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Trade

Could restarting agricultural negotiations save Doha?

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G7 finance ministers meeting at Lancaster House in London, Britain, 5 June 2021 (Photo: Reuters/Henry Nicholls).

Author: Joanna Hewitt, Canberra

Political level interest in reforming and restoring the weakened rules-based trading system is overdue, as argued recently on East Asia Forum. Language from the APEC Trade Ministers and G7 Leaders meetings last month is only a start but more than had been possible before President Biden’s ‘America is back’ message displaced his predecessor’s ‘America First’ wrecking ball.

The time is right for serious follow up. Challenges to the trade rules and arbitration system are now existential. The World Trade Organisation (WTO) Doha negotiations remain stalled some 20 years since their launch and entrenched disagreements abound among the membership on old and new issues.

Some of the problems reflect dramatically changed geopolitical and economic weights as well as tensions between the world’s two largest economies, the United States and China. Others reflect failure of the rules to keep up with evolving realities like global value chains and the digital economy. The WTO’s arbitration system has also been unable to function in the face of a US block on Appellate Body appointments. And strong differences simmer over eligibility of some emerging economies for developing country concessions, on transparency around industrial subsidies, on forced technology transfer and on coercive trade practices.

If that weren’t enough for the impressive new WTO Director General, Ngozi Okonjo-Iweala, agricultural negotiations are paralysed. Agriculture is central to progress on Doha as well as contributing to the stalemate. Turned around the other way, movement on agriculture could help boost certainty in global markets and aid in economic recovery from the pandemic.

A detailed proposal aimed at getting parties back to the table on agriculture has been launched by an independent group of international experts. The ‘New Pathways’ group, of which I am a member, comprises former top staff of international organisations and think-tanks, senior trade negotiators and academics. None is bound by any current organisational position.

The proposal aims to shift member countries from rusted on positions and offers solutions to known problems in the 1994 Agreement on Agriculture. The ‘continuation clause’ in the Agreement has fallen foul of the Doha stalemate, leaving countries with high agricultural support and protection free from pressure or incentives to change tack. Moreover, some emerging economies, including China, have also embarked on costly agricultural support programs mimicking those of industrial countries, allowed under current rules.

The New Pathways proposal puts forward rules changes aimed at driving more efficient, and less wasteful, inconsistent and environmentally harmful policies. It takes the 1994 Agreement on Agriculture framework as its starting point and suggests reforms commensurate with the degree of trade distortion engendered by the policy settings of each country as well as their impact in world markets. It is a holistic package covering all three pillars of the Agreement — market access restrictions, domestic support measures and export competition.

Potential gains from proposed new rules would be considerable. They focus reform efforts on policies that cause the most damage to countries’ own economic resource allocation as well as damage to third countries through world markets.

Market access gains would be delivered through ambitious options for tiered tariff reductions. Loopholes in arrangements for safeguards against imports are tightened or removed. Similarly, options for Domestic Supportprograms would require major trimming and reshaping. More scope would be granted for farm payments targeted at environmental challenges like climate change, biodiversity loss and resource depletion. Less scope would be allowed for ongoing income support payments such as Europe’s Blue Box measures. Input subsidies, for example on fertilisers and energy, that encourage harmful intensification, would be constrained. On the other hand, more flexibility would be allowed for programs targeting food security and support for low-income households and for public stockholding of farm goods if purchased at below world price levels.

The pathbreaking 2015 Nairobi Agreement outlawing Export Subsidies would be consolidated and export restrictions limited.

This proposed rebalancing addresses longstanding grievances of developing countries who see continuing high spending (they cannot match) on farm supports in rich countries, and increasingly in some middle-income countries, while…

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Trade

Fixing fragmentation in the settlement of international trade disputes

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Fragmentation in global trade due to the lack of development in multilateral trade rules at the WTO has led to an increase in FTAs. The Appellate Body impasse has further exacerbated fragmentation, requiring a multilateral approach for reform.

