The World Trade Organisation (WTO) will hold its 10th Ministerial Conference (MC10) in Africa this week. To be precise, it will meet in the Kenyan capital, Nairobi, from 15 to 18 December. This is the first time in the organisation’s 20 years of existence that its Ministerial Conference, its highest decision-making forum, will be held in Africa. The other major continents have hosted the summit, which usually takes place every two years. From a geopolitical point of view, it is significant that Africa has got its turn to host the conference.
But what does this mean for Africa, apart from the geopolitical balancing? Well, holding the world trade summit in Africa should be significant for a more substantive reason. Africa is the most marginalised continent in world trade. Surely, as the world’s trade ministers gather in Nairobi this week, it’s an opportunity to show their support for an inclusive global economic system by reaching outcomes that would help integrate Africa into world trade. This means they should give the moribund Doha Development Round the shot in the arm that it so badly needs.
Yet, truth be told, nothing that happens in Kenya this week is likely to revive the Doha round. In the mercantilist world of trade negotiations, the trade ministers will be driven by self-interest and not by altruism or the plight of Africa. Several studies indicate that the successful completion of the round would yield over $500 billion in global welfare gains, with a substantial amount of this going to developing countries. Yet distributional considerations and concerns about relative gains have prevented WTO members from reaching a comprehensive deal.
But few should find the negotiating inertia surprising. Trade negotiations have a chequered history. By its nature, the trade regime is less amenable to systemic or rule changes than other areas of the international economic order, such as the monetary system. Why, for instance, is the WTO just 20 years old while the IMF and the World Bank are 70?The answer lies in the tortured evolution of the international trade regime. The WTO’s negotiating limbo is therefore best understood in the wider context of the organisation’s antecedent.
The obvious question, of course, is this: if the WTO didn’t exist, would it have been necessary to invent it? Or, put differently, what is the purpose of the WTO, anyway? Well, that question was answered 70 years ago. At that time, the post-war economic planners concluded that a rule-based world trade body was needed to prevent a repeat of the disastrous economic policies of the interwar period. And they tried to create or invent one. Specifically, while negotiations to create the IMF and the World Bank were going on at Bretton Woods in 1945, similar attempts were being made to create an equivalent body for trade, to be called the International Trade Organisation (ITO).
In 1948, the draft ITO charter was completed at the Havana conference. But it was dead on arrival. The US Congress refused to ratify the charter because it went beyond just tariff reduction and covered wider domestic economic and regulatory issues. The refusal of the US Congress to ratify the draft charter automatically killed it and aborted the plan to create the ITO as the third leg of the tripod on which the world economy was to stand.
However, despite the death of the ITO, an international trade regime emerged by default. Simultaneously as the ITO was being negotiated, 23 of the 50 participants decided to negotiate a separate agreement, the General Agreement on Tariffs and Trade (GATT), focusing only on tariff liberalisation. The intention of the negotiators was to eventually incorporate the GATT into the ITO once the latter was ratified. But when the ITO became stillborn, the signatories to the GATT, which included the US, decided to turn it into a forum for negotiating further trade deals. This scope or mission creep effectively gave the GATT the semblance of a multilateral organisation. For nearly 50 years, eight multilateral trade negotiations, known as “rounds”, were held under the auspices of the GATT.
Yet the GATT was not a multilateral organisation in the shape of either the IMF or the World Bank. Indeed, the GATT’s “birth defects”, as the late American trade lawyer and scholar, John Jackson, put it, prevented it from functioning as a proper multilateral organisation. It was the attempt to tackle the GATT’s birth defects and turn it into a world economic body similar in status to the IMF and the World Bank that led to the establishment of the WTO during the Uruguay Round negotiations that began in 1986 and were concluded in 1994.
But, since its birth, the WTO has been dogged by crisis. At the heart of the crisis is the constant tension between the developed and developing members of the organisation, stemming from the latter’s belief that the outcome of the Uruguay Round was skewed against them in what some have described as “unequal bargain”. This internal tension has, indeed, pushed the WTO to the brink a few times over the past 20 years. The height of this chaos was, of course, the riots during the 3rd Ministerial Conference (MC3) in Seattle in 1999. Although hijacked by anarchists, the riots were triggered by complaints that the developed countries were doing secret deals in the so-called “green room” negotiations that excluded most developing countries, and that they attempted to impose those secret deals on other WTO members. Seattle remains a scar on the WTO!
Strangely, however, two years after the Seattle debacle, the WTO members came together in Doha, Qatar, during the 4th Ministerial Conference (MC4), and agreed to launch the elaborate Doha Development Round, underpinned by the Doha Development Agenda. There have been some explanations as to why Seattle failed and Doha succeeded two years later. Some argued that the 9/11 terrorist attacks on the US in September 2001, a few months before the MC4 in November of that year, concentrated the minds of WTO members. According to this view, the members agreed to launch the Doha round to show solidarity with the US, and to signal to the terrorists, who had attacked the World Trade Centre, a symbol of global commerce, that they could not undermine the world’s economy.
Another explanation was that the developing countries supported the launch of the Doha round because the developed countries agreed to make it a “development round” to address the trade concerns of developing countries, and that the word “development” was added to the title of the round for this reason! While there is some truth in both explanations, they do not, however, tell the whole story. The truth is that while the DDA has a development focus, it was also a broad-based agenda. It included the so-called “Singapore issues”, namely, investment, competition policy, transparency in government procurement and trade facilitation. These are issues of interest to the developed countries. They would not have supported the launch of the round if the DDA mandate did not include the “Singapore issues”. Anyway, the round was launched and widely hailed as a major breakthrough for the WTO.
