Monthly Archives: January 2014

What does the Bali Package mean for Small Vulnerable Economies like CARICOM?

Alicia Nicholls

Five days of intense negotiations have given birth to the first major trade agreement to be agreed to by all WTO members since the WTO’s formation at the conclusion of the Uruguay Round. Termed “a leap forward for developing countries” by WTO Director-General Roberto Azevedo, the Ninth WTO Ministerial Conference held in Bali, Indonesia, in December of last year has been heralded as the injection of confidence needed to bring new life to a Doha Round which seemed to be tottering on the brink of failure.

The Doha Development Agenda which, in the thirteenth year since its launch at the WTO’s Fourth Ministerial Conference in Doha, Qatar, has the unfortunate title of being the longest and most contentious multilateral trade round to date. It contains an ambitious work programme which covers about twenty areas of trade, including: agriculture, services, market access for non-agricultural products, trade facilitation, WTO rules, the dispute settlement understanding and trade and the environment. The disappointment with the lack of progress in the Doha Round since 2008 has led  many powerful WTO member states to turn their attention to bilateral agreements, including so-called “mega-trade deals” like the controversial Trans-Pacific Partnership (TPP). Entrenched interests and lack of political will have been blamed for the doldrums to which the Doha Round has been relegated since 2008. It is therefore no surprise that in his statement at the opening of the Bali Ministerial, Director General Azevedo noted that the future of the WTO and the Multilateral Trading System hung in the balance.

Coming out of the Bali Ministerial Conference, the Ministers adopted the “Bali Package” on 7 December 2013, a package of ten agreements covering three of the more easily reconcilable cluster of issues of the Doha Agenda, namely trade facilitation, agriculture, cotton and development and LDC issues. CARICOM has always been a loyal supporter of the multilateral trade system, a sentiment reiterated by Guyanese Minister of Foreign Affairs, Carolyn Rodrigues Birkett, in her capacity as CARICOM’s Ministerial spokesman on WTO matters. The question to be explored in this article is what implications do the agreements and decisions contained in the Bali Package have for small vulnerable economies like those in CARICOM and the wider Caribbean?

The Agreement on Trade Facilitation

The Agreement on Trade Facilitation seeks to facilitate global trade by speeding up, and providing transparency and efficiency in customs procedures. The provision on goods in transit is of importance to landlocked countries which rely on ports in neighbouring coastal states for the import of goods. Keeping up with the times, there is also the requirement that information be placed online. The language of the Agreement is primarily ‘best endeavour’ for the simple fact that the ability of most states to abide by the provisions will be contingent on their receipt of funding to defray the costs of implementation. Indeed, the implementation of these requirements, while important for the multilateral trade system, will be costly for cash-strapped CARICOM states in terms of updating their existing infrastructure and training customs officials. The technical and financial assistance and capacity-building provided for in the Agreement,  in-keeping with the principle of special and differential treatment for developing states, will be vital to help CARICOM states meet these new obligations. The issue of the US’ illegal embargo on Cuba since 1960 threatened to hold up any agreement on trade facilitation. Cuba, Venezuela, among others objected to the removal of a provision relating to the embargo from the text. A compromise was struck by which a provision was added upholding the principle of non-discrimination on transit trade, which spoke  to the embargo situation.

Agriculture

The main contentious issue at the Bali Ministerial was the complex issue of public stockholding programmes for food security, a practice where governments purchase food from local farmers at favourable prices in order to guarantee food security and to support low income farmers.  The US was insistent on the expiry of the “Peace Clause” (Article 13 of the Agreement on Agriculture) which prevents support measures and export subsidies of a member which are legal under the Agreement on Agriculture from being challenged for their illegality under another WTO agreement. India, however, which operates MSPs programmes on a number of agricultural products, strongly objected to the proposed expiry of the ‘peace clause’ without provision being made for a permanent solution. A compromise was finally struck whereby the peace clause would remain in the interim until a more permanent solution was found.  The implication of this is that for now developing country members’ public stockholding programmes for food security in times of food crisis cannot be challenged under any WTO agreement even if they go over their Aggregate Measure of Support (AMS).

Tariff Quota Administration

With respect to the administration of under-filled tariff quotas, the agreement was reached that members would engage in a combination of consultation and providing information where such under-filling occurs. However, importantly several countries, including the CARIFORUM states of Barbados and the Dominican Republic, reserved the right not to apply the system after six years.

Market Access for Least Developed countries

Of particular concern to Haiti, the only LDC in CARICOM, are the four documents on market access for LDCS, which have remained unchanged from the versions negotiated at Geneva. These include decisions for granting duty-free, quota-access for least developed countries to export to developed country markets, simplified preferential rules of origin for goods from LDCs, a “services waiver for preferential treatment for LDC service providers” and a “monitoring mechanism on Special and Differential Treatment”.

Of general interest to all countries of the region, decisions were also taken by the Ministers on five aspects of the WTO’s regular work. Members agreed not to bring “non-violation” cases in intellectual property to the WTO dispute settlement process, import duties would not be charged on electronic transmissions and special consideration would be given to the issues of small economies. Ministers also reaffirmed their commitment to Aid for Trade and affirmed that their Geneva delegations would be directed to continue examining the link between technology transfer and trade. However, the details of these latter decisions remain to be elaborated upon in future negotiations.

Implications for SVEs like CARICOM?

The conclusion of the Bali Package is a small but important step towards the achievement of the Doha Agenda for the simple fact that it gives a new infusion of confidence and credibility to the WTO as the pre-eminent forum for trade negotiations. This is only the beginning however. The Bali package focuses mainly on low hanging fruits, while negotiations on more contentious areas of interest to CARICOM, like services trade, remain. Other priority areas important for ensuring SVEs like CARICOM reap the benefits of the multilateral trading system are still to be finalised, including the work programme for SVEs,  Aid for Trade, the issue of appropriate flexibilities for SVEs in the NAMA negotiations, trade and technology transfer, more flexible accession for SVEs, and reforms of the dispute settlement process to take into account the difficulties faced by SVEs in ensuring compliance by larger states with dispute settlement body decisions.

In their Ministerial Declaration, the Ministers instructed the Trade Negotiations Committee to prepare “a clearly defined work program on the remaining Doha Development Agenda issues” within the next twelve months, building on the Bali decisions and prioritising areas where binding decisions had been unable to be made. Director-General Azevedo has optimistically stated that the WTO hopes to have a full agreement by year-end.  Small developing economies like those in CARICOM have a lot riding on the outcome of the Doha Round and stand to lose the most should the round fail or not fulfill its mandate of being development-focused. However, the success of the Doha Round will depend on whether WTO member states, particularly the richer countries, are willing to set aside their entrenched political interests in the effort of delivering a truly development-centred final package.

Alicia Nicholls is a trade policy specialist. She can be followed on Twitter at @LicyLaw.

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