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Multilateral trade: delivering on promises financial scene

January 1, 2008 is an important date for multilateral trade. The trading system first represented by the General Agreement on Tariffs and Trade (GATT) and now by the World Trade Organisation (WTO) completes 60 years.

An important date such as this one naturally calls for a review, of the role of multilateral trade, whether there have been or will be alternative routes to achieve the same results, and of some specific issues. In matters having global dimensions such as multilateral trade institutions, it is difficult to enumerate clear cut successes or for that matter outright failures.

It is equally difficult to visualise a situation without the WTO and come to meaningful conclusions on the superiority or otherwise of multilateral bodies.

It follows that a verdict on multilateral trade institutions will have to be qualified. On the positive side, multilateralism has won wide acceptance. The faith of member-countries remains unshaken even if the process of some key negotiations has been painfully slow. For instance, after the Hong Kong Ministerial meet of the WTO (end 2005), all members decided to continue with the Doha round even though the high level discussions did not yield anything at all.

In fact, the continuance of the Doha round over a six year period despite the seemingly intractable positions taken by both developed and developing countries is seen as a vote of confidence on multilateral trade and the WTO, the institution representing it. The list of member countries is expanding.

With the accession of China and more recently Vietnam, the WTO has a unique opportunity to frame and interpret rules that will enhance the benefits of multilateral trade.

It would have been highly appropriate, however, if there was a reasonable chance of concluding the Doha development round around the 60th anniversary date. Until a few months ago, there was a glimmer of hope that the stalled discussions would be revived giving an outside chance for a successful wrap up by the end of 2007. That, of course, is not going to happen. Even as new deadlines are fixed there are doubts whether the key issues relating to agriculture and market access for industrial products will be resolved at all. But there is a realisation that the WTO is the proper forum to continue with the negotiations.

A breakthrough in the Doha round, some time in the first half of next year, will considerably enhance the stature of the WTO. To coincide with the 60th anniversary, the WTO’s annual publication, the World Trade Report, looks at multilateral trade in all its aspects. Few can challenge the assertions made in the report. “The story (of multilateralism) is one of remarkable change and adaptation, of a system that has contributed significantly to post-war prosperity, but which still has not delivered on all it could and still faces formidable challenges.” For almost 60 years the global trading system has been a source of prosperity, stability and predictability. Many countries have benefited. They have raised their development levels and reduced poverty.

There could be sceptics, especially among the broad group of developing countries. As Director-General Pascal Lamy puts it, the GATT and the WTO have not done all that they could for developing countries. That is why concluding the Doha development round quickly becomes so very important. Over the medium term, the real challenge is to convince governments that there is really no alternative to the inclusiveness implicit in today’s multilateral trading system, especially in a context where the balance of economic power is constantly shifting. The future of the WTO will then be seen to entirely dependent on how far governments value such an institution. If the case for a multilateral trade organisation seems unassailable now, it was almost visionary when it was first conceived 60 years ago. That is because the inter-war years were not the best period for global economic co-operation.

There was rampant protectionism in many countries. ‘Beggar thy neighbour’ policies were common. There was a crying need for an institution that would oversee global trade and ensure stability and predictability.

Looking back over the past 60 years, the multilateral institutions have certainly delivered on many of their promises. They have reduced uncertainty, facilitated negotiations, disseminated information and reduced transaction costs. Perhaps the most tangible contribution of the WTO is to be seen in its disputes settlement machinery. It has brought the rule of law to international trade. Developing countries especially have benefited. There are however implementation problems in a few high profile cases.

However, neither this nor even the protracted delay in the Doha round, should detract from the significant achievements of multilateralism and the WTO in particular.

Increasingly, multilateralism is relevant not only for trade issues but also for crucial relationships between trade and energy and between trade and environmental issues such as climate change.

C. R. L. NARASIMHAN

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