Fragmentation in Global Trade

Fragmentation in global trade is not new. With the slow development of multilateral trade rules at the World Trade Organization (WTO), governments have turned to free trade agreements (FTAs). As of 2023, almost 600 bilateral and regional trade agreements have been notified to the WTO, leading to growing fragmentation in trade rules, business activities, and international relations. But until recently, trade dispute settlements have predominantly remained within the WTO.

Challenges with WTO Dispute Settlement

The demise of the Appellate Body increased fragmentation in both the interpretation and enforcement of trade law. A small number of WTO Members created the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) as a temporary solution, but in its current form, it cannot properly address fragmentation. Since its creation in 2020, the MPIA has only attracted 26 parties, and its rulings have not been consistent with previous decisions made by the Appellate Body, rendering WTO case law increasingly fragmented.

The Path Forward for Global Trade

Maintaining the integrity and predictability of the global trading system while reducing fragmentation requires restoring the WTO’s authority. At the 12th WTO Ministerial Conference in 2022, governments agreed to re-establish a functional dispute settlement system by 2024. Reaching a consensus will be difficult, and negotiations will take time. A critical mass-based, open plurilateral approach provides a viable alternative way to reform the appellate mechanism, as WTO Members are committed to reforming the dispute settlement system.

Source : Fixing fragmentation in the settlement of international trade disputes

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WTO ministerial trading in low expectations and high stakes

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The WTO’s 13th Ministerial Conference is set to focus on e-commerce transparency, investment facilitation, and admitting new members. However, progress may be hindered by disputes, especially regarding fisheries subsidies.

The World Trade Organisation’s 13th Ministerial Conference

The World Trade Organisation’s (WTO) 13th Ministerial Conference is set to take place in Abu Dhabi on 26–29 February, with expectations of deals on electronic commerce transparency, investment facilitation for development, and the admission of Timor Leste and the Comoros as WTO members. Despite these positive developments, the expectations are relatively modest compared to promises made at the 12th Ministerial Conference, which included addressing fisheries subsidies and restoring a fully functioning dispute settlement mechanism by 2024.

Challenges in Dispute Settlement and Agricultural Trade Reform

However, challenges remain, especially in the deadlock of dispute settlement since December 2019 due to a US veto on the appointment of Appellate Body judges. Progress in restoring the dispute settlement mechanism has stalled, and discord continues regarding India’s grain stockholding policy as a potential illegal subsidy. Restoring a fully functioning dispute settlement mechanism hinges on addressing US concerns about perceived bias against trade remedies in relation to China’s state subsidies.

Geopolitical Tensions and the Future of Trade Relations

The likelihood of reaching agreements amid geopolitical tensions between Western democracies and China appears slim, with issues surrounding subsidies and global supply chains causing rifts in trade relations. As nations focus on self-reliance within the global value chain, opportunities for trading face obstacles. Advocacy for open markets and addressing protectionist sentiments remains crucial for fostering resilience to external shocks and promoting economic growth.

Source : WTO ministerial trading in low expectations and high stakes

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Getting Vietnam’s economic growth back on track

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Vietnam’s economy grew 8% in 2022 but slowed in 2023 due to falling exports and delays in public investments. The economy’s future depends on structural reforms and reducing dependency on foreign investment.

Vietnam’s Economic Roller Coaster

After emerging from COVID-19 with an 8 per cent annual growth rate, Vietnam’s economy took a downturn in the first half of 2023. The drop was attributed to falling exports due to monetary tightening in developed countries and a slow post-pandemic recovery in China.

Trade Performance and Monetary Policy

Exports were down 12 per cent on-year, with the industrial production index showing negative growth early in 2023 but ended with an increase of approximately 1 per cent for the year. Monetary policy was loosened throughout the year, with bank credit growing by 13.5 per cent overall and 1.7 per cent in the last 20 days of 2023.

Challenges and Prospects

Vietnam’s economy suffered from delayed public investments, electricity shortages, and a declining domestic private sector in the last two years. Looking ahead to 2024, economic growth is expected to be in the range of 5.5–6 per cent, but the country faces uncertainties due to geopolitical tensions and global economic conditions.

Source : Getting Vietnam’s economic growth back on track

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