Future of WTO: Life after Nairobi — Poppy S. Winanti

DECEMBER 30 — The 10th World Trade Organisation (WTO) Ministerial Meeting in Nairobi failed to meet its original deadline on Dec 18.

The negotiations have been extended due to unresolved discrepancies between major and emerging economies on the issues on the Doha Round.

Approaching the scheduled deadline, the WTO members were still unable to reach a consensus, particularly on the issues of subsidies and protection for farmers, as well as regarding the adoption of new trade issues.

After the adjournment, the conference finally ended with no permanent solution. In this context, the stagnation of WTO negotiations has not only increased public cynicism but has also raised a question on the future of the global trade regime under the WTO and what implications it has for Indonesia in particular.

Difficulties in reaching a consensus had been expected since the beginning of the conference due to wide differences particularly between India and major economies including the US, EU and Japan.

India, since the commencement of the negotiations, has had a firm position on amending the Agreement on Agriculture (AoA) in order to accommodate a permanent solution regarding food security.

In addition, as an instrument to protect its domestic poor farmers, India has proposed a Special Safeguard Mechanism (SSM), which would allow developing countries to raise tariffs temporarily in order to deal with the negative impact of imports and a decline in global prices.

Some members rejected the idea on the grounds that it would distort the market. Interestingly, the rejection not only came from developed economies but also from other developing countries, who were also afraid of the negative effect of this policy on their economies.

The rejection by some developing countries regarding the SSM and a permanent solution to food security, to some extent, mirrors Indonesia’s dilemma on agricultural sector negotiations, which in general has two main conflicting objectives.

Indonesia on the one hand needs to ensure its food security (a rather defensive position) and on the

other hand also needs to promote its agricultural exports in international markets (a rather aggressive position).

For its first objective, Indonesia’s position is reflected in its involvement in the G-33 coalition and also in line with India’s argument, which basically provides special treatment for developing countries, as well as to find a permanent solution for Public Stock Holding (PSH) issues.

Nevertheless, it should be noted that the SSM and PSH proposals would not be without consequences since they may also increase trade barriers in the agricultural sector.

On the other hand, Indonesia is also part of an exporter countries coalition, which demands the elimination of any trade barriers for its main exports of agricultural products.

The elimination of production and export subsidies on all agricultural products will also force Indonesia to provide similar treatment and will ease the importation of agricultural products entering the Indonesian market.

This may then jeopardise domestic farmers who have to compete with imported products.

Against this background, Indonesia during the Nairobi conference was supposed to play a significant role in bridging the differences, considering its vital role as the coordinator of the G-33.

As can be seen from the result of the Nairobi conference, however, by agreeing not to have a permanent solution regarding the agricultural sector as proposed by India, it seems that Indonesia has taken sides to prioritise ensuring market access for its agricultural commodities rather than serving its interests to defend special treatment for developing countries in the agricultural sector.

This shows that Indonesia was unable to utilise its role to contribute to a robust post-Nairobi working programme, which includes a mechanism to minimize the negative effects of the implementation of the PSH without compromising its legitimate objective of ensuring food security in developing countries.

In other words, Indonesia seems unable to offer an acceptable permanent solution for this issue and more importantly unable to deliver its critical role of influencing the negotiations to achieve more meaningful results.

In addition to the divergence in the agricultural sector, the lengthy negotiations were also intensified by disagreement regarding the course of the Doha Round.

Advanced economies (US, EU and Japan) advocated the end of the Doha Round, which has been taking place for more than 14 years without any significant achievement.

Developed members requested a start to negotiations for new trade agendas, including investment, competition policies, government procurement, labour, environment and climate change.

These are the trade agendas that are known as the Singapore issues, oweing to the fact that they were introduced at the WTO Ministerial Conference in Singapore in 1996.

These agendas, however, in 1999 were dropped from the table and the negotiations were postponed for an indefinite period of time. The inclusion of these new trade agendas was strongly opposed by most developing countries.

Developing countries as led by India opposed the conclusion of the Doha Round without a clear decision regarding the solution on key existing issues particularly on the agricultural sector.

The impasse situation of the Doha Round after the 10th Ministerial Conference in Nairobi, has clearly posed a question regarding the future of the multilateral trading system under the WTO. Under these circumstances, it is not surprising if members no longer value the relevance of the WTO and become more frustrated with its progress.

As a consequence, members will be more eager to look for alternative routes outside the WTO, notably via regional integration or bilateral initiatives. The establishment of the Trans-Pacific Partnership (TPP), for example, can be understood as a pragmatic response by its members due to the unclear future of the WTO negotiations.

The establishment of regional integration, which is discriminatory in nature, however, will in turn influence global trade relations.

Considering these circumstances, it is crucial, therefore, for the WTO members to be aware of the importance of keeping “the bicycle moving” to prevent it crashing to a halt. — Jakarta Post

* Poppy S Winanti is director of the Centre for World Trade Studies (CWTS) at Gadjah Mada University in Yogyakarta.

** This is the personal opinion of the writer or publication and does not necessarily represent the views of Malay Mail Online.