Is the WTO a sinking ship?

2013-05-19 14:00

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Roberto Azevêdo, the new Brazilian director-general, promises to revive global trade deal negotiations

The new Brazilian director-general designate of the World Trade Organisation (WTO), Roberto Azevêdo, was formally elected on Tuesday last week, promising to “restore the WTO to the role and pre-eminence it deserves and must have”.

Like all nine candidates, Azevêdo had promised to revive the Doha Development Round, the negotiations for a global trade deal that has been on the back burner since 2001.

The very next day, the 17th round of negotiations kicked off in Peru for a “megatrade deal” led by the US that is very likely to finally help end the WTO’s role as the negotiating forum for global trade rules.

It is called the Trans-Pacific Partnership (TPP) and the current 12 members will encompass about a third of all international trade, including Japan.

The US is simultaneously starting talks on the similar Transatlantic Trade and Investment Partnership (TIPP) with the EU, which would cover an additional 40% of world trade.

These are works in progress, but if successful, the result would be that the trade rules covering the vast majority of global trade will be set far away from the WTO and its flailing Doha Round.

The conspicuous absence at both these negotiations is China and its Brics partners Russia, India, Brazil and South Africa.

The TIPP and especially the TPP are widely viewed as the West’s unofficial China containment strategy.

Proponents call it a necessary initiative to update global trade rules, which are a decade out of date owing to the WTO’s paralysis for most of the time since 1995, owing to its Doha Development Round.

A loser in the recent race to lead the WTO, Mexican Herminio Blanco, on his campaign trail listed the two deals among the major threats to the WTO.

TPP and TIPP are being marketed as “21st-century” trade deals that set “platinum standards” rather than focusing on lowering tariffs.

The core of the negotiations is standard setting on intellectual property, environmental issues, health and safety and the restriction of state-owned companies.

China probably couldn’t join the agreement even if it wanted to, because the agenda is practically tailored to attack all the practices that underpin its economic success.

The US undersecretary of state for trade, Robert Hormats, recently preached the value of the US mega-agreements in Johannesburg before attending the World Economic Forum on Africa.

The “probability is pretty low” that the WTO’s Doha Round ever concludes, Hormats admitted.

The issue, according to him, is that “large economic economies were poor at the start of the Doha Round, but are now major trading powers”.

The main goal of the round was to create concessions for developing countries, which in the WTO classification still includes China, Brazil and India.

“Arguably it is those very competitive countries that would benefit. That concerns the US and EU,” said Hormats.

“We want them to assume responsibility for that system and not ask for special exemptions.”

After TIPP, “the WTO might still be relevant”, he added.

“I imagine at some time a bunch of these agreements might go to the WTO to see if others want to join in.

“I can see a lot of this stuff being injected into the world trade system.”

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