Jessica Davis-Pluess, Manager, Partnership Development and Research, BSR
I first grasped the potential of the World Trade Organization (WTO) to transform lives as an intern at the U.S. Mission to the United Nations in Geneva. It was the summer of 2001, China had been awarded the 2008 Olympic Games, and just down the road, the WTO was discussing the country’s accession to the organization, which eventually occurred in December 2001. Everyone at the U.S. Mission knew that this was a turning point for globalization and development.
More than 10 years later, China’s entry into the global trade regime is credited with not only helping the country become the world's largest exporter and second-largest importer but also with helping lift 500 million people out of poverty. While one can debate how well trade rules have been implemented in the country, there is no disputing the incredible impact this event had on China, global trade, and business.
This week, the WTO stands at another turning point as ministerial talks take place in Bali on a deal, which emerged from a lengthy process that began in Doha in 2001, to put developing countries’ needs at the center of the global trade regime. Although the deal leaves much to be desired, an agreement in Bali would be a step forward in building an inclusive trade regime that enables developing countries to become integral players in global trade and creates a more level playing field for every country, business, and individual to compete in the economy.
There are many layers of complexity in the Bali negotiations that could have ramifications for every part of the value chain, from multinational companies to small-scale producers. Some of the critical sticking points in the negotiations include addressing intellectual property rights, easing custom procedures, and reducing tariffs and agricultural subsidies. These are not insignificant issues, especially as many countries emerge from economic recession and are increasingly concerned about foreign competition. Moreover, as has already been seen by India’s growing isolation on issues of food security, developing countries are divided in their needs and positions on key issues.
A breakdown of talks in Bali would deal a serious blow to the credibility and viability of the WTO to govern the global economy. This is particularly concerning as more countries set up side deals and regional trade pacts, disillusioned by the global trade negotiating processes. Many critics argue that the WTO has become a vehicle for developed countries—which have significant negotiating power—to increase their access to developing countries’ markets without making genuine commitments to remove protectionist policies, particularly around agriculture, that harm developing economies and communities. Leaving Bali without a deal could actually lead to greater exclusion of lower-income countries, which desperately need trade and business investment, as former UN Secretary General Kofi Annan pointed out this week.
While the relationship between trade liberalization and poverty alleviation is a much-debated subject, there is widespread agreement that the current trade regime is leaving many countries and individuals on the margins and that reform is urgently needed to achieve a more inclusive economy. A study commissioned by the International Chamber of Commerce estimates that reaching an agreement in Bali on trade facilitation could not only boost global gross domestic product by US$960 billion but also could increase exports of developing countries by US$570 billion and of developed countries by US$475 billion. A further benefit would be the associated creation of 21 million jobs, 18 million of which would be in developing economies. This is based on the fact that improving trade logistics, infrastructure, and bureaucratic processes could result in significant savings in many developing countries.
At BSR, we are focused on how international and domestic policies can incentivize business investments that advance groups marginalized from economic opportunities, including the more than 2 billion people who live on less than US$2 a day and the many more who face barriers in accessing essential goods and services. While trade, along with well-balanced governance, has the potential to unleash economic opportunities for many, business has a role to play in building an inclusive economy through the creation of quality jobs, tackling access barriers to essential goods and services, and respecting human rights. In addition, a strong global governance structure that is just and promotes transparency and accountability is essential to achieving an inclusive economy. Expressing concern about the preparations leading up to Bali, WTO Chief Roberto Azevedo stated, "We will fail not only the WTO and multilateralism. We will also fail our constituencies at large, the business community, and, above all, the vulnerable among us. We will fail the poor worldwide." This week will surely be an uphill battle, but one well worth the struggle.