The World Trade Organisation has just been able to agree on the Bali
Package at its Ninth Ministerial Conference, the first unanimous
agreement since the inception of the Organisation in 1995. The Bali
Package is not a replacement of the infamous Doha Round of 2001 but
rather an attempt to achieve some progress on the Doha Development
Agenda in smaller, manageable amounts.
The purpose of the Doha Round was
to establish a binding framework that was fair to all and agreed by
every member of the WTO. Its aims, and by extension all subsequent
ministerial conferences, is to loosen trade barriers between countries
and to aid development through trade. Media houses, especially in the
West are hailing this as the saving of the Organisation. This is
important to developing countries as the World Trade Organisation is
currently one of the most democratic institutions. There were not as
many bones of contention in the agreeing of the Bali Package, as there
were in the initial Doha Round and subsequent Ministerial Conferences.
This is because all countries have used numerous Ministerial Conferences
and inter-conference meetings to lay proposals that would be of
interest to themselves and their political groupings.
There are four key features to the Bali Package: trade facilitation,
food security in developing countries, cotton and measure for developing
countries. Every feature will affect developing countries in some way,
however they will not all impact every developing country. One feature,
for instance cotton, focuses on a select few countries. Nevertheless the
impact of the Bali Package on the economic prosperity of developing
countries especially Least Developed Countries (LDCs) must not be
overlooked, in the analysis of the importance of this agreement.
Trade facilitation
The most exciting feature of the
Bali Package is the trade facilitation deal which will simplify customs
bureaucracy. It has been most welcomed by businesses such as UPS who
have to deal with numerous checkpoint and restrictions in their
business. The trade facilitation deal makes provision for goods in
transit, lowering tariffs and non-tariff barriers for transit goods.
This will be very impactful for landlocked countries, the majority of
which are developing countries. The effects of the deal will be most
felt in the developing countries of Africa.
The UNCTAD estimates that
the average import involves up to 30 different parties, 40 documents and
the repeating of 70% of data at least once. Savings from trade
facilitation for developing APEC countries is estimated to be between
1-2% of import prices. With the trade facilitation deal, these barriers
will be rapidly reduced. The harmonisation of documents, reformation of
custom procedures and increased transparency and clarity will greatly
help developing countries two-fold. Firstly, it will welcome foreign
investment and second, it will facilitate easier exportation from their
own small and medium business. Furthermore, as part of the agreement,
African states and other developing countries will receive assistance
from the World Bank, EU and OECD in the development of infrastructure
and training.
It is expected that an extra $1trillion will be added to the global
economy as a result of this particular section of the Bali Package. The
UK expecting to benefit in excess of $1bn, whilst Germany has predicted
they are due to make an extra sixty million euros a year from this deal.
In addition, these new measures will ensure that the developing
countries are more appealing to foreign investors as it is often the
stress of goods mobility that is cited as the repellent to foreign
direct investment. However, there are no figures of expected financial
gain for developing countries from this deal.
Food Security
Food security has long been a
controversial factor in the Doha Development Agenda and it remained the
key negotiation of the Bali Package. It is the key feature that affects
all developing countries equally. Developing countries led by India,
struggled but succeeded in keeping the right to hold stocks of food to
protect their populations from a food crisis without risk of legal
action from other members of the WTO. The Bali Package offers a four
year grace period at the end of which stockholding will be revisited.
Although, this is thought of as a success, it should be noted that the
data that was being used (and was being rejected by India) derives from
1988 and therefore leaves little room for developing countries to remain
within agreed limits because the 1988 data does not reflect adequately
their needs or capacity today.
The Bali Package helps developing countries in that it stops short of
making legal commitments for WTO members. It requires only that members
do their best to reduce any policies that may resemble export
subsidies, this includes policies such as the EU’s CAP and the US’
government agro-subsidies programme. However, the disadvantage of the
Package is that the larger, richer countries can still channel large
amounts of money to their own food security policies and remain well
within the limits of the agreement, a luxury many developing countries
cannot do.
For developing countries, food
security proves to be the most worrying agreement. It is important that
developing countries that governments protect their citizens from the
volatility of global markets otherwise they risk a food crisis. At
present the Bali Package, in this respect does not make them better off
but it does allow them a level of freedom to determine their own
domestic needs.
Cotton
The decision on the cotton industry
in the Bali Package is a culmination of negotiations at the 2005 Hong
Kong Ministerial that could not be settled on as the WTO could not
agree. The Bali draft decision allows for continuous, twice-yearly
re-evaluation of the information on market access and export subsidies.
