RESEARCH AND ANALYSIS

Deadlock in the WTO: What is next?

Beginda Pakpahan

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Have your say

The WTO Doha round negotiations have deadlocked for more than a decade. It is quite a long time for negotiating the multilateral trading system. Then, what is next? I argue that the number of regional, inter-regional and bilateral arrangements would increase as alternative means to overcome the WTO deadlocked negotiations. The malaise in the world economy is a catalyst to accelerate these above economic arrangements. The WTO and regional organizations need to develop a flexible framework to manage these developments in order to support the multilateralism rather than to weaken it.

 

The deadlock in Doha round negotiations

The WTO launched the Doha round negotiations in 2001. These negotiations aimed to minimize tariffs on agricultural and industrial goods, to remove agricultural and farm subsidies and to relax non-tariff barriers.1 At the WTO meeting in 2003, however, the developed and developing countries failed to reach a collective position on provisions regarding trade liberalization which needed to be included in the future multi-trading system.2 More specifically, developed and developing countries have had dissenting positions on subsidies for food and agricultural sectors, Singapore issues, non-agricultural market access and trade facilitation provisions.3

All member countries have attempted to break through the deadlocked situation in each of the WTO annual meetings since 2003. Additionally, from 2008 to the present, the global economic crisis has determined some countries (e.g the US and Russia) to apply trade protectionism4 in order to save their industries and minimize potential social unrest (as in the Eurozone: Greece and Spain). Economic growth in developed countries has stagnated, such as the EU (e.g. 1.8 % in 2010 and -1.6 % in 2011), the USA (e.g. 3 % in 2010 and 1.7 % in 2011) and Japan (e.g. 4.5 % in 2010 and -0.7 % in 2011).5 These developed countries could possibly enter economic recession. Recently, economic growth in the emerging markets has also declined because of slow demand from the above developed countries, for example: China, (eg. 10.4 % in 2010 and 9.2 % in 2011), India (e.g. 9.6 % in 2010 and 6.9 % in 2011), Brazil (e.g. 7.5 % in 2010 and 2.7 % in 2011), Mexico (e.g. 5.5 % in 2010 and 3.9 % in 2011), Argentina (e.g. 9.2 % in 2010 and 8.9 % in 2011) and Turkey (e.g. 9.2 % in 2010 and 8.5 % in 2011).6 This situation has impacted significantly on the Doha round negotiations. The divergent position between developed and developing countries in these trade negotiations has been continuing until now. Therefore, the Doha round negotiations in the WTO have achieved an impasse.

 

The incremental number of regional, inter-regional and bilateral free trade agreements (FTAs)

Consequently, countries and regional entities have employed bilateral/regional and cross-regional approaches to create a commercial and investment relationship between them. Then, number of free trade arrangements and economic partnership agreements between regional organizations and countries increases. Based on the statistical data from the WTO, there have been increasing amounts of regional trade arrangement (RTA) since 2000. From 1958 to 1999, there were 75 RTAs which have notified to the WTO. From 2000 to the present, there were 156 additional RTAs around the world. It means that number of RTAs has doubled in 11 years.7 These RTAs have extended beyond Europe and North America, for example in East and South-East Asia, Africa, across the Pacific and in Latin America (e.g. an ASEAN-China FTA, South Asian FTA, Southern African Customs Union, Trans-Pacific Strategic Economic Partnership, etc).

Interestingly, the EU has been known as a main supporter of Doha round negotiations in the WTO. However, the EU launched “Global Europe: Competing in the World” in 2006. It means that the EU has also shifted its trade focus from a multilateral trading system to regional/inter-regional co-operation by opening free trade negotiations with ASEAN, India and South Korea.8 The EU and ASEAN had ceased their region-to-region free trade negotiations in March 2009. The EU has begun to negotiate a FTA bilaterally with every ASEAN country who wants to have free trade with Europe, such as Singapore, Malaysia9 and Vietnam10. The EU and India are still negotiating their free trade agreement which might be completed in 2012. The EU and South Korea signed their FTA on 6 October 201011.

Regional organizations may create a flexible framework in order to respond to the above situation. The main aims of this framework are (1) to avoid the overlapping and conflicting of trade provisions between economic agreements and (2) to oversee the social effects of these agreements on weak countries. The main consideration is that the levels of development between countries within regional organizations are various, from developed to least developed countries. Member countries of regional organizations should be aware of economic elements which may create a win-win commercial cooperation and take into account the social implications of their economic arrangements (e.g youth employment, environmental protection and labour rights).

These regional/inter-regional trade arrangements should not compete with the WTO economic arrangement. These arrangements can be a complementary support to the multilateral economic arrangement in the WTO. These economic arrangements need to be synchronized one to another. Therefore, they might shape each other.

 

The conclusion

The trend in the current world economy is that of improvement in bilateral and regional/interregional agreements between countries and regional organizations. These agreements have shaped global trade as a whole. More precisely, these agreements provide a rational way for countries and regional organizations to break out of the stagnancy in the Doha round negotiations.

There are two implications which need to be overcome by the WTO and regional organizations, they are as follows: first, regional organizations need to develop a flexible framework in order to manage and monitor economic agreements within their regions. Second, these regional/inter-regional agreements need to be harmonized by regional organizations and related countries in order to complement the WTO multilateral trading system. There is a possibility that these regional/inter-regional agreements will create a synergy with the WTO multilateral trading system.

 

Notes:

1. WTO (2001) ‘Doha WTO Ministerial 2001: Ministerial Declaration’, 14 November, Geneva: WTO, p.1  [accessed 6 August 2012].Back to text

2. WTO (2003) ‘Day 5: Conference ends without consensus’, Geneva: WTO, p.1 [accessed 6August 2012]. Back to text

3. Ibid. Back to text

4. UNCTAD (2010) ‘International Trade After The Economic Crisis: Challenges and New Opportunities’, Geneva: UNCTAD, p.1. Back to text

5. World Bank (2012) Global Economic Prospects: Managing growth in a volatile world, Volume 5, June, Washington: World Bank, p.2, [accessed 6 August 2012].Back to text

6. Ibid, p.2.Back to text

7. WTO (2012) ‘The Regional Trade Arrangements Information System (RTA-IS)’, [accessed 6 August 2012].Back to text

8. European Commission (2006) ‘Global Europe: Competing in the World’, Brussels: European Commission, p.11, [accessed 6 August 2012].Back to text

9. European Commission (2012) ‘ASEAN’, Brussels: European Commission, [accessed 6 August 2012]. Back to text

10. European Commission (2012)’EU and Vietnam launched negotiations for a comprehensive Free Trade Agreement’, Brussels: European Commission,  [accessed 6 August 2012]. Back to text

11. European Commission (2012) ‘South Korea’, Brussels: European Commission, [accessed 6 August 2012].Back to text

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