Mike Callaghan is Director of the Lowy Institute's G20 Studies Centre.
The world badly needs a bit of good news. Who would've thought it might come from the prospect of a WTO multilateral trade deal when ministers meet in Bali on 3 December 2013?
At the start of the year the French industry minister, Arnaud Montebourg, declared that multilateral trade deals were dead. Certainly the WTO Doha Development Round that has been underway since 2001 appeared dead. The absence of progress on the multilateral front had increasingly resulted in countries pursuing bilateral or regional trade agreements.
But it appears all is not lost for the multilateral approach.
The WTO is reportedly on the verge of a global trade deal that will be settled in Bali in early December. This will be a rare event, for as the US Trade Representative Mike Froman recently observed, 'in its twenty-year history, the WTO has never once produced a new, fully multilateral trade agreement'.
The prospective WTO deal in Bali is not the conclusion of the Doha Round. It is an attempt to break the deadlock of the excessively large negotiating agenda under the Doha Round by identifying a few areas which could be the 'deliverable' elements of a deal.
The main components of the reduced package are trade facilitation (reducing the cost of moving goods through customs borders), agricultural export subsidies (particularly stockpiles for food security purposes) and duty-free, quota-free trade for least developed countries. Yet even negotiations on this slimmed down package of measures have been protracted, and there are still last minute hitches to overcome. Among the most contentious items are those related 'food security' stockpiles and they have involved India.
The main achievement would be a deal on trade facilitation. The OECD says that such a deal could add billions to the global economy, with some estimates suggesting it could add about US$1 trillion to global trade. The bulk of this gain will go to developing countries, whose capacity to benefit from the global trading system is restricted by bureaucratic red tape and poor infrastructure, not to mention corruption.
To ensure that developing countries gain from a deal aimed at tackling inefficiency in clearing goods, shortening delays and reducing the cost of getting goods to markets, a number of international agencies recently committed to supporting developing countries in implementing any WTO trade facilitation agreement.
But as noted previously, one of the most significant features of a Bali WTO deal would be the signal that the multilateral approach to trade negotiations can deliver. Or to put this the other way around, the failure of a deal would be the death warrant for the Doha Round and a body blow to the WTO. The new WTO Director General, Roberto Azevedo, has observed that the WTO risked irrelevancy if it did not deliver something of substance at Bali.
Assuming the deal is done at Bali, what next for the WTO? Maybe the momentum can be channelled into advancing other elements of the Doha Round, such as a deal on trade in services.
Certainly it should provide renewed emphasis in advancing multilateral approaches to liberalisation, for this is where all countries can benefit. But even getting to this stage of the Bali deal demonstrated the major problems in the current approach to trade negotiations, including the negotiating position of major emerging economies (such as India, Brazil and China) who continue to want to be treated as developing countries in negotiations.
In addition, the former head of the WTO, Pascal Lamy, argues that the WTO badly needs to be modernised and the trade agenda brought up to date. As he notes, the main barriers to trade in the world today are not tariffs but differing regulatory standards.
Also, more needs to be done to update the measures of trade so as to reflect the existence of global value chains. This will help remove the mercantilist view that exports are good and imports are bad.
A prospective trade deal in Bali is good news. But in building on this progress, the G20 should focus its efforts in 2014 on providing a new strategic direction for the multilateral trading system and the work of the WTO.
Photo by Flickr user World Trade Organization.