World Trade Organization agrees Bali Package of trade measures

Peter HannStarred Page By Peter Hann, 22nd Dec 2013 | Follow this author | RSS Feed | Short URL http://nut.bz/3b-9sfc9/
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In early December 2013 the member countries of the WTO agreed on a package of measures that is expected to give a further boost to world trade. The agreement known as the Bali Package contains a set of issues that have been under consideration as part of the larger Doha round of negotiations in the WTO.

Introduction

The World Trade Organisation (WTO) is essentially a forum through which the member countries can explore multilateral solutions to the problems of international trade. The negotiations generally aim to open up and liberalise global trade and to maintain standards of health and safety. More than 150 countries are members of the WTO and a number of other countries are observers at WTO meetings.

In early December 2013 the member countries of the WTO agreed on a package of measures that is expected to give a further boost to world trade. The agreement known as the Bali Package contains a set of issues that have been under consideration as part of the larger Doha round of negotiations in the WTO. While many international trade issues remain unresolved the Bali package may help to increase trade flows by reducing red tape and saving compliance costs. A weakness of the package is that on the important issue of agricultural subsidies there is only a political commitment to take action in the future rather than a definitive agreement on immediate measures.

The Doha round of negotiations has been underway in the WTO for more than ten years. An important aim of the Doha round is to improve the trading position of developing countries. The general aim is to boost world trade by lowering tariffs and simplifying procedures while maintaining appropriate measures to ensure protection of local industries in developing countries. The Doha round negotiations have been held up by such issues as agricultural subsidies by the industrialized countries of Europe and North America. These subsidies allow local agricultural products to compete on favorable terms with imports from the developing world.

Bali Package

The Bali package is an agreement on some of these issues. The package contains measures to facilitate world trade and to accelerate customs clearance procedures. By removing some of the bureaucratic procedures the Bali package aims to save administration costs. Other aspects of the package are concerned with food security and development issues. The agreement contains a political commitment to reduce the subsidies for exports in the agricultural sector and to maintain them at a low level. There is also a commitment to take away the obstacles to trade such as quotas for imported goods.

The trade facilitation package aims to streamline customs procedures and thereby increase the speed of customs clearance while reducing costs for importers. The issue of goods in transit is of particular importance to landlocked countries much of whose trade may come through ports in neighboring countries. The trade facilitation measures include assistance for developing countries with training of customs officials and updating the infrastructure necessary for efficient trading.

By reducing the costs of international trade the Bali package is expected to bring benefits to the global economy in the region of USD 400 billion to USD 1 trillion. This will be achieved through reduction of trading costs, increased trade flows, efficient revenue collection and a stable business environment that facilitates foreign investment.

Agriculture and Food Security

The part of the Bali agreement dealing with agriculture aims to ensure that the public stockholding programs for food security in developing countries can remain in place even where a country has exceeded its limits for domestic support for trade. Governments buy food from farmers at supported prices and thereby build up the stocks of food in their countries. This can distort trade because it affects the market price and this has an effect on the quantities of food produced.

This category of government support is known under WTO procedures as Amber Box support (i.e. restricted support) as opposed to Green Box support that would be unlimited. Developing countries are permitted to provide support up to 10% of production; however they have complained that the way in which this 10% is calculated makes it increasingly difficult for them to keep the support within the required limit. Often the stockpiled food is supplied to low income consumers in a country and the calculation of the level of support is an important political issue.

While one solution would be to categorize these public stockholding programs as Green Box support some WTO members are concerned that this concession would weaken the whole framework in respect of government support. The Bali conference therefore discussed an interim solution. WTO members are undertaking to temporarily refrain from putting in any legal objection under WTO procedures (known as due restraint) where a developing country exceeds its Amber Box limits as a consequence of stockholding for food security.

While this temporary solution is in place work will continue on a permanent solution. In the meantime countries making use of this interim solution would provide full information on the public stockholding program in their country. Certain safeguards have been negotiated to make sure that countries do not misuse their public stockholding programs.

Quotas and Subsidies

Agreement was also reached on the issue of tariff quota administration. A tariff quota is a type of import quota that imposes a lower rate of duty on imports that are inside the quota. The agreement relates to the provision of information and consultation when quotas are under-filled.

The agreement on export subsidies does not include any legal commitments but contains strong statements of intent. The members of the WTO would use the utmost restraint in using export subsidies and would ensure as far as possible that progress will be made in eliminating all forms of export subsidy. The actual export subsidies imposed will be well below the permitted levels. Equally strong discipline will be imposed with respect to any export policies that could have the same effect as export subsidies.

Cotton holds an important place in world trade as it is produced in more than 100 countries and is either imported or exported by more than 150 countries. The US is a large player in the cotton market and trade in this commodity has become highly politicized. In respect of cotton the text of the Bali package states that the WTO members will meet twice a year to discuss issues and developments and consider the latest information on domestic support and export subsidies for cotton. The text also emphasizes the importance of development assistance for cotton.

Although the text of agreements reached at Bali is not finalized it is expected that there will be no change to the substance of the agreement. After review of the language and wording of the agreements they are expected to be adopted by the General Council of the WTO before 31 July 2014.

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Comments

author avatar Sivaramakrishnan A
23rd Dec 2013 (#)

Thanks for a detailed report, Peter. Many countries are suspicious of others' intent and subsidies are an integral part to poverty alleviation in poor countries. Good that the Bali Package has acknowledged this aspect - siva

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