But the Doha truce or unity did not last. By the next Ministerial Conference (MC 5) in Cancun, Mexico, in 2003, the DDA had begun to unravel. Cancun was almost going to become another Seattle. It was at Cancun that a group of powerful developing countries, called G20, led by Brazil, India and South Africa, emerged to counter-balance the developed countries, and to push them to further liberalise trade. Also at Cancun, most developing countries refused to negotiate the “Singapore issues”, arguing that they would not negotiate “new issues” until the “imbalance” in the previous rounds was redressed.
In an attempt to prevent the total collapse of the DDA, the WTO General Council agreed in July 2004 to amend the scope of the DDA and dropped all the “Singapore issues”, except trade facilitation, from the negotiations. Yet, despite the slimmed down negotiating agenda, all the deadlines set for concluding the round have been missed and the negotiations appear to be going nowhere!
In early 2013, ahead of the 9th Ministerial Conference (MC9) in Bali in December of that year, the Commonwealth Secretariat asked me and a colleague at the London School of Economics, Stephen Woolcock, an associate professor and head of the LSE’s International Trade Policy Unit, to carry out a study on how to unlock the DDA impasse to inform the recommendations of Commonwealth Heads of Government Meeting (CHOGM) taking place in Colombo, Sri Lanka in November 2013, shortly before MC9.
The project took us to Geneva three times. We met all the key trade ambassadors, including the then Nigerian Trade ambassador, Frederick Agah, who is now a deputy Director-General of the
WTO. We also met most of senior WTO officials, including Patrick Low, the then chief economist and Nigeria’s Chiedu Osakwe, director of the WTO’s Accession Division. It was clear to us, from our interactions with trade diplomats and officials in Geneva, that while everyone wanted the Doha round to be concluded, no one believed that an ambitious and comprehensive deal was ever possible. Lack of leadership by the developed countries and the major developing ones, such as China and India, remains a big drag on progress, as is the failure to agree a deal that is acceptable to the least developed countries (LDC). We produced our report, with key recommendations on the way forward, and presented it at an international conference in Geneva.
The expectations for the MC9 in Bali were decidedly low. But, surprisingly, it turned out to be the most successful WTO Ministerial Conference to date. This is because, for the first time since the WTO came into existence on 1 January 1995, a multilateral trade agreement was concluded. The Trade Facilitation Agreement (TFA) was concluded at the Bali Ministerial Conference in 2013. Most developing countries had opposed a trade facilitation deal, but, in the end, they came on board once some concessions, such as special and differential treatment, especially financial assistance, as well as an agreement on food stockpiling, which was of particular interest to India, were made.
But, despite the Bali success, there are still several DDA issues, notably agriculture, on which no significant progress has been made to date. And, unfortunately, since Bali, WTO members have been unable to agree any programme of action on how to advance, let alone conclude, the DDA negotiations. It is against the background of this state of limbo that the 10th Ministerial Conference will take place in Nairobi, Kenya, this week.
At the meeting of African trade ministers in Brussels on 19 October this year, they “reaffirmed the negotiating mandate, developmental principles and objectives of the DDA”. In other words, they want the DDA to be concluded. The reality, however, is that there exist widely differing perspectives between the developed and developing countries on the future of the DDA. Clearly, the developed countries will not support a DDA deal that does not require at the least the major developing countries, such as China and India, to take on more responsibilities and commitments. Yet, that gulf seems unbridgeable, which, therefore, makes reaching a comprehensive deal almost impossible.
Of course, MC10 in Nairobi may not be a disaster. The Kenyan government and particularly the Kenyan Minister for Foreign Affairs and International Trade, Amina Mohamed, who will chair the conference, will do their best to prevent it from becoming a complete failure. Nigeria showed this in 2011 when we chaired the MC8 in Geneva. Everyone had predicted a breakdown of the summit, but the then Nigerian trade ambassador, Frederick Agah, and the then trade minister, Segun Aganga, who chaired the conference, both made sure that the conference ran smoothly, and even ended with a positive ministerial declaration.
Nigeria’s achievement during MC 8 contrasted sharply with the country’s behaviour during MC6 in Hong Kong, in 2005, when we were told that we would not be allowed to be a Vice-Chairman of the conference unless we paid our annual subscription, which had accumulated for five years! Furthermore, largely because of Nigeria’s excellent performance at MC8, our trade ambassador, Agah, was made a deputy Director-General of the WTO, whereas in 2005, Chiedu Osakwe, a very competent WTO director, was denied the same role when he applied for it!
So, don’t rule out some modest success in Nairobi. In any case, there will be some celebrations. Liberia and Afghanistan will be formerly accepted as new WTO members. For an organisation that started with 128 members in 1995 and now has 164, the WTO is not a complete failure, its value as a rule-based multilateral trade body is fully recognised. But given that the primary purpose of the WTO is to progressively liberalise trade, its failure to conclude the Doha Round, 14 years after it was launched, is a total disappointment. Unfortunately, as I said earlier, nothing that happens at MC10 in Kenya this week will change that!
Olu Fasan
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