Coming on the heels of the successful conclusion of a not perfect but monumental Paris Agreement at COP21 setting the framework for post-2015 global cooperation on climate change, the eyes of the world have now turned to another sphere of international cooperation this week – trade. On December 15-18th trade ministers and delegates from over 160 World Trade Organisation member countries will gather in Nairobi, Kenya, for the WTO’s tenth annual Ministerial Conference.
The Nairobi Ministerial seeks to be a turning point in the currently deadlocked multilateral trade negotiations. While climate change and trade are two related but separate issues, the success at Paris causes one to wonder whether there are any take-away lessons from COP21 that can be used in achieving a substantive outcome in Nairobi.
In July Director General of the WTO, Roberto Azevedo lamented the lack of sufficient progress to deliver a work programme on the remaining issues of the Doha Development Agenda (DDA) by the 31 July deadline. More recently on December 11, he noted while there were no deliverables for Nairobi, there was some hope that hard work could lead to some potential outcomes; a package of measures for Least Developed Countries (LDCs), an agreement on export competition in agriculture, special safeguard mechanisms and public stockholding for food security purposes. Even so, agreement will not be easy. Some states have also been working on plurilateral agreements which include the Trade in Services Agreement (TISA), the Information Technology Agreement-2 (ITA-2) and the Agreement in Environmental Goods and Services.
The Paris Agreement was finalised after two intense weeks but was twenty years in the making. Like the pathway to the conclusion of the Paris Agreement, the pathway towards what we all hope will eventually be a final Doha Agreement one day has been one fraught with frustration, failure, missed deadlines and sparse successes here and there.
The 10th Ministerial will be the sixth ministerial conference to have been held since the Doha Agenda was launched at the 4th Ministerial in Doha, Qatar in 2001. The Doha Agenda encompasses an ambitious set of 21 issues, including agriculture, non-agricultural market access (NAMA), anti-dumping, subsidies and safeguards, cotton, dispute settlement, e-commerce, the environment, government procurement and information technology agreements, intellectual property, LDCs, services and trade facilitation. Agreement is to be achieved by consensus (agreement by all) and all of the negotiations are to be treated as components of a ‘single undertaking’, although there is also legal provision for an early harvest under Paragraph 47 of the Doha Ministerial Declaration.
Nearly fifteen years after the start of negotiations, there has been little success to show. The notable exception is the Trade Facilitation Agreement which was concluded at the Bali Ministerial in 2013 and which has only been ratified by 57 of the WTO’s 162 members to date. There are also draft decisions like those on e-commerce and on assisting the integration of small economies to be adopted at the Ministerial this week. LDCs also scored some victory as the TRIPs Council extended until January 2033 the period during which key provisions of the TRIPS Agreement do not apply to pharmaceutical products in LDCs. But when considered against the ambitious scope which Doha had set for itself, these “successes” are not even a tip of the iceberg.
High level of symbolism
In both the COP21 and upcoming Nairobi Ministerial there is a level of symbolism attached to the points in time in which they are being held. In Paris, the delegates recognised that now more than ever was the opportunity for an agreement on a framework for climate change cooperation before it was too late to reverse course.
Turning to the upcoming WTO Ministerial, not only is this the twentieth anniversary of the WTO’s existence but the first time that a WTO Ministerial will take place on the African continent. President Kenyatta’s message sums up well the hopes that African countries, which comprise 43 of the WTO’s member states, have about the significance of the WTO’s first ministerial in Africa:
“This Ministerial Conference will be the first to take place on African soil, a historic occasion, which will do much to help further integrate the African continent into the global trading system.”
Less optimistically, the Nairobi Ministerial comes against the backdrop of a slowdown in global trade growth and within an uncertain global economy. Given the important role of trade in the global economy, any further movement on the negotiations front would be a positive signal.
Diverse set of countries
COP21 had brought together 196 countries ranging the gamut from small island developing states (SIDS), landlocked states, to industrialised nations to least-developed countries (LDCs).
