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Speaking at the IISS-Oberoi Discussion Forum in Delhi on January 29, Lamy said economic crises of the type that began in 2008 have forced developed countries to look inward and often blame emerging nations for their fiscal woes.
“In high-income countries, a weak recovery and stubbornly high unemployment have made voters fearful that any gains made by faster-growing emerging economies are coming at their expense.
“This has made their political representatives even more reluctant to make what they see as “concessions” to China, Brazil or India in international negotiations. Emerging economies have responded in kind, wary of losing hard-earned developmental gains,” Lamy said.
A divide between developed and developing nations has been slowly growing among WTO members, with the latest disagreement arising between India and richer nations over IT and environmental goods pacts.
With negotiations at the Doha Round of talks stalled for over a decade, a group of developed countries have taken a detour and are urging India, among other developing countries, to accept four major sectoral pacts – trade facilitation (TF), information technology (IT), environmental goods and international services agreement.
A sectoral pact is often used to bypass persistent trade obstacles because its limited coverage minimises spillover to other areas of trade.
“The result has been that multilateral rule-making on issues ranging from trade governance to climate change, already struggling prior to the crisis, has come to a near halt,” Lamy said.
The impasse reached between developed and emerging economies at the Doha Round of Talks on implementing reform measures, such as lower trade barriers, subsidies in agriculture and fisheries, tariff cut in industrial goods and market access for services, has only served as impetus to turn to one-on-one trade negotiations.
This has come at the same time that multipolarisation has gained momentum; the formation of a bloc such as BRICS is evidence that production and trade value chains, security and environment issues, trade rules and global financing can be addressed in a multipolar way. But at the WTO, trade governance is reverting to bilateralism. Lamy calls this a paradox.
“But one has to ask whether these bilateral rules will adequately respond to the needs of the regional and global value chains that now make up a majority of world trade.
“While bilateral tariff reductions can ultimately be multilateralised, a plethora of bilateral trade agreements will produce a multitude of regulatory standards with which businesses will struggle to comply. We risk scattering the level playing field,” Lamy said.
Lamy suggests that WTO members begin to tackle the easy issues first, thereby encouraging confidence-building measures. He says trade facilitation should be the best first issue on the table because it can increase volume of goods that cross borders without putting people’s jobs at risk.
With input from Agencies