Question

What are the current trends that may impact the World Trade Organization?

Answer 1

World trade in 2009 was dominated by the worst financial and economic crisis in decades. Global output shrank. So did the volume of international trade. Despite bearing no responsibility for the crisis, the poorer developing countries have fared the worst. China, Brazil and India saw exports drop by between a fifth and a third in the second half of 2008, but countries not belonging to the top 20 developing country exporters were hit even harder. Trade and GDP growth have started to pick up again, but some economists fear a “double-dip” recession. If unemployment continues to grow, it may become harder for governments to resist protectionist pressures. In terms of the WTO negotiations, the crisis cuts both ways. Governments are preoccupied with more immediate concerns. But the crisis has shattered the sense that protectionism was unthinkable, making a trade deal seem more valuable. The G-20 major economies have called for concluding the Doha Round in 2010, but it remains to be seen whether this pledge will amount to anything.
The number of bilateral trade deals continues to grow, with Switzerland an enthusiastic participant. Some of these deals have been criticised for “WTO-plus” obligations, particularly regarding intellectual property. Meanwhile, there are real grounds for arguing that the Doha Round agenda does not reflect many current problems, especially climate change. With the US and the EU threatening to impose tariffs on exports from emerging economies with no hard emissions caps, it is clear that governments need to find some way of discussing the new challenges confronting the global economy.

The context for global trade in 2009 was dominated by the world’s most severe financial and economic crisis since the 1930s. Global economic output shrank for the first time since the Second World War. Growth in the developing world as a whole remained positive but was far below the levels seen in recent years.

Although the crisis had its origins primarily in the United States (US), developing countries have been hit especially hard. The World Bank estimates that the economic downturn will add an additional 53 million people to the ranks of those living on less than USD 1.25 a day and 64 million to those living on less than USD 2 a day (World Bank 2009b). Exports from the developing world were projected to fall by 33% in 2009, as the foreign demand that had underpinned the growth of many countries evaporates.

If governments have not been scrambling to raise new barriers to trade, they have not exactly been rushing to agree to new liberalisation either. The Doha Round of trade talks at the WTO continues to languish, despite assorted governmental promises, including by the G-20, to bring them to conclusion. This is understandable. Since the collapse of Lehman Brothers in September 2008 governments, particularly that of the US, have had more pressing preoccupations: saving the financial system from a catastrophic breakdown and stimulating domestic economies mired in a deep recession.

Within this grim context, however, the political circumstances for negotiated trade liberalisation have become somewhat more propitious. For one, the crisis has shattered impressions that global trade was flourishing without a Doha agreement, and thus there was no point making unpopular choices to secure a trade deal.

For the third summer in a row, a push for breakthrough WTO accords on agriculture and manufacturing trade at a mini-ministerial meeting in July 2008 ended in failure. However, the most surprising thing about the summit was not that it broke down but rather how close ministers came to reaching an agreement

In the NAMA negotiations the principal division is over so-called sectoral liberalisation initiatives, i.e. proposals to eliminate or deeply cut tariffs across entire industrial sectors ranging from bicycles, motor vehicles and auto parts to chemical products, electronics, forestry products, sports equipment and toys. To compensate for what they see as weak levels of overall tariff reduction for developing countries, industrialised nations like the US, Canada and Japan want to be sure that major markets like China, Brazil and India will participate in some sectoral liberalisation initiatives.

With roughly CHF 6 billion a year of support notified to the WTO Switzerland provides significant levels of domestic support and, in spite of conforming to Uruguay Round requirements, this amount has remained fairly constant over the last ten years, Support to farmers includes green and amber box subsidies. Green box subsidies refer to non- or minimally trade-distorting subsidies. They are mainly provided through direct payments that are de-coupled from production. They amount to roughly CHF 3.6 billion a year. Amber box payments are linked to production and are expressed as aggregate measurement of support (AMS) in WTO parlance. In the case of Switzerland they essentially refer to market price support. Overall nearly 40% of total support remains linked to production, which is slightly lower than EU support but considerably higher than support in the US or Japan.

Finally, a reduction in the more trade-distorting types of supports will likely be accompanied by increases in direct payments, or green box subsidies in WTO parlance. While such payments are much preferable from a developing country perspective in the sense that they do not encourage overproduction, most experts tend to agree that such payments still generate distortions, for example by discouraging farmers from getting out of the business of production.

Intellectual property provisions in EFTA FTAs have evolved from a model that basically follows the content and structure of NAFTA and the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to a model that contains very detailed provisions providing for higher intellectual property protection standards than the minimum requirement of the TRIPS Agreement, e.g. EFTA agreements with Chile, Egypt, Morocco, Korea and Colombia. These are often referred to as FTAs containing TRIPS-plus obligations. More recently issues that fall outside the scope of TRIPS, such as genetic resources and the promotion of research, technology and innovation, are starting to arise, for example in the EFTA-Colombia agreement.

Agriculture is a major source of GHGs, currently contributing to 10-12% of global anthropogenic GHG emissions (excluding deforestation). While the Swiss AP 2011 does not aim to address climate change as such, it indirectly contributes to this objective through the shift it promotes from intensive agriculture to integrated or organic farming and limited chemical treatment of plants. It also gives priority to exports manufactured using sustainable methods and in particular organic certification and good agricultural practices.