WTO Deal Buys Trade Talks Time to Craft Broader Deal

Photographer: Sonny Tumbelaka/AFP via Getty Images

Indonesia's Trade Minister Gita Wirjawan, right, shakes hands with World Trade Organisation Director General Roberto Azevedo after the final agreement before the closing ceremony of the WTO conference in Bali, Indonesia, on December 7, 2013. Close

Indonesia's Trade Minister Gita Wirjawan, right, shakes hands with World Trade... Read More

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Photographer: Sonny Tumbelaka/AFP via Getty Images

Indonesia's Trade Minister Gita Wirjawan, right, shakes hands with World Trade Organisation Director General Roberto Azevedo after the final agreement before the closing ceremony of the WTO conference in Bali, Indonesia, on December 7, 2013.

The Obama administration lauded an agreement on trade rules struck by the World Trade Organization, while analysts said the deal may do more to salvage broader WTO talks than solve food shortages and help global commerce.

The draft deal unveiled yesterday in Bali, Indonesia, was the first multilateral agreement negotiated by the WTO’s 159 member nations. It emerged after the U.S. and India compromised on food subsidies and a Latin American bloc led by Cuba dropped its opposition to an agreement.

A successful deal may add $1 trillion to the world economy, according to supporters among business groups.

“The WTO’s Bali agreement also represents the rejuvenation of the multilateral trading system that supports millions of American jobs and offers a forum for the robust enforcement of America’s trade rights,” President Barack Obama said today in a statement.

Humanitarian advocates, though, said the accord produces few gains for the poor, while farm groups in the U.S. -- the world’s biggest agricultural exporter -- had little reaction. Still, the accord may help extend talks on the Doha Round of trade negotiations, which have dragged on for 12 years and stalled over agriculture, industrial tariffs and services.

Buys Time

“A successful Bali buys the WTO time to prove that multilateral trade talks can be productive on a regular basis and in a timely manner,” said Terence Stewart, a trade lawyer based in Washington, in an e-mail yesterday. “The risk is that members will not address the underlying issues that have crippled the organization’s ability to respond to the changing business environment.”

The Bali agreement was part of a once-every-two-years ministerial conference at which WTO members may make decisions on issues of common concern. In the Doha Round of talks, begun in 2001, negotiators are seeking major revisions to the international trading system, including lower tariffs.

The deal reached in Bali lets India and other developing nations continue to subsidize their crops to bolster food security without having to worry about legal challenges, so long as the practice doesn’t distort international trade, according to a draft text. The U.S. and other members of the Geneva-based WTO would retain the right to file a complaint if subsidized goods are sold in global markets and depress prices or harm competitors.

Subsidy Reporting

The accord also will require India to provide more reporting of its farm-subsidy programs or face potential trade-dispute challenges. It includes provisions to reduce paperwork requirements at some borders, a step sought by shippers including FedEx Corp. (FDX) and United Parcel Service Inc. (UPS)

U.S. officials and business groups said the accord points the way toward more progress on world trade.

The agreement “takes important steps” to address farm-trade issues while pushing toward a broader agricultural agreement, the U.S. Trade Representative’s office said in a statement yesterday.

The deal “is a giant step forward for businesses large and small in expediting the movement of goods globally and reducing unnecessary paperwork,” said Scott Davis, UPS chairman and CEO, in a statement.

Obama, in the White House statement, said the accord will eliminate red tape and bureaucratic delays in shipping goods around the world.

‘Biggest Winners’

“Small businesses will be among the biggest winners, since they encounter the greatest difficulties in navigating the current system,” Obama said.

On the other hand, the agreement falls short as a tool to lift the living standards for much of the world’s poor, a stated goal of Doha negotiations, said Romain Benicchio, senior policy adviser with Oxfam, a global humanitarian organization.

“The Bali package is hardly going to make a difference for poor countries, but at least it keeps the negotiations on food security alive,” he said in a statement. “Negotiators now have to find a long-term solution to change the rigged rules that stand in the way of developing countries’ food security policies.”

The trade organization’s supporters said the agreement’s significance goes beyond specifics involving farm goods.

“I don’t think it’s an exaggeration to say that today we have saved the WTO,” European Union Trade Commissioner Karel de Gucht said in a report from Bloomberg BNA.

Farm Issues

Indonesian Trade Minister Gita Wirjawan, chairman of the Bali talks, said the agreement puts the entity “back on the center stage of trade negotiations.”

Agriculture is traditionally one of the toughest areas to negotiate because of its importance to nearly every nation, and “any indication there’s goodwill and mutual trust in the agricultural negotiations is important,” said Jim Grueff, a former U.S. agricultural trade negotiator, in a telephone interview.

The agreement, while not perfect, will help bring more transparency to commodity markets, said Tom Sleight, president and chief executive officer of the U.S. Grains Council, a group that promotes exports for U.S. corn, barley and other products. More importantly, he said, it showed the viability of the WTO.

“We did not want to see the WTO go down in flames on this,” he said. “The world needs the WTO. Every other trade agreement relies on the disciplines of the WTO.”

To contact the reporter on this story: Alan Bjerga in Washington at abjerga@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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