Is the latest round of World Trade Organisation (WTO) talks held in Bali, Indonesia at risk of a failure to come into an agreement?

Before discussing the topic of this article, I will like to provide readers with some background information on the roles and advocacy goals that the World Trade Organisation (WTO) plans to achieve for global trade movements. According to excerpts taken from Wikipedia.org, the World Trade Organisation (WTO) is an organisation that intends to supervise and liberalise international trade. The organisation officially commenced on January 01, 1995 under the Marrakech Agreement, replacing the General Agreement on Tariffs and Trade (GATT), which commenced in 1948. The organisation deals with regulation of trade among participating countries; it provides a framework for negotiation and formalising trade agreements, and a dispute resolution process aimed at enforcing participant’s adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliaments. Most of the issues that WTO focuses on derive from previous trade negotiations, especially the Uruguay Round (1986-1994).

The current negotiation talks organised by the WTO are held in the resort town on Bali, Indonesia. According to a December 03, 2013 Bloomberg News Online article, the talks are currently stalled over the lack of agreement among member nations on reducing farm subsidies, with India opposing to the form of current proposals, citing these proposals are expected to pose a risk to its food security. The current talks held in Bali are a continuation of a series of negotiations that were still outstanding from the last round of discussions held in Doha, Qatar back in 2001. Back then, the 2001 Doha round of trade talks was focused on addressing the needs of developing countries, but there was a lack of a consensus agreement over farm subsidies among the 159 members. As a result, the goals that were set out originally from those talks remained unresolved, namely due to the conflict between free trade on industrial goods and services, but retention of protectionism on farm subsidies to domestic agricultural sector (requested by the developed countries), and the substantiation of the international liberalisation of fair trade on agricultural products (requested by developing countries) which continue to remain the major obstacles.

The current round of WTO trade talks in Bali (December 03 – 06, 2013) came at a time when global economic slowdown for 2014 is expected, given the lack of robust economic growth outlooks seen in certain countries, including India, and Indonesia. These two countries continue to be mired by high current account deficits, and political uncertainties as general elections in both Indonesia, and India are due in April and May 2014 respectively. The Euro zone continues to face high unemployment numbers along with the expected recessionary growth outlook, and China is expected to see its gross domestic output (GDP) growth to shrink to 7.0 percent in 2014 from an expected 2013 growth of 7.5 percent based on the official government forecasts. These economic uncertainties have resulted in developing countries resorting to trade protection moves in a bid to forestall the potential harm it might inflict on domestic industries if certain sectors of the economies, namely the agriculture and industrial production sides of the economies are being gradually open up to face the global competition posed by other players.

According to one of the video segments broadcasted in the December 05, 2013 Bloomberg Television news edition during early Asian trading hours, it mentioned that barring any differences, and potential failures, the WTO talks currently underway in Bali has the potential of increasing global trade volume by over USD 1.0 trillion if all sides agree to abide by one common goal of removing trade barriers over the movements of goods and services, and the settlement of all outstanding issues left from the last round of talks in Doha, Qatar in 2001. India is opposing the current plan to reduce, or possible removal of the food subsidies programme, which the government continues to push through into several parts of the rural regions in the country. India’s Commerce Minister, Mr. Anand Sharma made some comments in Bali on December 02, 2013 saying that, “The group’s rules for determining farm subsidies are outdated, and subsidising the agriculture industry in developed countries is not even a subject of discussion. India will not compromise on its food security at the talks.” The tone expressed by India’s Commerce Minister during one of the event segments, was harsh, and defiant, and it could be seen as not a good sign should the latest round of WTO negotiation talks ended without coming into a consensus agreement.

Although the latest comments made by India’s Commerce Minister were seen as relatively hostile, it is unlikely to bring a complete halt towards the overall efforts advocated by WTO in promoting free trade and movement of goods and services, ease restrictions on trade, bring down on tariff and non-tariff barriers, among others. The Indonesian host, Trade Minister Gita Wirijawan has expressed some optimism that differences among nations over the major sticking issues including food subsidies could be resolved soon. However, given the spate of events, including remarks made by India’s Commerce Minister over the issue of food subsidies and food security, the Indonesian host government is showing some determination in achieving some successes that will bring about a harmonised system of free trade movements of good and services. The odds of a failure in the latest round of WTO trade talks are high. Given the fluid nature of the various opposing camps, and interest groups, it is still too early to tell whether there will be a breakthrough during the talks in resolving all, if not, most of the outstanding issues that could pose a threat to the future of global free trade.

About Hock Meng Tay - Chief Editor, Asia-Pacific Region

Hock Meng Tay, CAIA has written 181 post in this blog.

Chief Editor, Asia-Pacific Region Hock Meng Tay is a CAIA holder and is currently taking CFA qualification. He has over 10 years of experience working as research associate in several investment companies.He is an expert in financial analysis and has published research reports in his current role. He obtained his Masters of Business Administration in Integrated Management and Masters of Arts in Economics while serving his internship in Starsource Inc

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