By  on April 27, 2010

GENEVA — The World Trade Organization faces myriad issues and challenges in the coming years, not the least of which is its own effectiveness and direction.

Global developments such as political and economic power shifts, the threat of climate change and pressures on corporate compliance and labor standards will have a direct and lasting impact on the WTO’s ability to oversee global trade in sensitive sectors such as textiles and apparel, and to negotiate international accords, as countries look more to bilateral and regional pacts that better suit their needs and are easier to achieve.

The range of issues likely to confront the 155-member organization in the next decade also include the effects of currency manipulation on global trade that has been in the spotlight during the worldwide recession, said experts.

“If there aren’t any other mechanisms to enable the world’s major currencies to adjust in a way that reflects the underlying fundamentals, that is going to bring pressure on the trading system,” said Rufus Yerxa, WTO deputy director-general. “So, it’s going to have consequences on the WTO system. It’s going to force governments to take protectionist action and we’re going to have less enthusiasm in the WTO for negotiating deals.”

Paul-Henry Ravier, a former WTO deputy director-general and a senior member of the National Audit Office of France, said “trade and currency” is an issue WTO members will not be able to avoid.

If industrial tariffs go down close to zero for a wide range of goods if a Doha Round deal is struck, fluctuations in currencies could serve to compensate various sectors. So the link between currency and trade policy is and will be “impossible to deny,” he said.

However, Yerxa, a former deputy U.S. Trade Representative, doesn’t see currency issues as being on the WTO agenda.

“Finance ministries and central banks are not willing to bring it to a regime of rules like the WTO,” he said. “If currency markets are not operating in the right way, it will have consequences for us. But that does not mean I see people coming to the WTO and saying let’s negotiate rules in the WTO on currencies.”

The state of relations between the U.S. and China, along with major emerging powers such as India and Brazil, as well as the European Union, is also expected to weigh heavily on how things evolve in the WTO in the coming years. An escalation in tension could paralyze the agenda, as seen in the stalled Doha talks, while an attempt to manage the evolving order could usher in new prospects for global trade, envoys said.

The benchmark on how events play out over much of the next decade will depend on whether the troubled Doha global trade round closes with a successful deal or not. If Doha is a failure, it would mean stopping the clock for one or two years, and a lot of free trade agreements would be done, said Francesco Marchi, director-general of the European apparel and textile confederation known as Euratex.

The talks, launched in November 2001, are stalled over differences between rich countries and blocs such as the U.S. and EU, major merging nations including China, India and Brazil, and developing economies such as in Africa over market access, government subsidies and tariff rates.

The recent global economic crisis also complicated efforts to close a deal in the Doha talks. Some trade diplomats and industry experts don’t see the round finishing on a successful note before 2013, while Western envoys believe if the world economy bounced back, a final accord could be reached in 2011. President Obama has said he is committed to negotiating a Doha deal.

Munir Ahmad, executive director of the International Textiles & Clothing Bureau, believes that textiles and apparel are likely to stay an important sector for many years in the WTO. Ahmad said in a post-Doha deal world, industrial tariffs for textiles and apparel will have been lowered to around 5 percent in key markets.

“So there would be no need to protect industries or ask for market access,” he said. “The new issues would be in the shape of trade and environment and labor clauses. Nontariff barriers would also be important.”

Euratex’s Marchi said trade and labor will be “the most confrontational” even if all WTO members have signed the relevant International Labor Organization conventions. Many emerging powers are likely to oppose efforts to add labor standards to the WTO agenda.

Successive rounds of global trade talks since the late Forties helped remove barriers to trade in goods and services on trillions of dollars worth of trade and contributed to global growth and prosperity. It was the Uruguay Round that led to the creation of the WTO in 1995 and the end of worldwide import quotas a decade later.

But on top of the conventional agenda, Yerxa noted, the WTO will also have to cope with larger issues between the integration of trade and other areas.

“A multilateral effort over the next decade on climate change will have implications for the WTO if it’s successful,” he said. “I’m not prejudging what that will look like or what kinds of trade rules you would have to incorporate. That’s for governments to decide.”

Yerxa said there will still be a need for more tariff negotiations in the future under the auspices of the WTO.

“Depending on what happens in Doha, there will still be some significant tariffs,” he said. “They will be a lot lower and will be more harmonized, but there will still be a lot of scope for negotiations on tariffs.”

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