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Time for a “Nuclear Option” in the World Trade Organization

by | December 6th, 2013 | 03:55 pm
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After 12 years of arduous negotiations, it appears that the ninth WTO Ministerial Conference in Bali will accept a compromise package that will lead to a long-sought agreement on trade facilitation. Led by India, a handful of naysayers out of 160 WTO members had earlier blocked trade facilitation—an agreement that benefits every country—until they extracted concessions allowing additional agricultural subsidies and stockpiling schemes, under the misleading label of food security. This compromise likely represents all that will be delivered from the ambitious Doha Round launched in 2001.

Implemented over the next decade, the trade facilitation agreement should deliver a tremendous boost to world commerce. The pact envisages electronic customs declarations, thereby reducing the scope for corruption and pre-shipment inspection, and many other improvements that could speed up merchandise exports and imports. Time is money: Comparisons between best- practice ports (e.g., Singapore) and worst-practice ports (e.g., Calcutta) indicate that unnecessary obstacles are equivalent to a global tariff of 10 percent, and their cost to the global economy is approximately $1 trillion annually [pdf].

In the United States, before Senate Majority Leader Harry Reid (D-NV) unleashed the “nuclear option” in November, a minority of 41 senators out of 100 members could block any presidential nomination to high office. After the recent rule change, it now requires 51 senators (a majority) to block nearly all nominees.1

The consensus rule in the WTO—which set the stage for the Bali compromise—is far worse than the old Senate requirement of 60 votes to bring a bill or a nomination to a vote. In fact, WTO procedures make the US Senate look like a speed demon.

All 160 WTO members must consent to each new agreement. The Doha Round added the further requirement that everything must be agreed before anything is agreed, the so-called single undertaking. This effectively linked an agreement on trade facilitation, which was welcomed by a big majority of countries, to the mislabeled agreement on food security, which commanded the active support of very few WTO members.

The compromise conclusion of the Bali Ministerial underscores the necessity of a “nuclear option” for future WTO agreements. Under a WTO version of a “nuclear option,” a large subset of members, accounting for a majority of world trade, should be empowered to adopt, for themselves, a new agreement on trade facilitation or anything else. This would be consistent with the plurilateral approach of many trade accords, very different from the dysfunctional consensus rule. Moreover, any agreement could stand alone; it would not need to be part of a larger package, a sharp departure from the single undertaking. These reforms have been advocated, among others, by the World Economic Forum’s Global Agenda Council on trade and investment.

If WTO Director General Roberto Azevedo and the 160 WTO members cling to the consensus rule and the single undertaking after Bali, the organization’s future will be bleak: Judging from the long and tortured path to the Bali compromise, the WTO will become almost irrelevant as a negotiating forum.

Note

1. Appointments to the Supreme Court can still be blocked by 34 senators.