Trade ministers from 159 countries have restored credibility to the multilateral trading system by reaching an agreement over the Doha-lite Bali package.
It is the World Trade Organisation's first comprehensive agreement that involves an effort to simplify the procedures for doing business across borders.
The so-called “trade facilitation” measures were taken from the stalled Doha round of world trade talks and will also improve duty-free access for goods sold by the world's poorest countries.
Further moves to implement multilateral free trade deals are grounded because of differences between rich and poor countries, and agricultural exporters and those that protect their farmers.
The Bali package could add about $US1 trillion to world trade by standardising the costs and time taken to clear goods over borders. In general, the poorer and less organised a country the longer and more costly the process of exporting and importing goods.
It is common in Africa, for example, for perishable goods to go to waste because of the amount of red tape. The Bali package aims to reduce this.
The other major issue in the package is the extent to which countries should subsidise their agriculture as this can lead to dumping on world markets.
India has lead opposition to the removal of subsidies on grounds they are essential to feed its hundreds of millions of poor who live on the verge of starvation. It was granted a concession though the package opposes subsidised food exports.
The countries most opoosed to the consensus agreement — Cuba, Bolivia, Nicaragua and Venezuela — recorded serious reservations about what they considered to be imbalances in the package in favour of richer countries, and the absence of provisions barrng discrimination in the form of trade embargoes on goods in transit.
The Bali package does not tackle some of the major issues of trade barriers, such as tariffs and quotas, but the reduction in facilitation costs could be even greater, a US think tank report says.
The report prepared for the Peterson Institute says the potential gains to the world economy are $US1 trillion in more exports, $US960 billion in gross output and 20.6 million additional jobs. It also estimates the cost of administrative barriers as double the cost of tariffs.
The deal has been welcomed across the board.
"For the first time in our history, the WTO has truly delivered," says director general Roberto Azevedo. It is the organisation’s first comprehensive agreement since it was founded in 1995.
"We have put the 'world' back in World Trade Organisation."
The core of this agreement is what is called trade facilitation. This is about reducing the costs and delays involved in international trade. It is often described as "cutting red tape".
A key trade off is that the rich countries have agreed to help the poorer WTO members with implementing this agreement by reducing tariffs and quota limits on imports.
New Zealand Trade Minister Tim Groser says, “It’s a modest deal but one well worth having at this time.
“Although the Bali outcomes provided limited direct benefits for New Zealand, the cost of failure at Bali would have been very significant for the international trading system.”
Mr Groser, a former trade negotiator, says the major work on the Doha Development Round remains to be completed.
“We can take some encouragement that this package, shows that key players are willing to make significant compromises to sustain the system. Now comparable flexibility has to be deployed by all major players to advance the rest of the Doha agenda.”
New Zealand’s interests lie here and are focused on trade-distorting policies in agriculture, which threaten the livelihoods of farmers, and imperil efforts to achieve global food security.
“If we are to confront these problems head on, members may need to consider putting more, not less, on the table in the years ahead,” Mr Groser says.
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