The WTO: “Breakthroughs” in Bali and Modest Gains in Nairobi

Background 

Typically, issues related to agriculture are among the most contentious sticking points of WTO negotiations, and that was no different in Bali. At the conference on the Indonesian island in 2013—which we wrote about here—most fiercely debated questions were related to the ways in which a developing country should be allowed to intervene in its domestic markets in the pursuit of food security. 

One such intervention under fire was stockpiling: developing countries, led by India, argued that they should have more flexibility to stockpile food in the name of food security. Another controversial intervention practice was related to subsidies: non-developed countries argue that the WTO-defined federal agricultural subsidy caps are derived from 1980s crop prices, rendering them archaic. At the end of the discussions in Bali, negotiators agreed to revisit the issue at a later time and that they would settle on a permanent solution by 2017.

India, a leader in the food security fight, flexed its muscles in July 2014 when it refused to ratify a separate, but critical component of the Bali deal: trade facilitation. The largely uncontroversial trade facilitation agreement was designed to make trade easier and more efficient across international borders by simplifying border procedures and boosting transparency on trade-related information. 

India’s policymakers refused to sign off on trade facilitation not because they were opposed to the idea in principle, but rather as a sort of ultimatum—arguing that progress on the food security question was slow and that their concerns were not adequately addressed. 

Though India’s refusal stoked widespread concerns over the future of the widely-lauded Bali Package, by November 2014 it had managed to reach an agreement with the US. The compromise ensured that developing countries would not have their stockpiling practices challenged, and that countries would have until a new permanent solution was reached—even if that were to happen after the 2017 deadline.  

In addition to the above agreements, the Bali Package included provisions to strengthen tariff rate quota administration, to keep export subsidies low, and to place additional scrutiny on cotton by hosting discussion regarding that market twice each year. 

Bali progress

Although the fact that the negotiators were able to reach such an agreement was monumental in and of itself, the implementation of the decisions is still ongoing, and will be another feat altogether. 

The good news for the enthusiastically anticipated Trade Facilitation Agreement is that it is binding and will enter into force once two-thirds of WTO members ratify the agreement. As of the Nairobi Ministerial meeting in December 2015, 63 countries had ratified, still far short of the 108 countries required for the two-thirds minimum. Once the agreement is ratified, developed countries will have to demonstrate their progress on implementation within one year. Developing and least developed countries, however, will retain the power to determine when they will implement the TFA provisions in accordance with their capacity to do so.  

Many of the other decisions included in the Bali Package were non-binding: rather than commitments, they were “improvements.” Such improvements include the opening of developed and developing markets to least developed countries (LDCs), which is happening gradually. Another improvement is centered on the reduction of export subsidies. 

Many WTO members have, for many years, looked to the US in the hopes that it would soon be reforming its farmer support programs which are frequently accused of being given unfair, market-distorting assistance. The complaints, which have centered on cotton farmers in particular, have been repeatedly been shown to be valid, forcing the US to pay in penalty fees and commit to reform. The US made adjustments to its farmer support programs—evidenced by changes to such programs contained in the farm bill, in which the supports offered to cotton farmers are separated out from all other crops in a unique farmer support program, STAX. Despite these adjustments, critics maintain that these changes are more in name than anything. Even a paper published by the US Congressional Research Service indicated that in a worst-case scenario, in which prices for multiple crops would drop significantly and within the same year, the US would be in excess of its permissible $19.1 billion trade-distorting spend limit. 

The Nairobi package

Last month’s Nairobi ministerial marked the 20th anniversary of the establishment of the WTO. The conference, which ran from 15 to 19 December 2015, reaffirmed many of the same ideas and stances expressed in Bali.

By far, the most significant accomplishment of the Nairobi package is within the Ministerial Decision on Export Competition, in which negotiators agreed that they would eliminate agricultural export subsidies—a policy that WTO members had long struggled to formulate.

The Director-General of the WTO, Roberto Azevêdo described the binding agreement as the “most significant outcome on agriculture” in WTO history.  

Developed countries will have to remove export subsidies immediately except for subsidies on a handful of agricultural products (including dairy  and some processed foods, and the exclusion of the latter has some developing countries concerned). Developing countries will have to eliminate such subsidies by 2018 with the option to cover marketing and transport costs through 2023; while LDCs have a flexible and extended timeline for their elimination.

Importantly, the elimination of agricultural export subsidies does include cotton, and the Nairobi Package stipulates that cotton from LDCs should be given duty-free and quota-free access to developed markets.

The Nairobi package also affirms the right of developing countries to utilize a special safeguard mechanism (SSM), which enables them to temporarily increase tariffs in the event of agricultural import surges. As a replacement to the previous SSG (special safeguard) system which only applied to countries with certain tariff policies in place, the SSM is designed to protect small-scale farmers across the developing world from unfair competition. 

The Nairobi Package also reaffirms many of the non-binding improvements and targets set out in the Bali deal, such as the need for member countries to provide the WTO with detailed information regarding food aid received or shipped; and the need for them to provide it with information on any export credit or insurance programs. 

The other major outcome of the Nairobi Ministerial was not strictly related to agriculture: discussions on the Information Technology Agreement (ITA) of 1996 were finally concluded at the meeting. The agreement, reached by 81 countries that account for roughly 97 percent of world trade in information technology products, eliminates tariffs on 201 IT products (including computers, telecommunications equipment, semiconductors, and scientific instruments), trade for which is valued at more than $1.3 trillion per year.

Still, one of the most widely discussed events from the Nairobi ministerial was not so much rooted in what was said, but what was not said: some WTO members did not reaffirm the Doha mandate. Although countries including India maintained their belief in the Doha Development Agenda (DDA), others cited the need to formulate new approaches capable of producing meaningful outcomes, given that the Doha negotiations have been stalled since 2009.   Though there’s no specific proposal as to how to replace the DDA, the WTO’s focused successes in Bali and Nairobi—trade facilitation in Bali and export subsidies in Nairobi—suggests that a narrower approach to trade negotiations might be more effective. Others also argue that there is a need to refocus the trade negotiations onto the types of issues and products that are relevant today, as opposed to those that were relevant in 2001. The EU Commissioner for Trade, for example, noted that there is a need to focus negotiations on issues like e-commerce and digital trade, tackling “murky” local content laws, and regulatory challenges affecting trade beyond the border.   She also noted the potential of “plurilateral” agreements to alleviate some of the traditional deadlock of the WTO—meaning, agreements that are agreed upon between smaller groups of countries, and to which other countries can join at a later date.

Going forward

The Nairobi ministerial meeting also marked the first since the accession of Yemen (June 2014), Seychelles (April 2015), Liberia (October 2015), and Afghanistan (December 2015).

The WTO’s continued growth; the success at Bali; the more modest but still significant success at Nairobi; and the recognition that a new approach to negotiations is likely necessary may help breathe life into an organization which at times over the past twenty years appeared lifeless.