MULTILATERALISM 2.0 – will trade ministers take up the challenge?

MULTILATERALISM 2.0 – will trade ministers take up the challenge?
By Anne Laure Constantin, IATP

CONTENTS

I. WRESTLING WITH DOHA: negotiators go nowhere slowly
II. MINISTERS DESCEND ON GENEVA: what will they make of the opportunity?
III. TEARING DOWN A NEW WALL: what will it take?
IV. IMPORTANT DATES TO REMEMBER

The World Trade Organization (WTO) is getting ready for its 7th ministerial conference, to take place from November 30 to December 2, 2009 in Geneva. As trade ministers pack their suitcases, a few of them must be asking questions about the value of the trip. More than a year after the July 2008 mini-ministerial collapsed in acrimony, the Doha talks have not moved an inch – except to go backwards, according to some developing country representatives.

Confronted with multiple crises, the world is desperately in need of a new way to do business – call it “Multilateralism 2.0.” But leaders are reluctant to change. What will it take to convince them?

I. WRESTLING WITH DOHA: negotiators go nowhere slowly

The final declaration of the G20 summit that took place in Pittsburgh in September 2009 committed governments “to bringing the Doha Round to a successful conclusion in 2010.” Echoes of this sentence reached Geneva, where negotiators were left wondering how exactly that was supposed to happen. WTO Director General Pascal Lamy proposed an intensive work program for October and November. But no new instructions came in from capitals. No new U.S. Trade Representative was appointed to Geneva. And so meetings were held, some lasting no longer than half an hour for lack of substance for discussion, others focusing on desperately high levels of technicalities to pretend engagement – the discussions on templates in agriculture, for example. And no progress was made. In fact, at the October 23 Trade Negotiations Committee, many members complained that negotiations were backtracking. When G20 leaders “review the progress of the negotiations at next meeting,” (as they promised they would do in June 2010), they will not need long – it only takes a few minutes to postpone once more the deadline for concluding the Doha Agenda!

Central to the deadlock is the Obama administration’s hesitation when it comes to trade policy. Caught between Congress—where influential voices still insist on more market access for U.S. based firms—and disillusioned workers’ unions advocating for trade policies that benefit workers rather than shareholders, President Obama is unsure.
Other WTO members in Geneva are eager to finally have a U.S. ambassador in place, but the U.S. Senate was not able to confirm Michael Punke in time for the Ministerial Conference. One thing is certain: his confirmation is unlikely to bring much change to the contents of the discussions. Punke’s responses to senators as he went through the confirmation process reveal little appetite for innovation. On cotton, agricultural subsidies, market access and services, most of his responses sounded similar to those a Bush administration official would have given. In a response to Senate Finance Committee Chairman Max Baucus, Punke stressed that “if confirmed, will insist on a deal that achieves significant new opportunities for U.S. exporters.” So much for the significant new opportunities promised to poor countries in 2001!
In Geneva, USTR insists they need to get clarity on market access concessions from major developing countries. To that end, the U.S. is engaging bilaterally on a continuing basis with Brazil, China, India and a few other WTO members. But the process is producing more frustration than breakthroughs, with many countries complaining of being excluded, and emerging economy countries wary of being cornered.

However, the U.S. situation is not the only hurdle for Doha. The sense – conveyed by international NGO Oxfam in its July 2009 Empty promises report – that the “development” aspect of the Round has by and large disappeared, is widely shared by developing country negotiators in Geneva. The process of bilateral engagement has revived fears that a package agreeable to the largest economies of the planet – and that brings no benefit to poor countries – will emerge. In a communiqué issued in Cairo on October 29, African trade ministers made it clear: “We consider that informal bilateral and plurilateral consultations may be useful in enhancing mutual understanding. However, such consultations cannot be a substitute for a genuine multilateral process, nor should they affect the consensus reached within the multilateral context.” Nine years of Doha have only increased distrust among WTO members. Disagreements over what the mandate is about, and how negotiations should proceed, have perhaps never been wider. Observers around the world are wondering what it will take for trade ministers to acknowledge the situation. Denial only allows an unacceptable status quo to prevail for a few more years. Enough is enough.

II. MINISTERS DESCEND ON GENEVA: what will they make of the opportunity?

The decision to convene the WTO’s 7th ministerial conference was approved by the General Council last May. The agreement that established the WTO requires that its members meet at the ministerial level every two years. However, since the 2005 Hong Kong Ministerial, DG Lamy has been waiting for Doha to be close to conclusion before reconvening trade ministers. Four years later, a final agreement is still out of reach, and the WTO risks losing its credibility. Trade ministers are instead invited to discuss “the WTO, the Multilateral Trading System and the Current Global Economic Environment,” a theme that is supposed to encourage them to get behind the WTO as a keystone for economic stability. More specifically, Ministers will focus on a “Review of WTO activities, including the Doha Work Program” on the first day and on “The WTO's contribution to recovery, growth and development” on the second day.

There is no shortage of issues to discuss under these two broad sub-themes. Pick one, randomly: ministers could debate the lessons learned from the food price crisis concerning the WTO’s contribution to food security – and draw conclusions for how to reform agricultural trade rules moving forward. Indeed, according to a 2008 USDA report, “food import dependence in many developing countries has grown during the last three decades.” In particular, for least developed countries, the USDA study concludes that – as a consequence of this dependence – the 2007 price hike will lead to an 8 percent increase of the food gap (the amount of food needed to raise consumption of all income groups to the nutritional threshold of roughly 2,100 calories per person). Is this good enough reason to reconsider the alleged benefits of free trade for food security?