Similarly, the WTO’s membership, which will increase to 164 with the accession of two LDCS Afghanistan and Liberia, comprises a geographically diverse set of states whose varying interests and perspectives can be seen from just a cursory look at the various negotiating groups. This makes achievement of consensus on such a wide range of issues even more elusive. Large developing countries like India and China are now major players in global trade which has compelled some developed countries to object to their continued classification as “developing” countries.
Developmental thrust but diverging interests
In the COP21 negotiations there were several thorny issues which at some stage seemed irreconcilable. Compromise was eventually achieved in the final text. Likewise, the paralysis in the Doha Round is due to entrenched positions by both developed and developing countries on politically sensitive issues. In summary, developing nations believe that the demands by developed nations are not taking into account their development levels and objectives, while developed nations argue developing nations are not being ambitious enough in their commitments. An unfortunate consequence therefore is that members have been taking advantage of the issue-linkages by tying outcomes in one area to negotiations in other areas.
The Chairman of the Agriculture Negotiating Group reported as of December 7 that “[d]espite the intensive consultations and progress made, there is still no appreciable convergence on any of the issues Members are working on, with a limited exception in the case of cotton”.
Agriculture is one of the most politically sensitive issues for states and the major issues surround public stockholding, export competition, domestic support and access and the special safeguard mechanism. Any binding commitments on these issues are not simply words on a paper but will have implications for developing countries’ local farming industries, their rural poor and food security. The G-33 proposal reintroduced in November 2014 has again argued that public stockholding for food security purposes should be designated as subsidies that cause no or minimum trade distortion, the so-called “Green Box” which are except from ceilings or reductions. The ‘peace clause’, which India was able to secure at the Bali Ministerial, is only a temporary solution. The G-33 also call for a special safeguard mechanism in agriculture whereby developing countries, with special flexibilities given to LDCs and SVEs, can temporarily raise tariffs on farm goods in response to any sudden import surges or price reductions. However, according to the latest Chairman’s report, other Members are opposed to the “idea of an outcome on SSM at MC10 in the absence of a broader outcome on agriculture market access”. Members are also still unable to come to any form of consensus on the issue of domestic support and market access.
Another issue of importance to developing countries, including SVEs, is on improved flexibilities for tariff cuts in NAMA. They have been successful so far in having the current draft negotiating text (Rev.4) contain explicit mention of SVEs and specific treatment in market access, domestic support and export competition. However, the Chairman of the NAMA negotiating group reported on December 7 that “real progress on NAMA has remained elusive since the 9th Ministerial Conference in Bali” and that negotiations and ambition in NAMA appear to be linked to the agriculture negotiations.
There are 48 WTO members which are LDCs, 33 of which are African states. Critically for LDCs would be the completion of a package of measures specific to LDCs which provides duty-free, quota-free market access for LDC cotton and cotton products, DFQF access to 100% of products originating from LDCs and preferential rules of origin which would ensure that LDCs can take advantage of any market access concessions. The Ministerial Conference in Bali in 2013 had called on developed country members, which had not yet done so, to provide DFQF access to least 97% of products originating from LDCs. Most countries provide some DFQF access to LDC goods, including China and India, but these are still far short of the requirement and less than the 100% which years ago Millennium Development Goal 8 had called for.
For Small Vulnerable Economies (SVEs), besides work on the work programme for SVEs and recognition of their unique challenges through greater flexibilities and longer commitment periods, a key issue is on rules for fisheries subsidies. The fishing industry is important for SVEs as a source of food and nutrition, economic livelihood, community stability and as a contributor to GDP. Africa, Caribbean and Pacific (ACP) countries tabled a proposal which includes areas on fisheries subsidies to be addressed, including IUU fishing. The fisheries subsidies are being negotiated in the Rules Negotiations which also includes the issues of anti-dumping and countervailing measures. The Chairman Report notes that some links have been drawn by Members between outcomes in anti-dumping and fisheries while there is disagreement as to the inclusion and scope of transparency rules as a focus of the negotiating group’s work and as an outcome of the Rules negotiations. Progress on service negotiations has been non-existent for some time.
