This year the World Trade Organization (WTO) faces two challenges. These
should be confronted simultaneously: to bring the Doha Round to its conclusion
and, at the same time, to become the institutional background in which
member countries examine the impact of the current economic crisis on
world trade, particularly of the measures adopted to face it and that
could greatly affect commercial flows.
The 2009 agenda, including that related with the Doha Round, will be
strongly conditioned by the evolution of global trade in the following
months. If the recession and deflation scenarios take place in the main
economies, there could be a tendency towards an increase of certain modalities
of protectionism that have already become manifest. These would complicate
the current global situation even further. (For more on this issue, please
check the e-book by Richard Baldwin and Simon Evennet (editors) and the
article by Carolyn Deere, both cited under "Recommended Reading"
included at the end of this newsletter).
In this regard, it should be noted that, at the beginning of 2009, the
somber forecasts predicting the economic and even political effects of
the current global crisis tend to be confirmed. These have started to
show in key sectors of the Mercosur countries. Last December's figures
for the automotive industry are quite telling. According to ADEFA (Association
of Automotive Factories of Argentina), the fall in production in relation
to the same month of the previous year has been of 47.3 percent. And in
Brazil, as per ANFAVEA (National Association of Automotive Vehicle Manufacturers
of Brazil), the decrease during the same period of time has been of 54.1
percent. This situation is clearly affecting the sector's commercial exchange
between the two countries.
However, the most alarming scenario comes from the United States. The
description of the situation by president elect Barak Obama, on January
8th in Washington, during his introduction of the measures he will propose
to Congress, is more than eloquent: "We start 2009 in the midst of
a crisis unlike any we have seen in our lifetime - a crisis that has only
deepened over the last few weeks. Nearly two million jobs have now been
lost, and on Friday we are likely to learn that we lost more jobs last
year than at any time since World War II. Just in the past year, another
2.8 million Americans who want and need full-time work have had to settle
for part-time jobs. Manufacturing has hit a twenty-eight year low. Many
businesses cannot borrow or make payroll. Many families cannot pay their
bills or their mortgage. Many workers are watching their life savings
disappear. And many, many Americans are both anxious and uncertain of
what the future will hold. I don't believe it's too late to change course,
but it will be if we don't take dramatic action as soon as possible. If
nothing is done, this recession could linger for years. The unemployment
rate could reach double digits. Our economy could fall $1 trillion short
of its full capacity, which translates into more than $12,000 in lost
income for a family of four. We could lose a generation of potential and
promise, as more young Americans are forced to forgo dreams of college
or the chance to train for the jobs of the future. And our nation could
lose the competitive edge that has served as a foundation for our strength
and standing in the world" (for the full text go to http://www.ft.com).
Furthermore, the economic data from the European Union, indicating a
pronounced and growing recession, is alarming as well. It comes as no
surprise that, as announced by the European Commission on January 8th,
economic trust in the Euro region has dropped to its lowest point in the
last twenty four years.
It is in such a context that the warning signals regarding different
forms of protectionism tend to emerge. Some of these protectionist modalities
would take advantage of the margin of action offered by the limitations
to discretionary commercial policies assumed by countries in the WTO.
In many cases, the current ceilings are too high as a result of the difference
between consolidated and applied tariffs, and between current agricultural
subsidies and those that may be granted without violating existing commitments.(On
this subject, please see the article by Antoine Bouët and David Laborde
mentioned under the section "Recommended Reading". See also
the article by Simon Evenett in the e-book by Baldwin and Evenett (editors)
under the same section).
The most negative effect of the successive failures in concluding the
Doha Round is, perhaps, that the opportunities to lower such ceilings
were lost. This could be proof, yet again, of the simple truth which José
Saramago reminds us of in his fascinating book The Elephant's Journey:
"not only what is best is enemy of what is good, but also what is
good, try as it may, will never come close to what is best". In a
certain way, the winding journey of the Doha Round reminds us of the elephant's
journey between Lisbon and Vienna!
Other modalities of protectionism may result as a consequence -not necessarily
a desired one- of the measures that are being applied in many countries
to counteract the recessive effects of the current economic crisis. They
originate in public policies but also in the defensive strategies applied
by those companies with simultaneous production in different countries.
