Renewed focus on core issues will help global trade

A robust response to Trump by the entire membership is a must to save WTO

Amultilateral, rule-based trading system is our best bet for promoting global trade. Nearly everyone agrees with that. It’s a pity then that the WTO made no significant rules for promoting businesses in the past 20 years. The Trade Facilitation Agreement signed in 2013 at Bali was just a weak face-saver for the WTO leadership.

Shifting focus from the core trade issues like reducing tariffs is the main reason. Most negotiating energy is spent on the non-trade issues that are of interest to few developed countries. The history of trade negotiations confirms this. Let us have a quick recap.

The General Agreement on Tariffs and Trade (GATT) took off in April 1947 with 23 founding members. For the next 40 years, it was more of a cozy confident club led by the US, EU and Japan. They cut their tariffs and passed on the benefits to all members without seeking reciprocal cuts. It was an excellent strategy as most goods on which duties were reduced, were produced and traded among them.

The negotiations were crisp as the tariff cut was the only issue on the table. So each of the first five rounds of negotiations between 1947 and 1960 were concluded within 12 months. The sixth round in 1964 included anti-dumping in addition to tariffs, so took 37 months. The next round at Tokyo added nontariff measures and took a more extended 74 months. The eighth or the Uruguay round endured 87 months as it discussed still more new subjects: services, intellectual property, dispute settlement, textiles, agriculture, the creation of WTO, etc.

So, we see, as the number of negotiating issues increased, focus diluted and negotiations took more time. Why crowding of the WTO agenda happened? The greed of the US- and EUbased large pharma and services industries provided the initial reason.

The pharmaceuticals lobby wanted ironclad patent protection in every country. It was not a trade, but a public health issue dealt at the World Intellectual Property Organisation (Wipo). But Wipo was of little use as it had no power to punish the patent-violating nations. WTO’s Dispute Settlement Mechanism (DSM) was needed. The challenge was how to get the member countries to agree to make rules on a non-trade issue.

So a deal was stitched, and WTO came into being with the liberal use of political pressures in January 1995. All countries agreed to new proposals. In return, the developed countries decided to reduce agriculture subsidy. Also, abolish import quota on textiles and apparels.

The GATT made rules for trade in goods. But the WTO also covered services and intellectual property rights. The DSM was recreated as an efficient body for disputes resolution with the provision for appeal. A small country like Antigua could sue the US and get a favourable verdict.

The inclusion of The Agreement on Trade-Related Aspects of Intellectual Property Rights (Trips) in the WTO was a big victory for the pharma lobby. The inclusion of a non-trade issue like Trips in WTO emboldened developed countries. This paved the way for the entry of similar non-trade issues at the WTO. They soon took the first steps to include issues related to labour, environment, foreign investment, government procurement and e-commerce into the WTO. The rules then could be used to check undesirable imports from developing countries.

Amidst the confusion, the twin tower attack happened in September 2001. A shaken US needed to enlist all countries in its fight against terror. The 9th WTO round called the Doha Round was launched within two months of the attack. The agenda was again heavy with the inclusion of all new issues.

Most developing nations already had a feeling of being short-changed at the time of formation of WTO. They opposed the inclusion of new issues in the WTO agenda: New issues were not the core trade issues. The impasse continued in Buenos Aires in December 2017.

Trump almost precipitated the crisis by imposing tariffs on steel and aluminium early this month. A robust and unified response to Trump by the entire WTO membership is a must for saving the WTO.

We need to bring back the negotiating focus on the three core areas—tariff cut on goods, domestic regulation for services, and reducing agriculture subsidies. This approach alone will revitalise the WTO and trade.

The writer is an Indian Trade Service officer. Views are personal