In accordance with the Bali Package, LDCs will be given duty-free,
quota-free access to developed and emerging markets. Furthermore, LDCs
are being given the chance to be more competitive in the cotton industry
as the developed countries will abolish any existing export subsidies,
thus giving the LDCs a more level playing field. This plan will affect
the Cotton Four (C4) which consists of Benin, Burkina Faso, Chad and
Mali who are al developing countries.
Measures for developing countries
One of the measures being put in
place for developing countries is the preferential treatment for
services from LDCs. This will increase LDCs involvement in global trade,
especially in services which accounts for 70 per cent of global GDP.
However, there is no binding guarantee that LDCs are chosen. Furthermore
the economic portfolio of LDCs, do not lend themselves to enabling the
states to make the most of the preferential treatment measure. Travel
and transport account from 44.9% and 21.8% respectively, services that
cannot be exported to other countries.
Rules of origin are applied to
products to ensure that products genuinely originating in LDCs benefit
from the preferential measures. This will help overcome the measures of
exploitation that some countries experienced when America offered
preferential treatment to African countries.
Tariff-rate quotas (TRQs) see that
tariffs are lower on imports within quota limits but understandably high
on imports exceeding those limits. This is a feature of the Bali
Package that derives from the Uruguay Round. Therefore, the Bali
Package, with regards to tariff-rate quotas has not made developing
countries better off, it has put onto the table for operationalisation
policies that were agreed earlier than the Doha Round which have been
lost in the political negotiations of the Doha Round.
Critique
What does this mean for developing
countries? Is the Bali Package better than, if any different from, other
existing multilateral frameworks? Should it be as celebrated as it is?
Gita Wirjawan, the Indonesian Finance Minister has declared that the
Bali Package will support the least developed countries (LDCs) to “take
more benefits from the multilateral system” he adds that “most of the
economic benefit from trade facilitation will flow to developing
countries”.
The WTO will have us praise the fact that the Bali Package
is an agreement that every country, including LDCs and other developing
countries have agreed to. It apparently sits in the interests of the
poor as well as rich countries and is not like other multilateral
agreements shaped and driven from the secret rooms of Europe or the USA.
That being said, developing countries were not a stumbling block in
previous failed negotiations. The spectrum of developing countries
affected by this Package is wide. It ranges from the LDCs who account
for less that 1% of global trade, to the emerging markets of Brazil,
China, India and South Africa. It is therefore difficult to claim that
“developing countries are better off” or “developing countries are not
better off” because the assistance given to LDCs and the
responsibilities attributed to the larger developing economies are
different from other developing countries.
One critique of the Bali Package is the opt-out option from the
tariff-quota system that would allow developing countries to fill
under-filled quota tariffs, an option the US (and a few developing
countries in the Americas) has utilised. Furthermore, non-governmental
organisations have expressed concern that the sudden reduction of import
taxes can wipe out industries and create job losses as opposed to the
20 million jobs that the plan is purported to create. Many countries
receive a large proportion of their revenue from the tariffs they impose
and for national security and data collection reasons must put many
non-tariff barriers in place. The trade facilitation deal removes that
power and effectively the expected revenue with no guarantee that it
would attract investment, especially for resource-poor, land-locked or
low population markets. In addition, the aim of the WTO, the Doha Round
and the Bali Package is to lower duties and barriers (tariff and
non-tariff) between all countries. Across the board, tariffs are being
lowered and therefore it is not clear how much impact the duty-free,
quota-free (DFQF) agreement for LDCs will have on those economies. The
quotas will be a deciding factor on how much LDCs benefit from the Bali
Package in comparison to non-beneficiaries of the DFQF waiver, however
for countries with very little to offer they will find that competing
with wealthier states, in a world of lower tariffs will be difficult.
The one feature that favours all
states equally also hinders countries. Most of the WTO’s agreements are
legally binding and therefore this stops countries from setting their
own priorities and responding to the changing features of their
political and economic domestic needs. This was shown more specifically
in the food security negotiation that India fought for. There is
obviously a clear attempt to liberalise international relations and
individual markets however, this liberalisation for the most vulnerable
countries can be more harmful than good as their policies are decided by
more stable markets.
Bali’s implication for Ghana-European Union Economic Partnership Agreement
The WTO’s Bali Package is, of
course, not the only trade agreement deal available to Ghana. The
European Union (EU) has put on the table the Economic Partnership
Agreement which can be signed individually by West African states. The
EPA is a free trade area scheme between the EU and African, Caribbean
and Pacific group of states (ACP). The EU is an important trading
partner for Ghana. It accounts for 40% of Ghana’s agricultural-related
exports. In the absence of the EPA, Ghana will spend $52million annually
in exporting goods to the EU. According to Haruna Iddrisu, Minister of
Trade and Industry, Ghana’s involvement in the EPA is dependent on the
ECOWAS region’s collective decision to accept or reject the agreement.
