Last Updated 08 | 12 | 2013 at 11:20

Business & Technology

WTO agrees global trade deal worth $1tn

Article By:
di-ve.com news
editorial@di-ve.com

Ministers from 159 countries have reached a deal intended to boost global trade at a meeting in Bali, Indonesia. The World Trade Organization's first comprehensive agreement involves an effort to simplify the procedures for doing business across borders.

There will also be improved duty-free access for goods sold by the world's poorest countries. The deal, which could add about $1tn to world trade, gives developing nations more scope to increase farm subsidies.

"For the first time in our history, the WTO has truly delivered," said WTO chief Roberto Azevedo, as the organisation reached its first comprehensive agreement since it was founded in 1995. "This time the entire membership came together. We have put the 'world' back in World Trade Organization," he said.

Indonesian Trade Minister Gita Wirjawan said the deal would "benefit all WTO members".

UK Prime Minister David Cameron said the "historic" agreement could be a "lifeline" for the world's poorest people, as well as benefiting British businesses to the tune of more than $1bn (£600m). However, the "Bali package", as the WTO calls the agreement, was criticised by some development campaigners who said it was not going far enough.

It is worth spelling out something what is not covered by this - tariffs or taxes on imported goods. Dealing with them has been the bread butter of past trade rounds - but not for this deal. The core of this agreement is what is called trade facilitation. This is about reducing the costs and delays involved in international trade. It is often described as "cutting red tape".

Some analysts suggest the benefits could be large. An influential Washington think tank has put the potential gains to the world economy at close to $1tn and 20m million jobs. It also estimates the cost of administrative barrier as double the cost of tariffs.

The rich countries have agreed to help the poorer WTO members with implementing this agreement.

Another important aspect of the Bali package is about enabling poor countries to sell their goods more easily. This part is about tariffs, and also quota limits on imports. Rich countries and the more advanced developing countries have agreed to cut tariffs on products from the poorest nations.

But campaigners describe the plan as weak. Nick Dearden of the World Development Movement said: "If the US and EU really wanted to tackle global poverty, they would have made the least-developed-countries package much stronger."

Getting this deal has involved introducing some extra flexibility into the existing WTO rules on farm subsidies. India led the campaign, by insisting that it should be allowed to subsidise grain under its new food security law.

There is a strong possibility that India's policy would break WTO rules that limit farm subsidies.

A "peace clause" has been agreed, under which members agree not to initiate WTO disputes against those breaching the subsidy limits as part of a food-security programme. But it only lasts four years and there is criticism from campaigners.

John Hilary of War on Want, a UK-based group, said: "The negotiations have failed to secure permanent protection for countries to safeguard the food rights of their peoples, exposing hundreds of millions to the prospect of hunger and starvation simply in order to satisfy the dogma of free trade."

The Bali meeting was an important one for the WTO's credibility. The deal includes a rather small part of the negotiating programme that was launched 12 years ago, known as the Doha Round.

Repeated delays have made the WTO seem irrelevant as a forum for negotiating trade liberalisation agreements. It was a leading reason so many countries have sought to make deals bilaterally or among small groups.

The agreement will help repair the WTO's damaged image. Nonetheless, the rest of the Doha Round will be very difficult to conclude.

The deal seeks further reductions in farm subsidies, tariffs on industrial goods, barriers to international trade in services and more.

All are very difficult to conclude and are entwined with domestic political factors in many of the WTO's 159 member countries. So don't hold your breath waiting for the final deal.

Please sign in or register to post comments.