DAVID A. GANTZ ROGERS COLLEGE OF LAW THE UNIVERSITY OF ARIZONA The Quad—BRICS Standoff and the...

DAVID A . GANTZROGERS COLLEGE OF LAW

THE UNIVERSITY OF ARIZONA

The Quad—BRICS Standoff and the Uncertain Future of “Single Undertaking” Trade

Negotiations at the WTO

Stanford Center for Int'l Development, April 24-25, 2014

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Introduction

Quad—BRICS split has all but destroyed the Doha Round Despite Bali’s limited success with trade facilitation and some

agricultural issues, no consensus has emerged for pursuing other aspects of Doha Development Agenda

Members can’t even agree on a 7th Appellate Body memberStandoff continues despite the potential economic benefits of

a successful conclusion of DohaDownside risks of failure, resulting protectionist policies may

be $570-$800 billion in lost trade


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Introduction: Structure of the Paper

II—Seattle and the Rise of the BRICSIII—Factors Contributing to the Doha Round FailureIV—Role of Quad—BRICS SplitV—Bali Ministerial: Too Little Too Late?VI--Conclusions


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Debacle in Seattle and the Rise of the BRICS

Long history of divisions between developed and developing nations Permanent Sovereignty over Natural Resources Charter of Economic Rights and Duties of States Trade and Development section of GATT Unhappiness with some elements of Uruguay Round Agreements

Seattle in retrospect Too soon for another round given UR implementation challenges? Unwillingness of US and EU to address major areas of developing country

concerns Carryover of standoff over choice of WTO director-general


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Debacle in Seattle, Cont’d

Loss of US and EU influence with developing nations, especially Brazil, India and China

Lack of Quad enthusiasm for further reduction of agricultural subsidies (especially cotton), DFQF treatment for LDC exports

(Often unarticulated) frustration by many developing countries with lack of access to BRICS agricultural and industrial markets


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Events Leading to the Doha Round Failure

Unhappiness among many developing country Members with fruits of the Uruguay Round Slow Quad implementation of Agreement on Textiles and Clothing Complexities of implementing TRIPS, TBT and SPS in particular Continued broad use of unfair trade practice laws by Quads, particularly

the USUnrealistic expectations regarding Members’ ability to

implement the Doha Declaration given lack of consensus on elements


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Doha Failure, cont’d

Ongoing disagreement over key issues Reduction of Quad agricultural subsidies and high agricultural import

tariffs BRICS’ refusal to open agricultural markets and provide greater NAMA US “early harvest” on cotton subsidies and market access Extent to which special and differential treatment would be provided,

particularly to countries (Brazil, China) that many believe no longer merit such treatment

Expansion of BRICS’ services market accessIndia and China’s insistence on being able to protect small

farmers with high tariffs and safeguards going beyond bound levels


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Role of Quad—BRICS Split

Evidence of an unbridgeable divide on noted issuesNegative impact of other factors

Fear of increasing Chinese exports Lukewarm support by business groups, because of failure of Doha to

address such issues as supply chain management, investment, competition law and others where RTA were considered more promising

General lack of political will and leadership in both developed and developing country Member governments

Expansion of industrial policies, again in both developed and developing Members

Often understated but real disagreements between the BRICS and other MICs and LDCs


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Role of Quad—BRICS Split, Cont’d

Rise of influence of other middle income countries, and shift of negotiations from a few world powers to G-20 beginning with Cancun

Continuing concerns over lower growth resulting from world-wide recession and questionable economic policies, particularly in Brazil and India, that discourage trade, innovation and economic growth

Brazil: GDP growth reduced from 7.5% in 2010 to est. 1.8% in 2014 China: over 10% to 7.3% est. for 2014 (annualized <6% for first quarter) India: 6.1% est. for 2014 (down from 10.4% in 2010) Russia: 2% est. for 2014 (effect of Crimea invasion and sanctions?) South Africa: 2.3-2.5% (down from 2.8% est. in January)


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Role of Quad—BRICS Split, Cont’d

Disagreements among the US, EU and Japan over level of reductions of agricultural subsidies and agricultural tariffs (including tariff peaks)

BRICS opposition to plurilateral agreements that would not provide MFN treatment, and Quad’s increasing concerns over “free rider” problems in TISA and ITA in particular


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Bali 2013 Ministerial: Too Little, Too Late?

Trade facilitation agreement could be a major step if widely implemented, whereby worldwide income could increase by at least $40 billion annually, most in developing countries, and world GDP increase by $1 trillion Transparency (leading to reduced corruption) Reduced discrimination against foreign goods Stakeholder right to comment on draft regulations and seek legal redress Streamlining existing border and procedures Expedited treatment for courier shipments Expanded rule of law in related areas


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Bali Ministerial, Cont’d

Many uncertainties remain Will it require eight or more years for the TFA to enter into force, as with

2005 TRIPS amendment? Will developed Members provide the necessary technical assistance and

training? Will developed country Members, particularly LDCs be able to overcome

opposition of national stakeholders, including well-entrenched bureaucracies, to improved procedures and reduced corruption?


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Modest gains on agriculture “Food Security” through open-ended “peace clause” for Indian and other

subsidies to small farmers, under Agreement on Agriculture Improved calculation of tariff-rate quotas, preferential rules of origin for

LDCs, DFQF market access for LDCs (all hortatory rather than binding)Lack of progress on elimination of cotton subsidies and

import duties (affecting mostly the US but also China)No changes in Quad agricultural subsidies, which likely

disrupt world trade far more significantly than anything India or most other developing countries could afford


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A step toward completing Doha, or confirmation of the death of the single undertaking, or a basis for other piecemeal progress on non-controversial issues? Freer trade in environmental goods (at the WTO or in APEC?) Shift in focus toward protecting past agreements Efforts to forge stronger links between RTAs and the WTO Continuing expansion of plurilateral trade agreements where free rider

problem can be avoided (e.g., TISA as an “economic integration agreement” under GATS, Art. V)

Seeking out other areas for “pragmatic negotiation initiatives” Further (so far unsuccessful efforts) to establish greater WTO oversight

over RTAs


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Conclusions

Quad—BRICS divide doesn’t seem capable of resolution in a broad sense in the foreseeable future

WTO will continue to play a vital role in enforcement of existing agreements, including but not limited to the DSU

Focus of trade liberalization negotiations will continue a decade-long shift toward RTAs, with the willing, both developed and some developing, Member, actively participating while others sit on the sidelines

Many Members and their stakeholders will become even more convinced that if they wish to deal with cutting edge issues—e-commerce, global supply chain issues, competition, SOEs and perhaps information technology—it will not be through multilateral trade negotiations


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Conclusions

Major developed Members, including all of the Quads, will continue their preoccupation with negotiating and implementing “wide and deep” RTAs Trans—Pacific Partnership EU—Canada EPA EU—Japan FTA Transatlantic Trade and Investment Partnership

Some developing Members, particularly China, will pursue a “shallower” approach Regional Comprehensive Economic Partnership China—ASEAN FTA ASEAN Community 2015

Success in meaningful RTA negotiations is anything but guaranteed

DAVID A. GANTZ ROGERS COLLEGE OF LAW THE UNIVERSITY OF ARIZONA The Quad—BRICS Standoff and the...

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