The market liberalisation agenda, led by the EU, would see the EPA
granting signatories 100% duty-free access to EU markets and 80% of
goods would be imported into African states also tariff-free. Ghana has
initialled but not signed an Interim EPA. The Interim EPA has enabled
Ghana to benefit from duty-free, quota-free style access into Europe,
similar to what the Bali Package is offering LDCs. Unlike the Bali
Package, the EPA does not require universal agreement. Therefore, as
much as ECOWAS states are to work together to improve the terms of the
EPA to benefit all the signatories, if there is a sticking point for one
or two countries it is possible that they are excluded from the deal
and their economy will suffer the consequences.
This is what the WTO’s
Doha Round and Bali Package aimed to avoid and the completion of the
Bali Package offers ECOWAS’ LDCs a safety net of assured preferential
treatment in the wealthier states in Europe.
Ghana already imports a lot of the
goods that it consumes. It has been admitted by Haruna Iddrisu that our
balance of trade is harming the strength of the currency. Ghana stands
to lose around $150-$374million in tariff revenue if the EPA is signed.
Additionally, it is a real possibility that the European goods will
out-perform locally produced goods and the volume in which they are able
to enter the market in comparison to the struggle local start-ups go
through to reach a critical mass will harm Ghana’s manufacturing
industries. The Bali Package made provisions only for the safeguarding
of food security. The threat of an influx of European goods, therefore,
is the cause of the delay to signing the EPA. This would be a
well-judged delay if the government was using this extra time to make
the economy, the market and the local companies more competitive with
both the ECOWAS neighbours and more ambitiously with EU members.
However, with the signing of the Bali Package, that aims to lower
tariffs across the board and will affect Ghana equally, the 80%
tariff-free will not be so impactful.
If the ECOWAS bloc is able to negotiate power relations, they could
secure the extra development support to deal with the shocks of the
agreement, similar to what the WTO members have agreed for developing
countries to deal with the economic shocks of the Bali Package.
Politically, the EU is driving the timing and terms of the EPA, they
have set a deadline of October 2014. Therefore, the question of who is
setting the agenda crops up. The government’s analysis on Ghana’s
decision has been accurate. Ivory Coast possesses an export economy
resembling Ghana’s and Nigeria offers a larger market and superior
return on investment (one of the highest on the continent). If Ghana
chooses to opt-out of the EPA whilst the Ivorians and Nigerians sign it,
the country would have to battle to attract European investment and to
find favourable export markets and import partners. It is important to
note that the EPA enables Ghana to protect 20% of its domestic produce
including poultry, tomatoes, onions and sugar from a European-goods
influx. Therefore, so long as the government accurately identifies the
industries that require ring-fencing the key contributors to the
domestic market should not cripple under the new agreement.
Conclusion
It is imperative that the Bali Package is judged not only on the fact
that it is the WTO’s first real agreement, but that it actually helps
all states, especially the poorer ones who do not possess much
bargaining leverage in other multilateral frameworks. Furthermore, that
these states have been given a fair opportunity to resist the imposition
of any global trade rules that harm rather than help them. The Bali
Package appears to be in the interest of the developing world. In a
speech in the plenary session, Nigeria’s representative declared that
the country was “fully supportive” of the Package, Nepal claimed that
LDCs unanimously endorsed it and Morocco praised the Package as fair and
balanced.
Although it may appear that the
burden of complying to the Package may unfairly be greater for
developing countries than for the developed countries, the waivers and
additional assistance to establish the mechanisms to ensure freer and
quicker goods transit ensure that developing countries, especially the
least developed countries, grow their stake in the global economy
quicker than they could independently.
The Bali Package is a more
successful and fair agreement than the initial Doha Round because it is
more focused and streamlined. The restricted number of issues under
discussion gives developing countries a greater chance of affecting the
outcome and reduces the impetus to derail negotiations, as occurred so
many times in the past. It should be remembered that the Bali Package is
not a replacement or rival to the Doha Round, it is an attempt to
fulfil the objectives of the Doha Round in a manner that is more
manageable and more likely to yield results. The projected gains should
see that developing countries are much better off as a result of the
Package especially in comparison to more restricted, regional, smaller
partnerships and frameworks such as the TPP or the Economic Partnership
Agreement between the EU and West African nations in which the more
developed states wield more power.
Politically, the Bali Package, or
at least the fact that the WTO was able to reach a consensus of some
kind, shows that the leaders of the developing world are more active and
influential in global negotiations. The WTO is perhaps the only
platform whereby this is true.
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