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Revitalising the multilateral trading system

Revitalising the multilateral trading system
Published 29 Sep 2016   Follow @jhbrown16

The multilateral trading system has served Australia and our region exceptionally well, and it has delivered a program of trade liberalisation and reform over the years that has been important in underwriting global growth.

But there is no doubt it is now facing multiple strains. The regrettable failure of the Doha Round underscores the need for a change in the way the system is functioning. That failure is a symptom of a bigger issue: the weakening of multilateral processes and institutions. 

The new global reality is the increasing trade and economic significance of large emerging economies such as China, the world’s largest merchandise trading country. Gone are the days of the major developed countries solely determining the direction of the global trading system. With these changes in the global economy has come a debate about the extent of the contributions and leadership that is now needed from the major emerging countries in support of global efforts to open markets and encourage growth in trade and investment. 

At the recent Hangzhou summit, G20 leaders made a commitment to revitalising the WTO’s negotiating function, and talks are now underway in Geneva to explore the way forward. 

Australia has historically been a strong supporter of multilateral deals, reflecting the fact that we have global trade and investment interests. The successful result of the WTO ministerial meeting in Nairobi last December (which resulted in the historic agreement to ban agricultural export subsidies) shows the value of multilateral rules.

But the Doha experience underscores the need to be realistic. If we are faced with the choice of making progress with a sub-set of WTO members (those with a shared interest in liberalisation and reform) or no progress at all, we will choose to move forward. [fold]

Rule-making is a key value-add of the WTO. While FTAs are primarily focused on opening up access to markets for goods, services and investment, they have only limited capacity to introduce disciplines on actions by governments that distort trade, most notably subsidies.

Australia is playing an active role in the talks on future WTO negotiations. Those discussions are looking at new issues for negotiation as well as new ways of moving forward. These efforts are being informed by the experiences of many countries, including Australia, in tackling new issues in bilateral and regional FTAs. The stalemate in the Doha round has resulted in the proliferation of new rules on a number of issues not covered by the WTO. 

Developing these new rules has made sense as a response to the realities of the global marketplace and the needs of the business community. But there are some risks that multiple rules could increase the complexity of trade, which in turn could introduce restrictions and distortions. ‘Multilateralising’ these rules (getting broad adoption and adherence) would help to minimise some of these risks.

So-called plurilateral negotiations, involving a sub set of WTO members and often on an MFN basis, are one option being explored. Current examples of such an approach are the negotiations for the Environmental Goods Agreement (EGA), which Australia is chairing, and the Information Technology Agreement (ITA). Efforts are underway to conclude the EGA this year. In both cases, the benefits of the deal are extended to the entire WTO membership, an important feature in ensuring these deals strengthen the WTO system. Australia’s involvement in the Trade in Services Agreement (TISA) negotiations is also premised on using that plurilateral platform as a basis for making future multilateral progress through the WTO.

Possible future candidates for new or expanded plurilateral negotiations include digital trade, investment, government procurement, fish subsidies, competition policy and good regulatory practices. All of these have been incorporated in the Trans-Pacific Partnership Agreement (TPP).   

In discussing possible new issues, we have not lost sight of the fact that many of the issues that were on the Doha agenda remain critically important for Australia, notably domestic agriculture subsidies and services regulation. We are continuing to push for these issues to be addressed in the WTO’s forward negotiating agenda. 

We are hopeful that agreements can be reached on this new agenda at the next WTO ministerial meeting at the end of 2017. Progress will be challenging; even achieving incremental movement will be tough, but equally, any progress on the WTO agenda can be a positive factor in improving the conditions facing Australian exporters and businesses operating internationally.

Photo: Getty Images/Bloomberg

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