The Breakthrough in WTO Talks and the Trade Facilitation Agreement (TFA)-Far from Meaningless

by Robert Howse

[Rob Howse is the Lloyd C. Nelson Professor of International Law at NYU and is guest blogging this week here at Opinio Juris. His first post can be found here and his second, here.]

At International Economic Law and Policy Blog, where I’m a regular, I’ve been blogging for a while about the impasse in WTO Doha round negotiations and how to break through it. See here and here India has learned from the way developed countries operated in the previous Uruguay Round of negotiations, linking different issue areas or agreements, so for example rich nations could get developing countries to agree to TRIPs (intellectual property rules), on the basis that they had to do it to get something on agriculture, etc.  So, in this round, the Indians have insisted that implementing trade facilitation (mostly a developed country demand) depends on protection against WTO challenge for food security programs like India’s food subsidies for its poor.

With a bilateral deal between India and the US last week on food security, there is now the opportunity to move forward to complete the package negotiated in December 2013 at the Bali WTO Ministerial, and then, beyond that, to strike further deals that make the WTO as a negotiating forum relevant to the issues of today and tomorrow.  Reflecting the diversity of the WTO’s membership, some of these accords will be plurilateral, not binding all Members, but rather in the manner of “coalitions of the willing”, but still  (at least eventually) under the WTO umbrella, using its well-developed dispute settlement system and institutional framework.  Thus, another bilateral accord in recent weeks, between the US and China, will allow the Members involved to push forward with a new version of the plurilateral Information Technology Agreement (ITA).  At the same time, negotiations on liberalization of green goods have been happening in Geneva, another plurilateral initiative, where US leadership has been crucial (Canada’s WTO Ambassador, Jonathan Fried, has also given these talks a big push).

So, contrary to what the pessimists have been saying, the WTO is far from dead these days.  But some are claiming that the recent breakthrough is in fact trivial and disguises the virtual irrelevance of the current WTO agenda.  Financial Times journalist Alan Beattie, writing yesterday on one of the FT’s blogs, claims that reaching agreement with India on food security in order to push forward on the Trade Facilitation Agreement is hardly a victory, at all but perhaps a defeat in disguise.  Part of  Beattie’s argument is that the TFA is an unimportant accord, which has been blown up in significance because other elements of the Doha round agenda proved largely impossible to move forward on (such as genuine reform of rules on agriculture).   So what is the real story about trade facilitation?  Beattie is more wrong than right, and here’s why.

First of all, a little explanation of the jargon.  Trade facilitation is about improving customs administration, and the necessary infrastructure to move goods across borders.  Sounds boring, but the losses to otherwise efficient trade from these kinds of bottlenecks at the border, whether do to as corruption and incompetence, or just inadequate resources or out-of-date technology, are real.  One may question whether, however, the WTO, or indeed any set of legal rules, is up to tackling this kind of issue: it seems more a matter of institution-building, support for new technology and infrastructure, and rule of law/governance activities such as training of officials and redesign of domestic agencies.  In other words, if anything, the World Bank’s and regional development banks’ sort of thing, not the WTO’s.  Thus, I myself have in the past expressed skepticism about how much the WTO can do in this area.  (An excellent guide to the TFA by Ole Miss law professor Antonia Eliason can be found here).

Yet, as Ruti Teitel and I have argued in our essay “Beyond Compliance,” the effects of international legal norms can’t be gauged simply in terms of rules compliance and what comes out of it.  International agreements can create dynamic effects, changing the incentives of actors, and unleashing forces for change, even some not anticipated by the drafters.  I would argue the TFA is just such an agreement.  First of all, it is tied explicitly to financial support for improvement in customs administration and infrastructure in developing countries.  Of course, merely signing the TFA won’t guarantee all of the funds.  But it will create a strong basis for prioritization of this agenda in development banks and aid agencies.  Second, the TFA is, in its structure, a ground-breaking WTO Agreement.  Unlike the “one size fits all” approach reflected in many of the Uruguay Round WTO treaties, where “special and differential treatment” for developing countries was largely lip service, the TFA allows developing countries to implement at a pace suited to their individual situations, to revise those timetables in light of changing circumstances, and it reflects the very important principle that commitments should be matched to capacities.  Thus, the TFA is perhaps the first genuine deliverable of the promise that Doha is a “development round”-that trade treaties will now be done at the WTO in a development-friendly way, with flexibility that reflects the diversity of the Membership, and the complex and fast changing environment of globalization in which developing-country (indeed all )Members operate.  But there is a further “beyond compliance” point here. Trade facilitation has, understandably, been conceived in the WTO as improvement of customs administration with a view to making it easier to get goods across the border.   But better technology, more competent and less corrupt customs administration, and improved information exchange between customs and other governmental authorities in importing and exporting countries can also address the reverse problem–too much trade in illegal or toxic goods.  Here, one thinks of smuggling in endangered species, for instance.  I’ve mentioned to folks at the CITES (Convention on International Trade in Endangered Species) Secretariat that they should pay attention to the work at the WTO on trade facilitation.  Enlisting constituencies concerned about “bad” trade in the goal of improving the way customs and related infrastructure works, may realize a potential for the TFA that its drafters hadn’t even thought about.

http://opiniojuris.org/2014/11/20/breakthrough-wto-talks-trade-facilitation-agreement-tfa-far-meaningless/

One Response

  1. Dear Rob

    Thank you for your very interesting and insightful blog. I read Alan Beattie’s article too and share some of his comments. But I share some of your comments too. I exactly agree that it is a matter of institution-building, support for new technology and infrastructure, and rule of law/governance activities such as training of officials and redesign of domestic agencies that may occur in any other international organization. This may be better placed elsewhere and not under the WTO.

    WTO should deal with greater coherence in global economic policy-making or otherwise change the mandate. I like to point out a basis for prioritization is not a prioritization. Merely in its structure a ground-breaking seems to me not enough for a ground-breaking agreement; the “one size fits all” approach reflects the mandate. You’re right developing countries need measures suited to their individual situations, in light of changing circumstances, and this reflects the very important principle that commitments should be matched to capacities. However, why under the WTO where should coherence be established?

    Even though I share sympathy with “diversity of the Membership, and the complex and fast changing environment of globalization in which developing-country (indeed all) Members operate” this is not the mandate of WTO. They seem to me on a trip of self-discovery, or male menopause. Some parts still function quite well. WTO appellate mechanism seems to work well but the body dealing with new treaties seems to be dead insofar as not new agreements like GATS, GATT or TRIPS may be expected. There is no willingness from the member states to greater coherence in global economic policy making. Member states used the forum to negotiate regionalism or even worse, bilateralism. Maybe this serves better the developing states maybe not. “Breakthrough” is a bit overstretched but I share a lot of your concerns you raised. You are absolutely right. Even though I believe some functions are dead, we should pay attention to the work at the WTO on trade facilitation. Learn from the mistakes made and maybe change the mandate to form a better world.

    Best
    Dimitrij

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