A little breathing room at the WTO

by | Dec 9, 2021 | Trade Working Blog | 0 comments

A little breathing room at the WTO

The emergence of Omicron has meant that the WTO Ministerial Conference has been put on hold – leaving in limbo key decisions about pandemic trade responses and fish subsidies (not to mention agriculture).   But there is some good news: members have finalised a deal to cut red tape for services exporters, and launched a new platform to help small businesses.

Like an unwelcome guest at the wedding, the new COVID variant Omicron and associated travel restrictions arrived just in time to derail the long-delayed WTO Ministerial Conference.   WTO members took the prudent decision to delay the scheduled 30 November meeting “indefinitely” – although there is talk of aiming for a new date in March.   

Decisions on pandemic responses, fish subsidies and agriculture support on hold…

The delay has meant that members were not able to make the key symbolic and practical decisions around pandemic responses that we had foreshadowed in our last blog, including a waiver of intellectual property protections for vaccines (which could contribute to greater global vaccine equity), and other measures including freeing up trade in essential medical supplies, enhancing transparency and smoothing supply chains.  

Equally disappointing was the missed opportunity to get a deal done at long last on eliminating harmful fish subsidies: the intensive preparatory negotiating process reportedly came very close to resolving the final details, but without Ministers to crunch the critical points, the agreement has not been concluded.  Nor was there the chance for Ministers to inject some much-needed ambition into agriculture.   

“…the breathing room that Omicron has created may finally enable WTO members to reconcile themselves to taking the hard decisions that the trading system needs – the status quo is likely to be bad medicine for future prosperity”

Lost momentum, or a useful pause?

Pressing pause may mean that critical momentum is lost, although work is continuing across the board, and the WTO Director General has urged members to aim for the end of February to bridge the outstanding gaps on key areas.  

Equally, the breathing room that Omicron has created may finally enable WTO members to reconcile themselves to taking the hard decisions that the trading system needs – the status quo is likely to be bad medicine for future prosperity.  

Among these, business priorities, including from the New Zealand International Business Forum, include agriculture subsidies, where it had become dishearteningly clear that meaningful reforms were likely to be kicked down the road; on the digital economy, a key priority alongside work on e-commerce was the potential to lock in the ‘Moratorium on Customs duties on electronic transactions’ (a cumbersome way of saying that digital exports should not face border taxes, the latter having been predicted to shrink productivity, innovation and GDP by more than the Customs revenues it could in theory raise.)   

In particular, the extra time may give a chance for the Biden Administration to firm up the detail of its trade policy, which has so far included some nice rhetoric but has been light on substance and action (including on making any concrete proposals about what it wants that could help resolve the worrisome impasse on the WTO’s Appellate Body).

Meanwhile, great news for services exporters and small businesses

In the immediate aftermath of the cancellation, however, there were two pieces of cheering news – particularly so given the pummelling that both services trade and small businesses have been given by COVID over the last two years.  

First, a group of 67 countries including New Zealand, collectively accounting for over 90 percent of global services trade, agreed a deal on “domestic regulations for services”.  The deal streamlines the red tape and slashes costs around licensing, qualifications and technical standards.  This may sound a little dry, but by increasing transparency and predictability and reducing bureaucracy, it is likely to have real-world commercial benefits, including for New Zealand suppliers of services such as legal, engineering, architecture or management consulting services, financial services, trade-related services and various others.   

Trade costs could be cut by up to US$150 billion per year – and even if only a fraction of this is realised, the deal should help improve the business climate after a bruising few years.  The sector’s recovery to date has only been partial, with global exports still down by 14 percent year-on-year in the first quarter of 2021.  For New Zealand, where services normally account for around one-third of exports, there was a drop of 53 percent in the year ending March 2021.  (The unsurprising outlier was telecommunications, computer and information services, which rose by 13 percent.)  

The other bright spot was the launch by the Informal Working Group on Micro-, Small and Medium-Sized Enterprises of a new platform for small businesses: “Trade4MSMEs”.  The platform aims to help small companies – many of which have struggled through the pandemic – to find trade-related information to help navigate complex non-tariff barriers, access trade finance and use digital tools, and will also help officials to design more inclusive trade policies – a long-held goal for New Zealand as part of its Trade for All agenda.   

As a final observation, it is noteworthy that both of these outcomes have arisen from plurilateral settings, rather than the WTO membership as a whole.   It seems that the ‘variable geometry’ approach to developing trade rules may be here to stay.

Stephanie Honey is Associate Director of NZIBF and was New Zealand’s chief agriculture negotiator for the intensive phase of the WTO Doha Round.

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