When trade ministers meet in Bali, Indonesia, next week, the elephant in the room will be whether the World Trade Organization (WTO) can function as a negotiating forum.
The agenda includes only a small set of issues to be harvested from the Doha Round of multilateral trade negotiations, and the prognosis is grim, according to director-general Roberto Azevedo. Achieving an agreement on the border management issues known as "Trade Facilitation" would be especially valuable for the world economy. But what's most important for the multilateral process is that the ministers simply secure a deal – any deal – that would finally get the stalled Doha Round moving forward again.
After staggering along for six years, the Doha Round hit an impasse in 2008 and has been stalled ever since, but the WTO itself is not sick. World trade is still growing, albeit slowly; protectionism was held in check during the Great Recession; the dispute settlement system works well; and the transparency and surveillance mechanisms are used more than ever, with substantial improvements since 2008.
But business as usual in Geneva is not sustainable. The world has changed since the last round wrapped up 20 years ago. Production is now fragmenting into "global value chains." Internet-related services were virtually unimagined when the WTO was born. The rise of China significantly alters the dynamic in Geneva.
Talented bureaucrats seek out opportunities to make a difference. The best people will not hang around in Geneva just to keep the system going. The detail of what happens in Bali is less important than restoring everyone's faith that deals can be done in the WTO.
WTO ministers meet every two years. The upcoming Bali meeting will be the ninth ministerial conference since the creation of the WTO. The Doha Round was formally launched at the fourth conference, in Doha, Qatar, in 2001, after the famous failed attempt at the third conference in Seattle in 1999. Success is never assured at these meetings.
The conventional story about the 2008 Doha impasse is that the main obstacles were the proposed "special safeguard mechanism" for developing countries in agriculture and "sectoral negotiations" in trade in goods – and that the split on both issues was essentially between the United States and India. Neither country stood alone, however, and these two issues were not the only obstacles to agreement. Just as important was the rapid rise in commodity prices since 2000 and the explosive growth of China's exports, both of which undermined the structural basis of the negotiations.
The last attempt to salvage the Doha Round as a whole collapsed in April, 2011, when the Group of Five (U.S., EU, China, Brazil and India) essentially gave up and put the round on life support. Are the grieving relatives delusional to think even a small part of the round could be salvaged at Bali next week?
Every previous round has crystallized only when the Americans and Europeans reached a basic accommodation. This time the blockage is across the Pacific. Generations of Atlanticism – that is, of shared elite perceptions – helped underpin the post-Second World War order. Nothing comparable exists for the new order. Whether or not we are living through a crisis of multilateralism, many international organizations are not working very well, as we saw at the climate change negotiations in Warsaw last week.
The WTO need not worry over much about the alphabet soup of bilateral and regional trade negotiations, especially the Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP), not least because China, India and Brazil are not participating in these so-called mega-regional deals. They are also standing on the sidelines from the plurilateral talks in Geneva for a new Trade in Services Agreement. If all these negotiations do result in a new set of 21st-century rules for trade policy, gaining the adherence of these most rapidly growing economies in the world will be essential.
One of the reasons that problems exist in every area of global governance is that unresolved transpacific relationship. The Americans had learned how to get along with the Russians during the Cold War, but they are still trying to figure it out with the Chinese, and vice versa.
Power matters. It has changed, and the global trading system hasn't caught up. The WTO remains the only place for a trade accommodation between the U.S. and China. That accommodation will not happen all at once next week, but the fate of the Bali ministerial conference will be a straw in the wind. Inability to conclude even a small package in Bali would be a discouraging sign.
Robert Wolfe is professor at the School of Policy Studies, Queen's University, an associate of the International Institute for Sustainable Development, and research fellow at the Institute for Research on Public Policy. This comment is based on his paper "First diagnose, then treat: what ails the Doha Round?"