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WTO Seals Deal for First Time in 18 Years to Ease Trade

By Neil Chatterjee, Brian Wingfield and Daniel Pruzin
December 07, 2013 12:47 AM EST 9 Comments
FedEx Avoiding Sideways Twisters Lets Freighters Fly Frequently
FedEx Avoiding Sideways Twisters Lets Freighters Fly Frequently

The World Trade Organization agreed to the first major accord in the group’s 18-year history, a pact designed to smooth commerce at borders and safeguard food security programs in developing nations.

The deal unveiled today in Bali, Indonesia, was the first multilateral agreement negotiated by the WTO’s 159 member nations. It emerged from talks that had continued through the night after the U.S. and India compromised on food subsidies and a Latin American bloc led by Cuba dropped its earlier opposition to a draft agreement.

“For first time in our history, the WTO has truly delivered,” said WTO Director-General Roberto Azevedo. “We have put the world back into the World Trade Organization.”

Success in reaching an agreement that supporters say could add $1 trillion to the world economy may help extend talks on the Doha trade negotiations, which have have dragged on for 12 years. A deal at Bali had looked unlikely earlier this week.

India wanted a pact that would satisfy its demands to exempt food security plans from being counted under subsidy spending caps, while the U.S. was concerned that surplus from India’s food program may get dumped onto world markets.

The agreement 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 trade, according to a draft text.

Market Access

Indonesian Trade Minister Gita Wirjawan told ministers at a conference today that the accord will provide more certainty to business.

“These countries will benefit from increased access to markets,” said Wirjawan, adding it will make it easier for the least developed countries to export goods.

The anti-poverty campaign group War on Want said the Bali talks still hadn’t resulted in universal rights to food.

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.

U.S. Trade Representative Michael Froman hailed the agreement, calling it an important step toward advancing the Doha agenda.

“The WTO has entered a new era,” Froman said in a statement. “WTO members have demonstrated that we can come together as one to set new rules that create economic opportunity and prosperity for our nations and peoples.”

Business Reaction

The draft included provisions to cut red tape at borders, a step sought by shippers including FedEx Corp. and United Parcel Service Inc.

U.S. business groups, including the Business Roundtable and the U.S. Chamber of Commerce, hailed the pact. The Washington-based roundtable’s members include the chief executive officers of U.S. companies such as Boeing Co. and Microsoft Corp.

This “will provide a solid foundation to re-energize the WTO” and provide momentum to conclude other deals, Caterpillar Inc. CEO Douglas Oberhelman, chairman of the roundtable’s international engagement committee, said in a statement.

Susan Ariel Aaronson, professor of international affairs who specializes in trade policy at George Washington University in Washington, said the compromise was a trade-off that keeps in place protectionist agricultural policies for the sake of the larger trading system.

“You always have to buy trade liberalization with some protectionism” at the international level, she said in a phone interview. If that allows the WTO to achieve some success in opening trade, it’s a good thing, she said.

No Meltdown

Public Citizen, a Washington-based consumer-advocacy organization, was skeptical of the effectiveness of an accord, saying the draft includes watered-down provisions that simply let the WTO save face after years of stalled talks.

“Reviewing the actual text of the agreement, it appears that the biggest ‘breakthrough’ was simply that yet another WTO Ministerial meeting did not melt down altogether,” Lori Wallach, director of Public Citizen’s Global Trade Watch program, said in a statement.

To contact the reporters on this story: Neil Chatterjee in Jakarta at nchatterjee1@bloomberg.net; Brian Wingfield in Washington at bwingfield3@bloomberg.net Daniel Pruzin in Bali at correspondents@bna.com

To contact the editors responsible for this story: Jon Morgan at jmorgan97@bloomberg.net; Rosalind Mathieson at rmathieson3@bloomberg.net

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