WTO failure points to fragmented future for global trade

Mon Aug 4, 2014 12:16pm EDT
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By Tom Miles

GENEVA (Reuters) - India has dealt a potentially fatal blow to the World Trade Organization's hopes of modernizing the rules of global commerce and remaining the central forum for multilateral trade deals.

In the short term, this is a setback for freer commerce. In the longer run, it means trade liberalization may advance -- if at all -- among narrower groups of countries, denying dissenters a chance to block progress.

While the unwieldy 160-member, Geneva-based WTO will survive as a body for enforcing existing multilateral agreements, smaller clubs of like-minded nations are trying to move ahead faster to update the trade rules among themselves.

"Without a serious shakeup, the WTO's future looks like that of the League of Nations," said Simon Evenett, a professor at the Swiss Institute for International Economics. "Perhaps ultimately that's what some governments want."

Last week India vetoed the adoption of a treaty to simplify, standardize and streamline the rules for shipping goods across borders, having previously agreed to its terms at a ministerial conference in Bali last December. It blocked the text because it wanted more attention paid to its concerns over food security.

After drawing widespread condemnation, the world's second most populous nation now says it wants to keep the treaty alive, with stronger assurances about protecting its food security needs, until a permanent solution is found.

But the genie is out of the bottle. India's tactics reawakened a ghost from the WTO's past that many diplomats hoped to have put behind them: the idea of "linkages".

Linking unconnected negotiations was a major reason why the Doha round of trade talks that began in 2001 collapsed. As more and more states parlayed a concession here into a pledge there, the weight of interwoven bargains eventually caused paralysis.   Continued...

World Trade Organization (WTO) Director-General Roberto Azevedo gestures during a news conference on world trade in 2013 and prospect for 2014 in Geneva April 14, 2014. REUTERS/Denis Balibouse