WTO Director General Roberto Azevedo presides over the meeting in Bali, Indonesia.
After years of stalled negotiations, the World Trade Organization concluded its first trade deal in more than a decade last week. The agreement, signed in Bali, Indonesia, could increase the value of global trade by $1 trillion and create as many as 20 million jobs, according to a report by the Peterson Institute for International Economics. The Bali package would harmonize border standards, making international trade less cumbersome—a process known as “trade facilitation.” It also includes provisions permitting developing countries to expand subsidies to their agricultural sector and provides support for developing countries to implement the trade facilitation provisions. But the agreement has widely been critiqued by development experts, who observe that the key provisions of the Doha Development Agenda—liberalization of agricultural trade, access to essential medicines, and other pro-development trade policies—were not included in the current agreement.
Bali was widely seen as a “make-or-break” moment for the World Trade Organization, which has been stalled since the Doha Round was launched 12 years ago. In the meantime, bilateral trade negotiations have proliferated, threatening to make the WTO less relevant. The agreement is seen as an important boost for the WTO, helping to repair its image in international trade circles. But parties remain very far apart in addressing the most important questions in the Doha Round, and it remains unclear whether or not the WTO will be able to translate the progress it made in the Bali Agreement into a broader consensus on the more complicated—and politically challenging—questions it still must address, including farm subsidies, tariffs on industrial goods, and liberalization of trade in services.
What do you think? Does the conclusion of the Bali Agreement signal a shift towards a more multilateral approach to trade liberalization? Or does the agreement represent the limits of the WTO and reinforce the trend towards bilateral negotiations?
Although the agreement must still be ratified by the Swiss parliament, the official signing ceremony took place during Chinese Preimier Li Keqiant’s visit to Switzerland last week. Li said that, “This free-trade deal is the first between China and a continental European economy, and the first with one of the 20 leading economies of the globe…This has huge meaning for global free-trade.”
The new agreement adds fuel to the discussion about the relative importance of multilateral versus bilateral trade agreements. When the World Trade Organization came into being in 1995, there was much celebration of its role in reducing global trade barriers. Now, almost 20 years later, the organization seems stuck in the past. It’s been unable to make progress on key issues like agricultural subsidies, and has not successfully concluded a round to talks since it was established…this despite promises to do so in Seattle (1999), Doha (2001), Cancún (2003), Geneva (2004), Paris (2005), Potsdam (2007), and so on. In the wake of its failure, countries seem more inclined to pursue regional and bilateral trade agreements instead.
The advantage of multilateral agreements is that they encourage the establishment of a more equal playing field and generally achieve a wider scope of liberalization. But they are difficult to successfully conclude, as the track record of the WTO suggests. Bilateral agreements, by contrast, permit countries to reach agreements and make progress on liberalizing international trade. But they are not without their critics.
“there is now a danger of creating a hodgepodge of inconsistent and partial bilateral agreements which may lower tariffs, but which also create new inefficiencies and dizzying complexities. A small electronics shop, for example, in the Philippines might import alarm clocks from China under one free trade agreement, calculators from Malaysia under another, and so on—each with its own obscure rules and mountains of paperwork—until it no longer even makes sense to take advantage of the trade agreements at all.”
Interestingly, Clinton called in the speech not for a return to the World Trade Organization or global negotiations, but to regional agreements like the Trans-Pacific Partnership.
More radical critiques of bilateral trade deals focus on the potential inequality between negotiating partners. According to its critics, the US Trade and Development Act (previously known as the African Growth and Opportunities Act, AGOA) was essentially a series of bilateral agreements between the United States and a number of developing countries across Africa that forced African countries to agree to develop stricter intellectual property systems than would otherwise have been required under the WTO agreement—and to refrain from criticizing US foreign policy—in exchange for lower tariffs on textile exports to the United States. By wielding its bilateral muscle, the United States was able to garner greater concessions from its trading partners than it might have been able to in a multilateral negotiation.
But as a result of the (ongoing) failure of the WTO, it seems likely that such bilateral and regional agreements are the wave of the future.
What do you think? Are multilateral trade agreements preferable to bilateral agreements? Take the poll or leave a comment below and let us know what you think.
In the speech, Cameron promises a referendum on British membership in the European Union if his Conservative Party wins reelection in 2015. The ballot, according to Cameron, will permit British voters the opportunity to choose between renegotiating British membership or complete British withdrawal.
Reaction to the speech was strong and quick. Germany warned that the United Kingdom could not “cherry pick” its membership criteria, while France asserted that an “a la carte” EU membership was not on the table. The United States has also weighed in on the debate, with President Obama last week asserting that, “he United States values a strong UK in a strong European Union.” Obama’s preferences were reiterated by US Assistant Secretary for European Affairs, Philip Gordon, who today stated “We have a growing relationship with the EU as an institution, which has an increasing voice in the world, and we want to see a strong British voice in that EU… That is in America’s interests. We welcome an outward-looking EU with Britain in it.”
The move, as we discussed last week, appears to be a function more of domestic British politics than broader multilateral interests. Flanked on one side by nationalist parties in Scotland, Wales, and Northern Ireland demanding greater devolution of political authority and on the other by British nationalists expressing a strongly Eurosceptic worldview, Cameron’s maneuver appears to have more to do with securing reelection of his party than developing a coherent policy towards Europe. Nevertheless, Cameron’s policy could have interesting implications for both British and European politics…even if we have to wait until 2015 to figure out exactly what those implications are.
The French government last week called on West African leaders to “pick up the baton” and support military operations against Islamic insurgents in Mali. France has already deployed more than 2,000 soldiers and is currently conducting air and ground operations authorized by a United Nations Security Council resolution. Other governments, including Chad, Nigeria, Senegal, Burkina Faso, Niger, Togo, Benin, Ghana, and Guinea have committed to sending soldiers, and Britain, Denmark, and Belgium are providing material support. The United States has offered to provide communications support, but has declined so far to commit soldiers or air support.
It is clear that France has already moved beyond the original UN-backed strategy, which called for Western governments to provide training and material in support of an African-led military intervention. Rather, French forces appear to be taking the lead in operations, with other governments in the region responding more slowly.
The politics of military coalitions are always interesting. Basic behavioral economics suggest that there is little incentive for a government to pay for something it can get for free. In game theory, this is referred to as the free-rider dilemma. In global politics, more powerful countries (often the hegemon) pay a disproportionate cost. The United States, for example, has borne the lion’s share of the costs associated with interventions in Iraq and Afghanistan.
But recent developments in Libya and Mali suggest a slightly different strategy at play. In both cases, the United States appeared willing to let others—France in the case of Mali, and the European Union in the case of Libya—take the leading role.
Does this represent a shift in American military thinking? Likely, the answer is no. While the Obama administration expresses a stronger commitment to multilateralism than the Bush administration did, it has already shown a willingness to undertake unilateral action when it perceives the national interest is at stake. The ongoing drone strikes in Pakistan are case in point.
However, where it sees the US national interest is less at play, the Obama administration appears far more willing to let other states pursue policies that align with US interests abroad.