The WTO Struggles in Nairobi

posted by
on December 21, 2015

The Wall Street Journal

The WTO Struggles in Nairobi
There is serious doubt the organization will ever be able to negotiate meaningful trade liberalization again.

Dec. 21, 2015 12:58 p.m. ET

The World Trade Organization’s ministerial conference in Nairobi last week brought one bit of good news. After five days of wrangling, the 164 member countries announced on Saturday that they had agreed to phase out export subsidies for agricultural products. That’s a small but worthy accomplishment that had eluded the global trading system for five decades.

Otherwise there wasn’t much reason in Nairobi to cheer. The deep divide between rich and poor countries on trade persists. There is serious doubt that the WTO will ever again be able to negotiate meaningful multilateral trade liberalization.

While the Americans, Europeans and Japanese succeeded in killing off the economically outdated Doha negotiations that date to 2001, they offered no new road map. Nor did the Indians, Chinese and some Africans who still pretend that the Doha patient still has a pulse. Accordingly, the Geneva-based WTO remains an institution with an uncertain future.

In the past 20 years, the WTO has completed one multilateral trade negotiation. At the 2013 Bali meeting, members agreed to give the world’s poor nations something called trade-facilitation assistance. That aimed at smoothing the flows of goods across presently clogged borders: modernizing inefficient customs procedures by introducing electronic payments and tracing, and so forth. As Hong Kong’s chief representative to the WTO, Irene Young, reminded everyone in Nairobi this week, that deal “is expected to reduce average trade costs by more than 14%, an impact possibly greater than the elimination of all remaining global tariffs.”

But the Bali deal hasn’t yet been implemented, as only 63 of the 108 necessary WTO members have ratified it. As WTO Director General Roberto Azevêdo told reporters in Nairobi, one successful multilateral negotiation in 20 years “is not good enough.” At the WTO’s closing ceremonies Saturday at the Kenyatta International Convention Center, Mr. Azevêdo referred to the continuing impasse between the rich and poor countries, noting “the world must decide what path this organization should take.”
The fundamental problem is weak political leadership that is mired in parochial protectionist politics, especially in capitals such as Beijing, New Delhi, Pretoria and Washington. In 1948, when the WTO’s predecessor organization, the General Agreement on Tariffs and Trade, was launched, there was a shared consensus that the gradual dismantling of trade barriers was the goal.

From 1948 to 1995, when the GATT morphed into the WTO, seven rounds of multilateral trade liberalization slashed tariffs to an average of 5% from 40%. But nowdays, the GATT/WTO could more aptly be dubbed the General Disagreement on Tariffs and Trade. Few still believe in the WTO’s core multilateral negotiation function.

Some poor countries such as India never really believed. In Nairobi, India’s main goal was the opposite: demanding that the rich countries slash their trade barriers, while raising its own. India already has authority to raise its average agriculture tariffs to more than 100%, yet still demands an additional “special safeguard mechanism” rights.

Last week, India was unable to play its customary role as a wrecker, as spoiling the only WTO ministerial meetings ever held on African soil would have been unthinkable. Besides, India lost the support of traditional allies like Brazil, who demanded more access to protected Indian markets.

The Chinese also were focused almost exclusively on restricting agriculture imports and on continuing the Doha negotiations as planned in 2001. That’s because back then, China was promised preferential treatment as a poor country.

Other examples of economic short-sightedness are depressingly petty. Pakistan came to Nairobi angry that a South African cement cartel has persuaded Pretoria to slap more than 60% tariffs on Pakistani cement imports. Meanwhile, the Pakistanis were against a proposal to give Bangladesh duty-free treatment for Dacca’s clothing exports. African countries like Lesotho, which have been granted preferential tariff-free treatments on their clothing exports to the U.S., also piled on Bangladesh.

So did the Americans, who remain in thrall to their own protectionist textile lobby. Meanwhile, South Africans came to Nairobi with assurances they would stop blocking American poultry imports—hoping that would persuade U.S. President Barack Obama from denying them preferential access to American markets.

Even sadder, when the Philippines offered an excellent idea to streamline export opportunities for small entrepreneurs, the usual nay-sayers—including Bolivia, Cuba, India, and South Africa—shot it down. Don’t give the capitalists anything until our demands for additional protection are met, they insisted.

U.S. Trade Representative Froman made a fine speech to his colleagues in Nairobi. It’s time for WTO members to stop playing cynical games, he said. He meant the other guys.

Mr. Rushford is editor of the Rushford Report, an online journal on the politics of trade.