[Poppy S. Winanti] The future of multilateral trading system under WTO

The 10th World Trade Organization’s 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, current trade-negotiation 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 U.S., EU and Japan.

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

In addition, as an instrument to protect its own poor farmers, India has proposed the Special Safeguard Mechanism, 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 did not come just 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 have 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 G33 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 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 agricultural exports.

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 jeopardize 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 G33.

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 prioritize 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 utilize its role to contribute to a robust post-Nairobi working program, 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 (the U.S., 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, labor, environment and climate change.

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

But they were dropped from the agenda in 1999 and the negotiations were postponed indefinitely. The inclusion of these new trade agenda were 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 in the agricultural sector.

The impasse in 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 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, 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 for WTO members to be aware of the importance of “keeping the bicycle moving” to prevent it crashing to a halt.

By Poppy S. Winanti

The writer is director of the Center for World Trade Studies at Gadjah Mada University in Yogyakarta. He wrote this for the Jakarta Post, which is published in Indonesia. — Ed.

(The Jakarta Post/Asia News Network)

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