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WTO reaches limited deal on global trade

WTO manages its first global trade deal after 12 years of talks. The trade agreement reduces red tape at borders, but lets India keep food subsidies for now.

By Jonathan HarschContributor / December 9, 2013

Indonesian Trade Minister Gita Wiryawan, right, shakes hands with World Trade Organization Director-General Roberto Azevêdo during the closing ceremony of the ninth WTO Ministerial Conference in Bali, Indonesia, Saturday, Dec. 7, 2013.

Firdia Lisnawati/AP

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Defying predictions that rich and poor nations could never agree on new trade rules, the 159-nation World Trade Organization (WTO) reached agreement Saturday on a global “trade facilitation” deal. Members also agreed to grow the group, voting to approve Yemen as the 160th member.

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The deal was less a breakthrough than a whittling away of trade-distorting border controls and a step toward further talks. To reach consensus, the world's trade ministers had to sharply narrow their agenda and postpone work on thorny issues, including agricultural subsidies. Heated negotiations among exhausted members dragged into an unscheduled fifth day on Indonesia’s resort island of Bali.

Nevertheless, for the first time in 12 years of WTO negotiations aimed at liberalizing world trade, the ministers signed a formal agreement on new trade rules that will pump hundreds of billions of dollars into the world economy.

“For the first time in our history, the WTO has truly delivered," Roberto Azevêdo, the WTO’s new director general, told delegates at the final session. "This package is not an end. It’s a beginning. As a consequence of our progress here, we’ll now be able to move forward on the other areas of our work that have been stalled for so long.”

The agreement includes measures to speed up and standardize customs and port procedures. It also includes “special and differential treatment” for goods and services imported from least-developed countries and, to satisfy India’s insistent demands, “public stockholding for food security purposes.”

The potential benefits are large, according to a report from the Peterson Institute of International Economics in Washington. Just by cutting red tape at borders and other “trade facilitation” measures, it forecasts, the global economy would see an extra $960 billion in economic activity and an added 20.6 million jobs, 18 million of them in developing countries.

“The WTO has re-established its credibility as an indispensable forum for trade negotiations," the U.S. Chamber of Commerce said in a statement. "Nor is this a paper victory: Streamlining the passage of goods across borders by cutting red tape and bureaucracy could boost the world economy.”

Not all observers are so sanguine. Jeronim Capaldo, senior researcher at Tufts University’s Global Development and Environment Institute, charges that the Peterson Institute forecast “overlooks the costs of implementing trade facilitation and it relies on many unjustifiable assumptions that compromise its accuracy.”

That's one challenge to Saturday’s historic WTO agreement: It may deliver far less than promised in terms of benefits. A more serious challenge is that the United States and other major trading countries may lose patience with an organization that took 12 years to reach its first agreement after watering down its objectives to make that agreement possible.

Among the issues shelved for later work, India and other developing counties are given a four-year exemption from WTO agricultural subsidy rules so that these countries can continue to subsidize poor farmers and stockpile grain in “food security” programs. This exemption was especially important to India’s government, which faces elections in 2014 and has made food security for the poor a major campaign promise.

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