The automotive sector is a clear example, but it is not the only one.
If recession deepens, the effects of a "run for your life" outlook
may have, as it has in the past, dangerous consequences for world trade.
These may even result in unsettling political impacts on countries and
even whole regions.
The mere fact that such a scenario may be feasible makes it altogether
more important to preserve and strengthen the WTO system. Since its creation,
together with the GATT, seventy years ago, one of its main contributions
has been to add a certain degree of discipline to the trade policies of
member countries. It bestows predictability to the rules that influence
the global exchange of services and goods. It benefits those countries
with the greatest real economic power, as well as those with a small relative
share in world trade, such as Argentina and other members of Mercosur.
The Doha Round continues to be a priority for the WTO. (On this issue,
please see the speech by Director General Pascal Lamy, addressed to the
Trade Negotiations Committee on December 17th, 2008, where he also conveys
his opinion on the other priorities of the 2009 WTO agenda, on http://www.wto.org).
Last December, negotiators were unable to comply with the G20 Washington
Summit mandate, which had been very clear. This fact undermines the credibility
of any other commitments assumed on that occasion.
The forecasts predicting that such goal may be attained in 2009 are cautious.
The new U.S. government is expected to provide believable signals for
a more precise outlook on this issue. However, it is obvious that it will
not depend only on the position adopted by the U.S. In the arena of international
trade, as with the current economic crisis in general, a collective leadership
is required. This leadership may even transcend the G20, which will be
meeting again in London next April.
Concluding the current trade negotiations would send positive signals
to governments, citizens and businesses of the efficiency of the system,
even when the actual results fail to bring together the ambitious goals
imagined in Doha in 2001.
In any case, it would be advisable that, without weakening such goal,
countries enhance the WTO 2009 agenda. Placing the emphasis on measures
to facilitate and aid trade, even when necessary, may prove insufficient
if the world situation continues to deteriorate.
The combined effects of a probable and complex scenario in which the
Doha Round is unable to reach its conclusion; where, at the same time,
the trends towards new and existing modalities of protectionism are accentuated;
and where preferential commercial agreements -which are discriminating
due to their potential impact on the rest of the countries- tend to multiply,
should be analyzed and discussed by member countries in an active forum
within the WTO.
For that purpose, two existing work mechanisms should be fully engaged.
These would enable to harness the potential for collective action that
results from the current legal and institutional system of the WTO, without
the need of any formal innovation.
The first of these mechanisms is the Ministerial Conference, which will
meet this year. It was held for the last time in 2005, even though it
was scheduled to take place every two years. Although not limited to the
Doha Round, its agenda should not be too comprehensive either. However,
it should enable to approach the general picture of the impacts of the
crisis on world trade, including those originating in policies applied
by the member countries. Its preparation should be channeled through different
types of informal ministerial meetings. The active participation of those
countries with greatest incidence on the global exchange of services and
goods would be essential, especially considering that thirty countries
represent approximately 90 percent of world trade. The World Economic
Forum, which will be meeting at the end of January (www.weforum.org),
is an opportunity for the participating ministers to advance ideas on
The other existing work mechanism is the general review of the evolution
of the international trade environment, foreseen in item G, Annex III,
of the Marrakesh Agreement. Until the present day it has not been used
to its full advantage. Pascal Lamy, on his speech of December 17th before
the Trade Negotiations Committee, pointed out: "I believe that the
WTO has a particular responsibility to follow up on the trade measures
which have been taken in the wake of the financial crisis; you all know
that I have set up an internal Task Force to produce regular updates of
these measures so that we have a better sense of the trade consequences
of the financial crisis. I am ready to report to you periodically on developments
on that front in writing
I also believe it would be useful to provide a forum where this WTO radar
picture could be discussed collectively; I do not think we need to reinvent
the wheel so we could use one of the existing forums in the house to this
effect: the Trade Policy Review Body
The combination of both work mechanisms may offer a framework within
the scope of the WTO that would help search for systemic answers to those
issues that have become collective problems.