Alternatively, ministers could discuss whether more financial services liberalization is a wise strategy when the right regulations are not in place; or whether facilitating trade in biofuels will help mitigate climate change, in view of the latest evidence… there is no shortage of good topics. Ministers could take stock of the Doha impasse and design a way forward that ensures the WTO is relevant to 21st century challenges.

But none of these crucial issues will be prominent. There is actually little interest in the official theme of the ministerial. Ministers will instead consider a series of reports on side issues, ranging from e-commerce to balance-of-payment restrictions, and including trade in civil aircrafts. And, on the sidelines, officials will engage in negotiations to try and make some progress on Doha.

On October 16, India circulated a proposal on behalf of a wider group of countries aimed at initiating a process to “review [the WTO’s] functioning, efficiency and transparency and consider systemic improvements, as appropriate.” The proposal did not trigger much enthusiasm. It will, however, be discussed at the Ministerial and could lead to a mandate for the General Council to design such a process. That would be a step in the right direction. However, unless WTO members decide to be serious about their assessment of where 25 years of Uruguay Round-style rules have led their economies, it is likely that the process will remain largely a formal exercise.

Recently, Pascal Lamy called for the ministerial conference to “facilitate the political commitment needed to conclude the Round next year” (speech at the November 17 General Council). Ministers were warned against the temptation to steer away from the usual statement of support for a swift conclusion of the round. This is despite the fact that these declarations have proved useless over the past four years.

III. TEARING DOWN A NEW WALL: what will it take?

On November 9, 2009, Europe celebrated the 20th anniversary of the fall of the Berlin wall. Mostly, celebrations focused on the triumph of civil and political rights over dictatorship and censorship. Many observers, though, pointed to the confusion that the end of the bipolar world had brought not only to Europe, but also to the wider world. Among them, Pascal Lamy has argued that “the reality is that the end of the cold war caught everyone by surprise (…). A new world order was born. And yet, there was not enough thinking and discussions about its governance structures. There was never a Bretton Woods or a San Francisco conference post 1989. As a result, global governance structures did not adjust. And here lies the root of many of today’s problems” (speech at the Bocconi University in Milan on November 9).
M. Lamy stopped short of calling for a new Bretton Woods for the 21st century, perhaps because it might prevent a conclusion of the Doha Round. Such a proposal, however, would have the advantage of bringing on board some of M. Lamy’s critics, who have been arguing for years now that the multilateral system needs to be revamped. And if the tremendous financial and economic crisis the world is experiencing is not enough to trigger such a reform, then what will it take?

Sadly, the diagnosis—that national governments and their inter-governmental institutions are unable to come to grips with the multiple crises they face in a collaborative manner—is undeniable. The recent World Summit on Food Security convened by the FAO (16-18 November 2009) produced only empty rhetoric. The closer the Copenhagen climate conference gets, the more developed countries are trying to downscale its importance. Progress in tackling the root causes of the financial crisis exists, but is too limited. Furthermore, these processes, just like the Doha negotiations, are conducted in isolation from one another.

The Doha negotiations are stuck both because the agenda is outdated, and because the new balance of power does not allow for the same kind of decision-making as during the Uruguay Round – when two members (the United States and the European Union) could agree on a deal and impose its conclusion to the rest of the membership. Brazil was the first large developing country to assert a leadership role at the WTO. It was followed by India and, more recently, China. Other developing countries are also more aware of the rules of the games, and African countries have been able to use the cotton case as a lever. The global economic crisis, and the way the G20 has superseded the G8 as the central economic decision-making forum only reinforces the weight of the “emerging” countries.

The WTO needs to shift to a new version of multilateralism – one that is more interactive, decentralized and more “user-centered”, i.e. focused on the interests of the people: a sort of “Multilateralism 2.0.” First of all, this entails re-focusing on the preamble of the Marrakesh Agreement establishing the WTO, which defines as overarching objectives for the organization: “raising standards of living”, “sustainable development” and “to protect and preserve the environment.”

The exclusive obsession with tariffs and subsidies, at the expense of public policy goals, needs to end.
Beyond that, the details of the new arrangements need to be debated among governments, with participation from other interested stakeholders. There are plenty of ideas out there, from academics, civil society experts, or even government officials. Taking on board the growing tide of regionalism, and designing a role for the WTO in building bridges between different accords is one. Revising decision making processes to allow for inclusiveness and transparency is another. It is also obvious that the WTO needs to review how it relates to the wider multilateral system and how it defers to the competencies of other intergovernmental bodies on human rights, development and environment, rather than reducing the mandates of those bodies to an element of the trade policy matrix.

In his speech in Milan, Pascal Lamy highlighted five ingredients for a governance system that works: leadership; legitimacy; ownership; efficiency in bringing results for the benefit of the people and coherence. Indeed, these are good benchmarks to evaluate the record of global governance – and the contribution of the WTO. Will trade ministers use them as they “review WTO activities?” Civil society groups gathering on the margins of the Ministerial Conference certainly will.

IV. IMPORTANT DATES TO REMEMBER

Nov. 30 – Dec.2: Seventh WTO Ministerial Conference
7 -18 December: Copenhagen Climate conference (UNFCCC)
27 – 31 January 2010: Annual meeting of the World Economic Forum in Davos, Switzerland
June 2010: G20 summit in Canada