multilateralism.

Fifth, number of countries are turning inward by resorting to a domestic-led demand driven growth model as global financial crisis has exposed that high export-led growth could be problematic for developing countries. Such inward driven model may slow down the progress of multilateralism.

Sixth, present uncertainty at Doha and world developments since 2008 financial crisis have given rise to apprehension among developing countries as to how global economy will behave in the foreseeable  future.

Economic slowdown and volatility and uncertainty in world economy have impacted almost all nations, and impact has been particularly severe on those economies which had deeper and extensive global engagement.

Many countries are adhering to exchange rate management to help their exports. This mechanism is currently being used by a number of countries as WTO has prevented member countries from indulging in other trade promoting measures like subsidies or export incentives. There is a growing apprehension that such exchange rate mechanism may lead to procedural currency problems among some countries.

Issues like trade facilitation, environmental standards and government procurement are currently occupying the centrestage of trade negotiations which are deviating the core issues of development on which Doha multilateralism laid its foundation. Developmental concerns like food security, livelihood, and rural employment need to be settled first before negotiations on non-developmental issues take off. Otherwise it will completely bury the foundation of multilateralism that is already set.

It should be recognised that multilateral arrangements being inclusive and non-discriminatory in nature, the benefits would accrue to all, particularly to less developed nations. There is a need to recognize the importance of a highly interdependent and interconnected world as human progress is multilateral. The task before Azevedo is to restore confidence and trust in multilateralism, by taking entire WTO members into constructive consultation before the ninth ministerial at Bali during 3-6 December 2013.

(The writer is with Indian Institute of Foreign Trade, New Delhi)

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