Sunday, January 13, 2013

WTO - Reboot Needed

They say Agriculture is one reason why Doha round failed. That may be true. Farming lobby in diverse economies like France, Japan (rice cultivator), India, Argentina, USA, etc.; are all strong and vocal. In each of these countries Political System decides to pay the price of the Farming lobby and move on to other pressing and core political struggles. It is rare to find a political movement based on 'taming of Farming lobby' in today's world. Generally, it is much more cheaper to pay their price.

The other reason of WTO failure seems to be rapid changes in economies of the world and failure of WTO Mandarins to understand that. In the above referred Rueter article, Economist Bhagawati still talks of Developing Countries as if it is 80s or 90s. India or China may be still developing countries from point of view of per capita income; but needs of these economies are very different. Whatever similarities and common needs might have been there in past; that common context has diminished lot. Same with Brazil too. When one thinks about other emerging economies like Turkey and Indonesia; again what each country needs is very different. Point is clubbing all these economies as 'Developing Economies' hardly works and is hardly relevant. Given that, why would USA or Europe or China tolerate non-sense forwarded by insular countries like Cuba or likes of Cuba in any of these WTO agreements? Even communist Vietnam has different needs than Cuba in WTO as it embarks upon Economic Liberalization. To this mixture, we have Middle East economies with different needs - some with Oil whereas some like Egypt without Oil. (By far Egypt could be one of the few countries to which the older label of Developing Country in traditional sense could be still applicable; but there is no monolithic block of Developing Countries left anymore. It cannot be, all due to structure differences.) As far as issues of African countries go, it is a different and complex problem; definitely not something WTO can expect to handle alone.

WTO was never about energy supplies. OPEC for long had maximum influence there and it still retains some influence. But then we got entry of Russian energy supplies in last 2 decades after the collapse of Soviet Union and that changed the trade dynamics of energy supplies. And now with shell gas revolution and higher oil production in USA; it is about to change again. Those are all monumental changes in world trade and world economies. WTO was never a part of it and never likely to be. Next, when it comes to Telecommunications and Information Technology, another of UN initiative failed miserably. (I am completely with USA Government and American Companies here - avoid government involvement as much as possible in any regulation and management of Internet. Interests of USA, Western countries are dramatically different than suspecious governments like China, Russia and Middle East. India could be in between though I would like India align with USA and Western countries in these matters considering her own future in protection of intellectual property rights. Smaller countries like Chile, Poland are very much in the camp of Western Economies in these matters and India should be too.) 

All this means any involvement of UN and WTO in global trade has been much less useful. As intellectuals of WTO and UN mandated trade  - I believe Jagadish Bhagawati is one of them - fail to realize all this emerging diversity and still insist upon 'global kumbaya' approach; we are bound to fail.

As far as Obama Administration goes, its topmost priority should be get the Trans Pacific Free Trade Agreement (why would the first Pacific President of USA want to loose this historic opportunity to cement his legacy?) and USA-EU Free Trade Agreement (why not Canada and Mexico in that?) ratified. Democratic Senate is the friendly chamber to Obama Administration and Republicans are traditionally more favorable to Free Trade Agreements. John Kerry's Sec. of State term will be firmly evaluated on the basis of whether he gets these 2 agreements through the Senate or not; preferably even before 2014 elections. On the basis of his relations with Senators, Kerry should be able to steer and shepherd these agreements. 

Assuming that is where bulk of trade agreement energy is going to be dedicated in coming days, WTO in its next incarnation should focus on living - even thriving - with these multilateral agreements. Many countries have lined up many more regional trade agreements. As those agreements start coming on line, dispute resolution, that is where WTO can be still helpful and it should focus on that (assuming WTO recognizes multilateral agreements and participating members find already established infrastructure of WTO convenient and cheaper rather than keep sprouting new dispute resolution mechanisms for each multilateral agreement). Essentially instead of being in a driver's seat WTO should let member countries to do whatever is needed, suitable to their needs. WTO should be simply a facilitator here for organic, bottoms up global trade development.

My view - odds are that WTO will not rise to the occasion. The whole culture of UN, WTO and intellectuals behind those are simply reluctant to be bold, have a solid reading on how structurally things have changed or going to change and overall refusing to climb down from their cozy intellectual perch which might have served them in the past, but not now. For governments around the world who want to usher prosperity for their citizens - time to move on. It is not job of member countries to 'save WTO'; it is the job of WTO to show how useful it can be to these member states. Else one more 'UN mandated contraption' will join the dustbin of History.

Update - Technically WTO is not part of UN, but it is closely aligned with it and is part of UN System.

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