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Life after Bali

From Bruegel by Suparna Karmakar:

Negotiating round the clock, World Trade Organisation (WTO) members successfully concluded an agreement on a mini-package at Bali MC9, on a package of issues designed to streamline trade, allow developing countries more options for providing food security, and boosting least developed countries’ trade and development. This was the first multilateral trade agreement of the WTO that came into being in 1995[1], but even this small package (consisting of 10 texts on a selection of issues from the broader Doha Round negotiations) proved very hard to reach, requiring tough compromises from all the key stakeholders.

Net gains from the Bali deal

The most significant gains for global commerce in the Bali deal will emanate from the trade facilitation part of the package, targeted for adoption by the General Council by 31 July 2014 and on ratification by two-thirds of the membership. This is a legally binding text aimed at simplifying customs procedures by reducing costs and improving their speed and efficiency. Part of the deal involves assistance for developing and least developed countries to update their infrastructure, train customs officials, or for any other cost associated with implementing the agreement, although financial commitments to support those have not been specified.

With respect to gains, potential benefits will materialise only after the WTO membership ratifies the agreement, widely expected to take at least a couple of years. The lower costs and reduced border delays can potentially help enhance global trade flows, a much needed boost at a time when weak global growth has resulted in a stagnation of global trade growth[2]. However, the greater gains from trade facilitation will materialise when all developing countries implement the commitments in Section I of the agreement, which is conditional on the technical and financial assistance which will be provided by developed countries to improve developing countries' implementation capability.

This is likely to take longer than the two years of the ratification period, implying that the gains from Bali will take a while to accrue. It is well-known that border delays arise from enforcement agencies, especially at sub-federal levels of governance in all countries, which calls for massive training at lower levels of customs bureaucracy to comply with cooperation norms and in cutting red tape. An analysis of the estimated gains from the trade facilitation agreement also show that existence of too many unjustified assumptions and non-accounting of developing country implementation costs have resulted in an overestimation[3] of the potential gains of USD 1 trillion to world economy and 18 million developing country jobs that an International Chamber of Commerce study[4] proclaimed.

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