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In late September, economic weakness around the world caused economists at the World Trade Organisation in Geneva to scale back their forecasts. In 2012, trade would no longer expand at a rate of 3.7 per cent, as previously predicted, but 2.5 per cent instead. For 2013, the prognosis was also reduced – to an expansion of 4.5 per cent from 5.6 per cent.
It was the latest sign that persistent trouble in the global economy – from slow growth in developing countries to slowdowns in some emerging economies – was limiting the strength in the recovery of global trade after the dip it took during the 2008/09 financial crisis.
For Pascal Lamy, director-general of the WTO, it was the latest sign that additional action was required on a policy level to rev up the engine of global trade. “More needs to be done,” Mr Lamy said. “We need a renewed commitment to revitalise the multilateral trading system which can restore economic certainty at a time when it is badly needed.”
Mr Lamy’s term at the WTO expires at the end of August, and nine candidates are lining up for his replacement – including three each from Asia and Latin America; two from Africa, and one from New Zealand.
But, regardless of Mr Lamy’s replacement, the new WTO head will be facing the same, daunting challenge of reinvigorating efforts to craft a multilateral trade deal from the ashes of the decade-old Doha round, which ran out of steam long ago.
“I think the big question is whether the major powers – China, the US, the European Union, Brazil, India – really want to put some energy into harvesting what can be harvested from the Doha round,” says Gary Hufbauer, a former US Treasury department official who is now a senior fellow at the Peterson Institute for International Economics. “The US has been conspicuously silent on this – but so have the others,” adds Mr Hufbauer.
Expectations have long dwindled that the full Doha round could be resurrected, certainly not before trade ministers hold their next major WTO summit in Bali in December, but the more likely scenario is that certain elements of the global trade agenda – such as a deal on an International Services Agreement – could be addressed on a piecemeal basis.
“We think this is going to be a year with a lot of activity, but not necessarily a lot of conclusions,” says Bill Reinsch, president of the National Foreign Trade Council, a Washington-based lobbying group for trade liberalisation.
Amid the search for a new path forward in the near-defunct multilateral trade agenda, many large countries are embarking on regional ventures to fill the void and make some progress towards greater market access.
For instance, countries negotiating the formation of a Trans-Pacific Partnership – including Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and the US – cited progress in the wake of their most recent talks in New Zealand in December, which for the first time also included Canada and Mexico. The 16th round of discussions will be held in Singapore in March, and optimists hope that a deal can be inked by the end of the year, though that may be wishful thinking.
An even more ambitious project, arguably, is the creation of a trade deal between the EU and the US, uniting the two economic powers in a way that has so far been elusive, and setting the standard on measures such as the protection of intellectual property rights. A working group led by EU trade commissioner Karel De Gucht and US trade representative Ron Kirk was expected this month to suggest the launch of formal negotiations, though huge challenges remain in crafting a deal and none will be forthcoming soon, with many judging it virtually impossible this year.
Meanwhile, China, Japan, and South Korea are laying the groundwork for their own three-way trade pact, despite some geopolitical tensions. “The big thing which might emerge in 2013-2014 is a China/Japan/Korea agreement,” says Mr Hufbauer. “At the moment it seems a bit far-fetched but it could be big stuff if they decided to go forward.”
As these efforts towards regional trade integration proceed, the WTO, trade officials and experts around the world, as well as business groups, are closely watching whether countries will tone down some of the measures to protect domestic industries that have flourished in recent years, leading to charges of protectionism. Such policies have rankled trade relations and led to increasing trade tensions, including within the WTO’s dispute settlement mechanism.
“The last thing the world needs right now is the threat of rising protectionism,” says Mr Lamy.