At one stage it looked as if the latest session of World Trade Organisation (WTO) negotiations in Indonesia was doomed to failure, but word arrived at the weekend that a deal had been struck. Despite some flaws, there is now a new trade deal, moving away from protectionism and towards liberalisation. This comes after more than a decade of failure. Detailed assessments will no doubt arrive in time, but we sought some initial reactions from some of our experts.
Former Trade and Industry Minister Alec Erwin:
It is pretty clear that this is a holding job, and a very necessary one at that! They have basically dealt with the issues that affect the developing and least-developing countries that are not of fundamental importance to the developed or the BRICSA-type countries. I am not sure what the precise content of the trade facilitation text is but that could be important for all. I also cannot see the planned work program ahead. The big elephants in the room – industrial tariffs and further agricultural liberalization have been left once again. So in short they have moved along the development path but have not been able to address the rapidly changing balance of power in the world economy, which requires a pretty fundamental look at the key issues of industrial tariffs, agriculture and services. The Doha Framework, whilst a good one, is rapidly becoming outdated with this new balance of power. However the fact that they were able to reach a range of agreements is a very positive step that they need to build on in order not to entirely loose the momentum of the WTO – which is the real protection against the maxim of ‘might is right’. The new kids on the block in this regard are groups like the G11 around industrial tariffs (SA being a part of this). The ‘might is right’ regime will hurt the least-developing and most African economies the most!
Professor Raymond Parsons from BUSA:
The draft global trade deal now struck by the WTO is good news for the world economy, as well as for SA. Whatever the trade obstacles that still remain in the spheres of agriculture, industrial tariffs and services, it is in the interests of small emerging economies like SA that an international negotiating forum committed to multilateral agreements exists to ensure enforcement of their trade rights. An effective rules-based multilateral system remains essential to underpin the world trading system and to help level the playing field. The latest WTO accord may also extend the already protracted negotiations on the Doha Round, which SA and other like- minded economies have been seeking to influence over the past few years. It at least provides time for the WTO and its members to see whether they can reach fresh accommodations which will strengthen the WTO’s ability to respond to the changing economic and business environment of the last few years. The WTO has now been given a new lease of life and it up to its member-countries to make the best use of it.
Peter Draper from the SAIIA (writing from Indonesia):
I think the deal is justifiably described as the best thing that’s happened to the WTO in decades. In fact it’s the first substantive deal the organization has delivered. That is also positive in terms of its implications for wrapping up the Doha round in some form, which is the next big hurdle the organization confronts and will be the focus of renewed and revitalized effort over the next year or so. Even though it is a relatively limited deal, the trade facilitation component in particular will have substantial, positive implications for traders around the world since it will lead to more automated customs processes and a renewed emphasis on authorized economic operator systems – implying less intrusive inspections regimes down the line. I think this is good for SA, not so much because we need this kind of fillip but more because our neighbours will have to pay it serious attention. That may of course lead to implementation problems, but the deal caters for external assistance. I don’t think the other elements of the deal are much to write home about since they don’t really have substantive implications for us. With the exception of the food purchase programme which the Indians held out so long on. I’m told that SA has a similar scheme and therefore can take comfort that it will be legal for at least another four years. (I wasn’t aware of this so I can’t comment on the accuracy.) But for the Doha Round it also gives developing countries some purchase to secure actual elimination of export subsidies and disciplines on US food aid, since the EU and US respectively want these food purchase schemes to be disciplined. That provides some hope of an overall package incorporating agriculture and industrial tariffs, although I think the latter will remain particularly difficult.
Martyn Davies from Frontier Advisory:
The WTO is battling to remain relevant. I would say that this deal is by no means the big achievement that it is made out to be – rather an “easy win” that did not take much compromise at all from its wide membership base. The future of trade liberalism lies in regionalism, not global multilateralism.
Former SACCI CEO James Lennox:
The deal seems to be an agreement to further talks over a number of years to address issues such as food supply. Trade facilitation advances will probably be offset with additional “national security” requirements, resulting in less than hoped for benefits. Any growth opportunity for agricultural products from developing countries will potentially be reduced by high tariffs imposed on increased volumes. Bi-lateral and regional trade agreements between major trading blocs will continue to throttle growth opportunities for LDC’s and small developing countries – making the WTO even more important at a time of its declining influence. Multinational companies and any distorting effect they have on national and international trade also needs to be considered when considering trade agreements.
Ian Cruickshanks from the SAIRR:
It is interesting to see how long it has taken to reach the first trade agreement since the founding of the WTO in 1995. However, we have seen the Doha Round of talks with 12 years of trying to level the playing field between poor and rich countries, so a move to limit agricultural subsidies and hold stockpiles off the markets should provide some greater certainty for the marketing of products from the least-developed countries. However, I think that many of the major players in the WTO have been motivated by fear of alternative regional agreements. Considering their own snail-pace advances, definitely this is a boost to world trade. However the possible 1 trillion dollar benefit may be over-optimistic. These changes will take months and possibly some years to be fully effective, but it is a move to assist emerging markets like SA whose economies are skewed toward base commodity exports. Markets should be supported by this agreement, but may not necessarily be expected to improve.
Miyelani Mkhabela from the Antswisa Management Group
The World Trade Organisations (WTO) outcome is a great achievement by 159 member nations to have signalled until they reach trade consensus and overlook minor regional challenges and differences. The WTO is the only global organisation dealing with trade rules between nations. The Indonesia agreement will resuscitate or asphyxiate the value of the WTO and make effective of their length and complex trade agreements. The agreement will also fulfil the principles that trading countries shall not discriminate between its trading partners, it should also not discriminate between its own and foreign products and services, lowering trade barriers is also one of the primary ways to encouraging trade and the discouragement of unfair practices will advance and mainstream the participation of developing economies that includes South Africa as well.
South Africa is trading mainly in mineral resources, agricultural products and other resources will benefit from the agreement. Economically, the disagreements in agriculture will continuously be witnessed as countries seek global competitive advantage within the sector and developing nations proved to use agriculture as their area of focus mainly for economic development. Trading nations and national domestic trading stakeholders will welcome the progress made by the conference 2013. The global community needs the WTO and other trade agreements between nations are guided by it. Trade Processes and other systems will change the normal operations of the world trade countries, chambers and producers will have to change slightly and this will add value in weakening trade barriers. Producers from emerging economies struggle to trade their products and the non-consensus discouraged fair trade for the past 17 years since World Trade Organisation formation 1 January 1995 and the outcome is a new practical formation in principle of the WTO and we anticipate flexible trading between developed and developing nations and also a symbol green leafs of the global economy to grow.
Conclusion: As is always the case with these deals, it is a compromise, and has some gaps and flaws. But for once let us consider the glass to be more than half full. Bravo WTO!
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