Jun 04, 2020 Last Updated 12:26 PM, Jun 3, 2020

Figuring Out PIF’s Support for the Multilateral Trading System

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The Pacific Islands Forum (PIF) Trade Ministers met in February in Suva. Their key outcome on the World Trade Organization (WTO) was: “there is support for the multilateral trading system and the opportunity therein to address global trade concerns including harmful fisheries subsidies.”

In the global context of the roles of WTO and the multilateral trading system, the support above is essentially general affirmation of globalisation. Such formulation of an outcome however is not new for PIF. Previous outcomes statements have reflected the same or similar support.

However, such an expression of support raises more questions than answers. Firstly, out of the eighteen PIF members, only eight are WTO members – six Pacific Island Countries (PICs) – Fiji, Papua New Guinea, Samoa, Solomon Islands, Tonga, and Vanuatu; and the two developed countries of Australia and New Zealand. Then why should the other ten PIF members, non-WTO members, be included in the decision, one may ask. Obviously, the Trade Ministers had decided by consensus. That could mean that the non-WTO PIF members did not object to the decision.

The non-objection by the other ten PIF members would have been political to allow a decision to prevail in the interest of group solidarity. But more so, the non-WTO members know very well that regardless of their non-membership, they still benefit from the provisions of the WTO. They know, for instance, that they have benefitted from the WTO initiative of Aid for Trade (AfT). AfT resources, have been re-committed by Australia and New Zealand under the PACER Plus, and a good share of that is being disbursed through the Pacific Horticultural and Agricultural Market Access (see Islands Business July 2019).

The second question is a more substantive one. Despite all the downsides of globalisation, despite the growing inequality globally resulting from capitalism that powers global economic growth, despite the inaction of the Doha Round of trade talks (Doha Development Agenda) that was aimed at elevating the  trade and economic interests of developing countries and the least developed countries—those underprivileged under international trade— why is there still support for WTO and the multilateral trading system (MTS)?

In retrospect, it has to be said that such support is an affirmation of the benefits that WTO and MTS have generated through international trade for the region, despite their shortcomings. And these benefits can potentially increase. Furthermore, the support emanates from the realisation that all other options apart from the existing MTS will render the global trading community worse off.

WTO and the MTS it champions is rules-based. Obviously, some rules are negative and some positive. Their respective applications also create mixed results for the global trading community. Under GATT 1947, incorporated into the WTO Agreement, PICs have been able to negotiate their Free Trade Agreements (FTAs), like PICTA and PACER Plus - the latter with Australia and New Zealand, despite the fact that the negotiating model offered by the WTO is ‘broken’ – according to Professor Jane Kelsey of Auckland University.  

PICs continue to use the model since it produces a rules-based regional trading system that is better than a trading framework with no, vague or draconian rules. Furthermore, they continue to place their hopes on the model believing that the same model can result in better regional FTAs – better concessions, more creative special and differential treatments, derogation from general provisions and waivers - if there is genuine political solidarity and commitment to configure/reconfigure Pacific regionalism to something that we can all be proud of.

Furthermore, the immense benefits that PICs/Pacific African Caribbean and Pacific States (PACPs) have accrued from their membership of the ACP-EU Agreements can also be attributed to the WTO Agreement. This is so since the ACP-EU Agreement has been notified under the WTO, and its preferential arrangements are granted exceptionality under the Organization. Over the years, such exceptionality has been extended. It may also have been preserved for posterity under the application of a ‘grandfather clause.’

Fiji, for example, has benefitted immensely from the Sugar Protocol - an arrangement that offers supply quotas and preferential pricing. The Sugar Protocol, like all the other protocols offered by the EU, are formulated and implemented under the EU’s Common Agricultural Policy (CAP).

The CAP offers other preferential arrangements that have benefitted other PACPs. Fiji and others have benefitted also from EU’s Generalized System of Preferences (GSP) and may even so  from its more liberal version of GSP+. PACPS that are least developed countries (LDCs) and that export to the EU benefit under another preferential arrangement known as ‘Everything But Arms.’ The term denotes exactly what it can do and what LDCs can export preferentially to the EU.

The Americans have their own version as well. Under the African Growth and Opportunity Act (AGOA), 2000, the US offers enhanced market access to qualifying Sub-Saharan African countries. This has been extended to 2025. Fiji, in the early 2000s, was contemplating negotiating a similar arrangement that could be extended to other PICs.

As stated above, these benefits can potentially increase. Developing countries and LDCs still hold on to the hope that developed country members of the WTO will find sufficient unity and determination in their ranks to progress the provisions of the Doha Development Agenda thus creating new levels in LDCs’ respective integration into the global economy. Under that framework, it is hoped, that new creative concepts to improve the lot of developing countries and the LDCs will become more palatable.

Two concepts in this respect have entered the lexicon of the WTO recently. Emily Jones wrote in 2013: “The Right to Trade: A Mechanism for Revitalizing Pro-Development WTO Negotiations?” She later introduced in the same article: ‘right to development’. She added: “Having raised deep concerns about the failure of ‘aid for trade’ (Joseph) Stiglitz and (Andrew) Charlton make ambitious proposals for rebalancing the global trading system. The first pillar of their proposal is to enshrine and enforce a ‘right to trade’ and a ‘right to development’ through the WTO’s dispute settlement mechanism (DSM).”  

For the PIC members of the WTO, that will be most welcome. Wilfred Golman of the University of the South Pacific wrote in 2017: “The WTO DSM and the South Pacific Island Nations’ (SPIN) Participation.” Golman concluded from his research that SPIN countries were notably absent from the WTO’s DSM. He discussed a number of reasons why this was so, including: the continuing debate as to whether the DSM accommodated the interests of the developing countries or LDCs; the issue of fairness in DSM’s decisions (that the process favours richer countries as they were able to argue more effectively and settle their cases), and that the poorer countries were disadvantaged by constraints on their ability to pursue any trade infringements at the WTO level.

As tools for globalisation, there is a sense of inevitability around supporting the WTO and the MTS, regardless of their respective downsides.  This essentially evolves from the understanding that global traders, large or small, lack a better trading framework option than that presented by the existing MTS.  With the benefit of history, it can be concluded that any setback to the MTS and a reversion to excessive and uncontrolled trade protectionism will inevitably return the global trading system to one of ‘Beggar Thy Neighbour’ situation, or much worse. When that happens, international traders will essentially be engaged in a kind of zero-sum game. The end result is likely to be unprecedented global inequality.

The author is a former Fijian Ambassador and Foreign Minister and runs his own consultancy company in Suva, Fiji.

 

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