What Brings Bali Package to Global Traders?
The World Trade Organization (WTO) reached its first trade reform deal on Saturday with the approval of nearly 160 ministers, who had gathered on the Bali to decide on the make-or-break agreement that could add $1 trillion to the global economy. The approval came after four Latin American countries gave up rejection to the package.
The elements of the Doha Round, that are likely to be finalized at the WTO Ministerial in Bali, are trade facilitation, agriculture and duty-free quota-free market access for the least developed countries. There are also other issues on the agenda for the meeting, the most important of these being expansion of the WTO International Technology Agreement. The decisions at the meeting are important “mile stones” to the completion of the Doha Development Round.
The Bali package provides flexibility to developing countries with better food security options and it is designed to simplify customs procedures and lower trade barriers making it easier for developing countries to sell goods. In order to make trade easier, bureaucracy has become the target of the Bali package. Import taxes and agricultural subsidies are also to be lowered as they make it more difficult for poorer countries to compete with Europe or the US.
1. Trade Facilitation
The trade facilitation decision, which is in fact one of the biggest reforms of the WTO since its establishment in 1995, is a deal to simplify customs procedures by reducing costs in order to improve their speed and efficiency and it will be a legally binding agreement.
The objectives of the deal mainly are; speed up customs procedures; make trade easier, faster and cheaper; provide clarity, efficiency and transparency; reduce bureaucracy and corruption, and use technological advances. Part of the deal involves assistance for developing and least developed countries to update their infrastructure, train customs officials, or for any other cost associated with implementing the agreement.
According to the WTO, the benefits to the world economy are calculated to be between $400 billion and $1 trillion by reducing costs of trade by between 10% and 15%, increasing trade flows and revenue collection, creating a stable business environment and attracting foreign investment.
Agreement on the agriculture part of the Bali Package aims to resolve two issues. Firstly, much of the focus was on shielding public stockholding programs for food security in developing countries, so that they would not be challenged legally even if a country’s agreed limits for trade-distorting domestic support were breached.
The other issue was about “tariff quota administration “, how a specific type of import quota is to be handled when the quota is insistently under-filled. Members have agreed on a combination of consultation and providing information when quotas are under-filled. Meanwhile, three texts remained unchanged from the versions negotiated in Geneva. One is on adding some development and land-use programs to the list of general services that are candidates for being allowed without limit because they cause little trade distortion.
Another is a strong political statement to ensure export subsidies and other measures with similar effect are low. A third deals with improving market access for cotton products from least developed countries, and with development assistance for production in those countries.
Some critics show that the attempt to eliminate the limits on agricultural trade is a positive sign. In the future, trade barriers for agriculture could be replaced with customs duties. That means that a country could export as much as it wishes, but additional tariffs would be charged for exports exceeding the former limits.
Four documents remained unchanged from their Geneva versions.
- Duty-free, quota-free access for least developed countries to export to richer countries’ markets. Many countries have already implemented this, and the decision says countries that have not done so for at least 97% of products “shall seek to” improve the number of products covered.
- Simplified preferential rules of origin for least developed countries, making it easier for these countries to identify products as their own goods, and qualify for preferential treatment in importing countries.
- A “services waiver”, allowing least developed countries preferential access to richer countries’ services markets.
- A “monitoring mechanism” consisting of meetings and other methods for monitoring special treatment given to developing countries.
WTO member agreed on the Bali package which plans to tackle trade barriers. In terms of making trade easier, bureaucracy was the main target of the Bali package. WTO package surely have drastic effects on many countries or is likely to have very limited benefits for many countries. However, the most important part of this package is, it signals a renewed commitment by WTO member countries to working together at a time of profound global recession.
Although, considering the new regulations determined on the Bali Package, WTO rules, which will be legally binding, may disrupt countries from setting their own priorities in environmental protection, worker rights, food security and other areas and accordingly those sudden reductions in import tariffs can wipe out industries, causing job losses in rich and poor countries at the same time. On the other hand, it would improve the efficiency and reduce the costs of moving goods through customs by adopting measures such as digitizing customs procedures and greater transparency. The deal itself will show its effects over the time when each country starts to adopt those regulations.