EconomyBattling to define success after the WTO summit

Battling to define success after the WTO summit


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It’s a little over three days after the World Trade Organization ministerial came to an agreement as dawn broke over Lake Geneva, and I’m sure some attendees are still catching up on sleep. There’s been a veritable banquet since of hot takes for you to choose from. Among the more thoughtful and optimistic are this thread from academic and former WTO official Nicolas Lamp and this on the fishing subsidies issue from piscine guru Alice Tipping. In today’s main piece I talk with Ngozi Okonjo-Iweala, the institution’s director-general, who was very pugnacious indeed in declaring the ministerial a success, and muse on a couple of themes about how negotiations work and what they mean. Charted Waters looks at UK-EU trade on the sixth anniversary of the Brexit vote. Thoughts, tips, questions: alan.beattie@ft.com or hit reply to this email.

Get in touch. Email me at alan.beattie@ft.com

Modest fare, but ministers will come back for more

It’s all about expectations, obviously. If you believed a failed ministerial would kill the WTO outright — especially if you genuinely feared India and its allies might end the 24-year-old moratorium on taxing digital trade — last week was a heroic escape act. Conversely, if you really thought the WTO would clear the thicket of intellectual property (IP) protection around manufacturing Covid-19 vaccines and treatments you might regard the outcome as worse than nothing.

On Friday night I talked with Okonjo-Iweala, who had quite a bit to say about those who were intellectually invested in the WTO’s failure. “People predicted total failure for this conference,” she said. “When you then deliver, the incentive is to minimise that as much as possible . . . there’s an industry of negativism against the WTO which has to stop.”

Okonjo-Iweala hasn’t made herself popular with health campaigners in particular, who supported India and South Africa’s initial proposal for a complete waiver in the WTO’s “Trips” agreement on IP. “You were never going to get the 100% waiver,” she said. “It wasn’t going to happen because this is an issue where you had members on opposing sides and by the nature of the organisation, when that happens, members have to negotiate.”

In some ways, to channel Zhou Enlai, it’s too early to tell the success of the summit. The decision to go for a limited outcome on fishing subsidies was portrayed as a temporary tactical retreat from a full-scale deal covering fishing overcapacity more generally. The idea is that governments can come back for another go at the next ministerial, to be held probably next year.

The Trips issue also has a built-in deadline, with negotiators due to look at IP for tests and treatments as well as vaccines within six months. That’s not going to be easy: the US (which those campaigners have now twigged has been stringing them along for two years with its purported support for a waiver) will resist expanding coverage to antiviral treatments at the behest of its pharma industry. Talking of the US, the ministerial also promised to try to restore the dispute settlement process — still handicapped by the US blocking appointments to the appellate body — to full functioning order by 2024.

The old-school view is that this bitty kind of approach, doing issues individually on different timelines, doesn’t work. Governments need grand bargains (the “single undertaking” principle) to trade off concessions in one area from gains in another. Unfortunately, as we saw with the late and unlamented Doha round, there are so many strands in a full negotiation that the complexity of constructing trade-offs outweighs the flexibility.

The WTO leadership and negotiation chairs have more recently tried to keep subjects separated. Okonjo-Iweala told me: “Sometimes, all this leveraging and cross connections between outcomes I think in the past has led to the failure to achieve anything, because then everything just doesn’t work and collapses. I was really determined from the get-go that wasn’t going to happen and I was trying to discourage members from linking one thing to another.” Santiago Wills, the Colombian ambassador who chairs the fisheries talks, argued last week that an urgent environmental global public good issue shouldn’t get tangled up in more routine subjects of commerce.

This didn’t entirely succeed. India arrived waving its threat to end the digital trade moratorium to get its way on the entirely separate issue of giving production-distorting subsidies to its farmers in the name of building buffer stocks of food (it’s an intriguing question whether Delhi would have gone ahead and killed the moratorium if other governments had tried to call its bluff). “India is very clear about what it wants . . . and will leverage outcomes to try to get what it wants,” Okonjo-Iweala told me. “Members do that. India is quite open about doing it.”

The geopolitics also currently favour Delhi using that leverage. The advanced economies are keen not to drive India closer to Russia by alienating it, and both they and India itself are looking for strategic counterweights to China. Australia and the UK are in the process of agreeing fairly thin bilateral deals with India that have more to do with strategic than economic considerations.

One final point. A lot of commentary naturally wraps this ministerial and indeed the general functioning of the WTO together with the future of globalisation. Certainly, a collapse last week would have given more material to the globalisation doomsters to work with. But recall that throughout the great surge of globalisation from the late 1990s to the global financial crisis in 2008, the WTO basically achieved nothing except a series of failed ministerials (Seattle 1999, Cancún 2003, Geneva 2008). In the real world, trade was taking off like a leaping salmon. At the WTO we had to watch the doomed Doha round flap around helplessly like a dying cod stranded on the deck of a subsidised fishing trawler.

Trade isn’t the same as the WTO, and the WTO isn’t the same as trade. The WTO isn’t even necessarily representative of trade policy. Fresh from being awkward over every single issue and floridly denouncing the iniquities of the rich countries in Geneva, Indian trade minister Piyush Goyal on Friday immediately skipped off to Brussels to relaunch bilateral talks with the EU, declared EU trade commissioner Valdis Dombrovskis his “partner in crime” (an unlikely pair of villains to be honest) and did a photo-op with some Indian mangoes. Striking postures at the WTO doesn’t equal wanting to watch the global trading system burn. Frankly, that’s just as well.

As well as this newsletter, I write a Trade Secrets column for FT.com every Wednesday. Click here to read the latest, and visit ft.com/trade-secrets to see all my columns and previous newsletters too.

Charted waters

This Thursday marks six years since the UK referendum vote that sparked the country’s departure from the EU. Downing Street this week insisted that it was “too early to pass judgment”, but that has not stopped my colleagues George Parker and Chris Giles, the FT’s political and economics editor respectively, from providing a fulsome assessment today.

The above chart tells a story. Despite sterling losing 10 per cent of its value after the referendum result was announced, there was no subsequent uplift in British exports. The country was just hit by inflation due to rising import costs.

The second point to note is that trade did not initially fall off a cliff. But that did happen at the start of 2021, not because of new tariffs between the EU and the UK but because of the friction caused by the introduction of significant border controls. (Jonathan Moules)

The head of Maersk, the world’s second-largest shipping group, says he doesn’t see global trade going into reverse.

The FT editorial board opines that the WTO is on life support, but the world still needs it.

Doug Irwin of Dartmouth College and the Peterson Institute argues that globalisation helped all countries get richer.

Bill Reinsch of the Center for Strategic and International Studies examines the US Congress’s complaints it is being cut out of trade policy.


Trade Secrets is edited by Jonathan Moules


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