Apparel Sourcing Intelligence - Worldwide

Facilitation, Schmacilitation. Why the WTO needs a sense of proportion

Trade lobbyists really have to get a sense of proportion. This week’s posturing by trade lobbies about trade facilitation suggests they wouldn’t recognise one if it turned up on their doorstep with a crate of champagne.

14 pro-trade organisations claimed on October 15 that the “WTO and the global trading system face a make or break situation” after the WTO hit obstacles proceeding with an agreement made last December. WTO Director General Roberto Azevêdo sent me (and thousands of others) an email yesterday afternoon claiming “This could be the most serious situation that [the WTO] has ever faced.”

To call this hysterical over-reaction is probably a colossal understatement.

Last December, most of the world’s trade politicians met at a WTO meeting in Bali. Unable to agree on many things, they agreed a package of proposals they, collectively, thought no-one could disagree with. The Bali package is sometimes short-handed “Trade Facilitation,” though only a bit is actually about facilitating trade

Six months later, the just-elected Indian Prime Minister, Nahendra Modi, said he didn’t like the package – because of one idea tied in with a lot of (I’d say) unexceptional plans for rich countries to subsidise more effective Customs procedures in poorer countries, and for trade by the very poorest countries to be made easier.

His objection was to a group of plans about something called “Public Stockholding for Food Security Purposes.” It’s not surprising he was unhappy: the plans proposed stopping countries from subsidising farmers to build up stocks of food. Farmers in poor countries (of which India’s got more than anyone else) hate the idea, and so do lots of self-appointed advocates of poor non-farmers (of which, again, India has more than anyone else), who claim that will stop subsidised food finding its way to poor people.

Advocates of the proposals claim abolishing these subsidies will actually make food cheaper in most countries – and they may well be right. But, with the massive subsidies the EU, Japan and the US squander on their farmers (which aren’t going to be banned by the Bali package), it’s tough to convince any trade sceptic this isn’t yet another devious plot by rich countries to grind the faces of the poor.

Whatever the arguments for the Food Security bit of the Bali Package, Modi’s not going to collaborate on the stuff in it about facilitating trade unless the Food Security agreement is changed to let him keep subsidising farmers. It’s practically impossible to find a sensible Indian agreeing with him – and his stance is encouraging natural opponents of trade (like South Africa) to take his position.

So why not just go along with him? Developing countries’ food subsidies really are a fleabite by comparison to what the US, EU and Japan (and Australia, and Canada, and Switzerland, and…) get away with – and as long as they keep subsidising, practically everyone in the developing world is going to think the plan is to help rich-country farmers dump their surplus produce onto the world’s poor, destroying the livelihoods of poor farmers.

I can’t find a convincing case for disagreeing with Modi – never mind seriously believing that Modi’s provoked “the most serious situation that [the WTO] has ever faced.”

True, India agreed to the Bali Package last December. But the US agreed, at a 2005 Hong Kong WTO meeting, to remove import duty on garments from the world’s poorest countries. It’s dodged that commitment for the past decade – and heaven knows how many similar commitments my own EU has ducked. Why should the newly-elected PM of the world’s largest democracy, taking power after 49 years of a rival party’s rule, be held to higher standards of honouring a predecessor’s commitments than Barack Obama?

By throwing its toys out of the pram, India hasn’t created a “make or break situation” for the global trading system. America and Europe will be buying their clothes from China, and competing to sell China Airbuses or Boeings, however this squabble pans out. Countries will still want a forum of other countries to help settle disputes in a reasonably objective way.

What IS threatened by the arguments over the Bali Package is one set of mechanisms – the WTO and its current procedures – for driving global cooperation on trade management still further.  I believe the WTO is one of the great successes for international cooperation of the past 50 years: but its obsession with this issue indicates its central weakness: an incomprehensible preoccupation with process over any serious interest in advancing worldwide prosperity.

Ever since the Great Recession started in 2008, the WTO’s been churning out increasingly shrill propaganda about the risks of mass global protectionism. None of those claimed risks ever materialised: a few poor (and therefore unimportant in their impact on global trade) countries invented silly and self-destructive trade barriers – and look at the mess Argentina (the prime culprit) is in as a result. Those barriers’ impact on the serious business of trade within rich-country blocs and between them and most of Asia has been quite imperceptible.

The Bali Package row is typical of the real problems with trade rules these days: a small elite of trade wonks is obsessed with trivia – like the Yarn Forward rule, this incomprehensible obsession with banning practices some poor countries think essential to their food security and defending the truly immaterial trade concessions the US has made to Nicaragua – at a time more and more voters are worried trade is damaging their lives.

The WTO and its supporters need to stop inventing hokey scare stories about “make or break situations.” They need to ditch policies – like opposition to food security programmes – that alarm voters to no good end (or at any rate find a way of quieting the alarm), and promote aggressively how policies like Trade Facilitation really do advance the world’s poor with minimal cost to the world’s rich.

If they persist on behaving like a bunch of drama queens over the utterly trivial, it’ll be their inability to see the wood for the trees creating the most serious situation the WTO has ever faced. The WTO  – and its 14 sycophantic associations – should stop scaremongering, trim its objectives, and concentrate on implementing projects – like the core trade facilitation programme – that really are capable of being implemented.