By  on August 1, 2014

World Trade Organization members failed to finalize implementation of a Trade Facilitation Agreement by the Friday deadline, putting in limbo a pact agreed to last December to reduce trade barriers and eliminate border transaction costs and casting a pall over the future of the WTO itself.

U.S. Trade Representative Michael Froman said Friday, “In Bali, seven months ago, the United States worked closely with World Trade Organization director general Roberto Azevêdo and numerous other WTO members to reach a landmark package of agreements that breathed new life into the WTO. As part of that package, all WTO members agreed to take certain actions to implement the TFA by July 31. That agreement would have reduced trade costs, especially in developing countries, and would have generated hundreds of billions of dollars in much-needed economic activity. The United States regrets that a handful of members have decided not to adhere to their commitment to implement the TFA consistent with the Bali agreement.”

Michael Punke, U.S. ambassador to the WTO, told a general council meeting on July 25 that the December TFA “flipped a switch that turned the lights back on at the WTO,” after the Doha Development Round, aimed at reducing tariffs among WTO countries, had come to a standstill after years of negotiations.

He said by failing to implement the TFA, “It is no use…to pretend that there would be business as usual in the aftermath. Many members, including developing country members, have noted that, if the Bali package fails, there can be no post-Bali. It’s with regret that we agree with them.”

Froman said the U.S. “is fully committed to the multilateral trading system embodied in the WTO, but the WTO system relies on its members to implement the commitments to which they have agreed.” He said, “Geneva will be quiet for the next several weeks. This is a good time for all of us to reflect on these developments and to consider the implications going forward. We will consult with our trading partners on potential paths forward.”

Juanita D. Duggan, president and chief executive officer of the American Apparel & Footwear Association, criticized the collapse of the TFA, apparently caused by India and other WTO members blocking action to implement the deal.

“Not only does failure in Geneva dramatically damage the WTO, but it also removes $1 trillion from the world economy, including the same countries that blocked the landmark deal,” Duggan said.

With apparel and footwear among the most heavily traded consumer goods that require sophisticated global supply chains, Duggan said, “Everybody who wears clothes and shoes will be adversely affected if the TFA is allowed to die.”

As the midnight deadline approached in Geneva on Thursday, Azevêdo urged WTO members “to reflect long and hard on the ramifications of this setback.”

“My sense, in the light of the things I hear from you, is that this is not just another delay which can simply be ignored or accommodated into a new timetable — this will have consequences,” he said. “And it seems to me, from what I hear in my conversations with you, that the consequences are likely to be significant.”

Azevêdo noted that the WTO breaks for August and urged members “to reflect long and hard on the ramifications of this setback.” He stressed the importance of each of the three pillars of the WTO — disputes, monitoring and negotiations — and said he was “very concerned…for the future of the negotiating pillar,” adding that “the future of the multilateral trading system is in your hands.”

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