Need for compromise
As shown, there is a wide range of outstanding issues to be discussed at Nairobi and consensus must be reached on all for there to be any agreement. On most fronts, there are wide cleavages between negotiating positions which seem almost impossible to be bridged. Wide divergences existed in the COP21 negotiations as well, particularly on the issue of the target limit for temperature increase, loss and damage and climate finance. However, in the end what made the Paris Agreement achievable was compromise.
Are WTO members willing to compromise to achieve outcomes? In many cases, it does not appear so. As it stands, there seems to be a splintering of opinion on whether the Doha Agenda should be pursued as the framework for the post-2015 trading agenda. ICTSD Bridges reported developing countries as expressing concern that developed countries have indicated that they “would not join a consensus on a Nairobi declaration that reaffirms the Doha declaration or subsequent ministerial communiques that mention the ongoing Doha Round of talks”. Moving away from the Doha Agenda, an agenda which is developmental in its outlook, is a move which developing countries should not support. Among other things the Doha Ministerial Declaration reaffirms parties commitment to the objective of sustainable development, confirms that technical cooperation and capacity building are core elements of the development dimension of the multilateral trading system, reaffirms that provisions for special and differential treatment are an integral part of the WTO Agreements and agrees to a work programme, under the auspices of the General Council, to examine issues relating to the trade of small economies.
There has also been calls by developed countries for an expansion of the current negotiating agenda to include the “Singapore” issues of competition policy, investment measures and government procurement and newer issues which take into account the growing digital economy. Developing countries are firmly against the inclusion of any extra issues, especially the “Singapore” issues, out of fears that any binding obligations in these areas would further erode policy space. Others fear that their limited capacity to implement obligations on these areas would put them at risk of having claims brought against them in the WTO dispute settlement mechanism. Moreover, developing countries are also against the widening of the agenda to include any additional areas when developed countries have shown little interest in compromising on existing areas such as on the large agricultural subsidies they give to their farmers.
Frustration with the deadlock in the Doha negotiations has led to an increase in regional trade negotiations, evidenced by the trend towards ‘mega regional trade agreements’ such as the recently concluded Trans-Pacific Partnership Agreement. While I do not necessarily see these mega agreements as threats to the multilateral trading system, the growing frustration with the current negotiations makes the need for Nairobi to be a turning point even more critical.
The way forward?
The Paris Agreement is by no means perfect but has been endorsed by both developed and developing states. The key success factors at the COP21 which led to an agreement were a shared vision that the sustainable future of the world depended on a deal at that moment, a group of States which were prepared to accept nothing less than a deal which put the planet and their survival first, and the political will on the part of all States to put aside narrow political and national interests to come up with a meaningful agreement, even where that necessitated some compromise on politically sensitive issues.
In the case of the Nairobi Ministerial, some of these factors exist. This year is the twentieth anniversary of the WTO’s existence. There is recognition at least in principle that actions taken at Nairobi will affect the course of the global trade agenda and that the first WTO ministerial conference on African soil is the opportune moment for pushing for outcomes which will go a long way in integrating African countries into the global trading system. Moreover, developing countries, including African LDCs, have insisted and continue to insist that any outcomes must be developmental in focus. The requirement of consensus means that compromise by both developed and developing countries will be necessary to bridge the wide gaps between members’ negotiating positions but not where such compromise defeats development objectives. Any Nairobi outcomes must be ambitious but fair, global in outlook but take into consideration the vulnerabilities and capabilities of developing countries (particularly SVEs and LDCs) and complement the post-2015 sustainable development agenda. In the end, as always, it will all come down to political will.
Alicia Nicholls, B.Sc., M.Sc., LL.B. is a trade and development consultant with a keen interest in sustainable development, international law and trade. Please note that the views expressed in this article are solely hers. You can also read more of her commentaries and follow her on Twitter @LicyLaw.
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