Tuesday, June 18, 2024


Dhaka Tribune

Bali or bust?

Update : 06 Dec 2013, 07:03 AM
The origins of international trade For as long as the human race has been cultivating saleable produce, it has wanted to trade. Among the earliest recognised ‘routes’ that facilitated the mass exchange of goods and cultures were the Silk Roads, established during the 1st century BC as China sought a pathway to India and the Western world. The Romans, also, traded spices, perfumes, and silk along the corridor. Inevitably, the steady expansion of global trade over the next two millennia was met with the raising of armies, the escalation of conflicts, and the need for negotiated agreements to protect national or tribal interests.    Trade, therefore, is inextricably linked to inter- and trans-national relations, and was freer across the Western world by the beginning of the 19th century than it was in Europe in 1970. But then came the destruction of the Great War followed by the earthquake of the Great Depression, causing a protectionist wave to wash over the world economy.    Establishing common rules In the immediate aftermath of World War II, as the defeated Axis nations were agreeing war reparations under the Paris Peace Treaties of 1947, another deal was emerging to better regulate global trade and to help improve international co-operation. The General Agreement on Tariffs and Trade (GATT) refereed the rules of commerce until it was consumed by the formation of the World Trade Organisation (WTO) on January 1, 1995.   The WTO was founded and exists by negotiation; the organisation itself admits that in the WTO system, accords are “painstakingly” constructed. This is because WTO rules require deals to be agreed unanimously by the 159 members before they can be sent to national parliaments for ratification.    Developing outnumber developed countries in the WTO by about four to one. With no weighting and each member receiving a single vote, the collective interest of the developing bloc should be proportionately served. However, there is little room for formal voting as the developed nations - led by the so-called ‘Quad’ of the US, EU, Canada and Japan - drive forward negotiations to form a consensus behind the scenes. In this way, everything (or nothing) is agreed before the ministers even arrive to shake hands and smile at the annual get together.    The Doha Round The Bali meeting this week was billed as the last chance to revive the “Doha Round” of talks, estimated by fledgling WTO Director-General Roberto Azevêdo to be worth a trillion dollars. Launched at the Fourth Ministerial Conference in the Qatari capital in November 2001, the ‘Doha Development Agenda’ (DDA) set out 20 objectives for global trade liberalisation but talks ground to a halt over deep-seated disagreements on the twin issues of tariffs and subsidies cuts. The original deadline of 1 January 2005 to complete the round proved unrealistic and a revised date of December 2006 was also missed. Eventually, the Doha talks were put on hold and only now - five ministerial conferences after the DDA was launched - has the negotiating table been re-set.     “We are too close to success to accept failure but it is all or nothing now,” said Azevêdo, the Brazilian who was elected to succeed Pascal Lamy and breathe fresh life into the talks in May. He warned ministers through a Wall Street Journal article last week that more than just Doha, the whole role of the WTO and the multilateral trading system in global economic governance was at stake in Bali. The reforms under consideration included new rules for streamlining customs procedures by reducing unnecessary paperwork, fees and procedures. These are only extracts of the overall Doha package, pulled out in the hope that their agreement could then lend momentum for a broader deal to be reached. It was thought that no member could find fault with the sentiment of the proposals to streamline customs procedures. But this is the WTO. Nothing is as straightforward as it should be.    The rise of regionalism The Doha impasse has led many WTO members to shift their focus to bloc deals such as the Trans-Pacific Partnership or the US-EU accord, and separate country-to-country arrangements like the Trade and Investment Cooperation Forum Agreement (Ticfa) finally signed by Bangladesh and the US last week, after almost a decade of negotiations. The legally non-binding contract is intended to promote bilateral trade while cautioning against protectionist policies. Bangladesh already has such accords with 42 countries, and negotiations are ongoing with eight others. The US, meanwhile, has contracts with over 90 countries.   Bilateral trade deals are nothing new. As a reaction to the colonialist spirit of mercantilism which prevailed in 17th and 18th century Europe, the Cobden–Chevalier Treaty was signed in 1860 to reduce French import duties on British goods to a maximum of 25%, in exchange for free entry of all French products into Britain, except wine. This taxing of the grape went against the grain of the liberal ideals advanced by the English economist Adam Smith in his seminal 1776 book, “The Wealth of Nations”. Smith advocated the removal of trade restrictions and the specialisation by each country in whatever they were best resourced to make. In France, this means wine. In densely-populated Bangladesh, it translates to labour-intensive industries like readymade garments.    After signing the Ticfa agreement, Dhaka and Washington were due to revisit the Generalised System of Preferences (GSP), which the US suspended for Bangladesh in June over the issue of workers’ rights following the outcry over the Rana Plaza and Tazreen Fashion factory tragedies. The US Congress created the GSP programme in the Trade Act of 1974 to help 127 developing countries expand their economies by allowing certain goods to be imported duty-free. Of course, by throwing open it ports, the US has done nothing to adversely impact on its own manufacturing sector; it still exports more than any other country in the world.   Roberto Azevêdo wants to see all such transactions regulated by a common framework under the WTO, rather than presiding over a slide towards regionalism and the protectionist policies of self-interest. The fear if significant progress has not been made at Bali this week, however, is a collective loss of faith in the capacity of the WTO to deliver agreements acceptable to all its 159 members, where national interests are often conflicted. In this respect, the organisation may have become too unwieldy. As membership has snowballed to the point where nothing can move, it has fallen victim to its earlier successes.
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