Ethiopia is about to enter into the most crucial phase of trade talks, having reached the stage of submission for its offers in services, which its negotiators declared had been finalised last week.
It is one of the two critical documents that it has to submit to the World Trade Organisation (WTO), in order to start negotiations on market access. Offers in services comprise of negotiations on issues such as telecoms and finance. These are areas of the economy that the Ethiopian authorities are known to be reluctant to open up – to domestic and international competition, respectively.
The country’s four trade negotiators, led by Ethiopia’s Ambassador to Switzerland, Minelik Alemu, were in Bali, Indonesia, last week, attending the ninth ministerial summit. Here, ministers from close to 200 countries have gathered.
Traumatised by failures to reach an agreement over the past 12 years, trade negotiators have whittled down issues of contention to just three: trade facilitation, food security and support to members from the least developed countries. Yet, even such mellowed issues were not free from sharp disagreements. India’s trade negotiators had held the WTO captive, denying what was required to pass rules – an explicit consensus from all of its members.
“The WTO is a good platform for trade talks,” said the EU’s Trade Commissioner, Karel de Gucht, speaking to journalists during the middle of ‘behind closed doors’ negotiations in Bali. “That is what is at stake.”
His voice of apprehension was echoed by his American counterpart.
“If we can’t get deals in this round, it will be hard to get into agreements on the more sophisticated issues,” Michael Froman, a United States Trade Representative, told journalists.
For over a decade, the legitimacy of the WTO has gone through a process of delegitimisation. In the eyes of Keith Rockwell, its chief of international relations, however, the organisation’s dispute settlement process and trade laws review mechanism remain solid and relevant.
Since a summit in Doha, Qatar, in 2001, where trade negotiators agreed to make deals considerate of agriculture and the development aspirations of poor countries, they have failed to strike a deal during five rounds, from Cancun to Geneva. Some spied a solution in avoiding contentious issues and focusing rather on the soft ones, described by experts as “low-hanging fruits”. However, ambassadors designated to the WTO in Geneva, its headquarters, were not able to come to terms with each other on the three issues, thus leaving the tough talks to their respective ministers.
One such minister is India’s Anand Sharma, who resolved to suggest that he would rather see, “no agreement, than to have a bad agreement”.
His country passed a food security act last year, pledging to offer welfare to 800 million of its poor by stockpiling food reserves in the same way Ethiopia does with its national food reserve, according to an Ethiopian trade negotiator. The problem with India, as a full member, is that the WTO has rules that punish countries which subsidise food aid at more than 10pc of total national production, for it is deemed as “trade distortion”.
India is not alone in its protest of this as unfair and damaging to the basic right of food for its population. The Social Movement for an Alternative Asia (SMAA) – one of the most vocal NGOs active against the WTO – described the whole negotiation as a “sham”.
“Why should humanity beg the WTO for a peace clause to guarantee the right to food?” The organisation questioned at the end of the summit on Friday night, while ministers were fine-tuning the last version of a text they were to agree upon. “The whole negation of the Bali Package is nonsense.”
India was asking for a “peace clause” to be granted, as an indefinite extension of the penalty until a permanent agreement had been reached. It also called for the review of prices used to determine the total cost of production, which are based on statistics from the late 1980s.
Although EU delegates said food security is not their issue, they joined the US and others in rejecting India’s demand and offered to limit the “peace clause” to only four years.
“They fear that leaving it open until a permanent solution is sought is a recipe for no agreement indefinitely,” a trade expert working for the WTO told Fortune anonymously.
Many delegates expressed their fears that another collapse of talks in Bali would mean that member countries resort to bilateral and regional trade deals. This could undermine the relevance of the multilateral – all inclusive and explicitly agreed – platform.
Despite such resistance from India, most delegates, – and Roberto Azevedo, the new director general of the WTO – declared their optimism that a deal in Bali was “within reach”.
“We are too close to success to accept failure,” said Azevedo, opening the summit on Tuesday, December 4, 2013. “It is all or nothing now.”
As the meeting drew in on its closing stages, India got what its negotiators held their position for. It was a price US and Pakistan paid to salvage the entire deal from collapsing, allowing them to be exempted from penalty over the coming four years for subsidising their poor farmers. Should there be no permanent agreement after four years, it was agreed that the exemption will continue for another term.
Despite India’s compromise, an unexpected rejection came in the eleventh hour from Cuba during a roll call. This was due to its delegates’ unhappiness on the way the process was conducted and because a mention of lifting embargo was taken out from the text, according to Rockwell.
“Disappointment” was the word used by Rockwell, during the early hours of the morning on Saturday, after negotiators from Cuba, supported by Venezuelan, Nicaraguan and Bolivian delegates, rejected the proposed text trade experts like to call “the Bali Package”, despite a consensus by the remaining 155 countries.
It is a package comprising of 15 documents, which consumed more than three hours of the ministers’ time to read, before midnight on Friday, and worked them up and “beyond the call of duty”, according to Rockwell. Delegates from the developed economies, the ASEAN, Arab and African groups had all accepted the package, however, to the delight of ministers from the least developed countries, for it would provide duty-free and quota-free access “for all products originating from LDCs”.
It is one of the four items agreed during what is known as the Doha Round. Most crucial to developing countries is the agreement reached to make preferential rules of origin “easier for them to identify products as their own and qualify for preferential treatment in importing countries”.
The objection from Cuba “is not a major trade issue between countries,” said a person knowledgeable of the process. “It is rather a political issue between the US and Cuba.”
With hardly anyone knowing what was to come, trade negotiators had continued their talk behind closed doors to resolve the objections raised in the final stretch of the summit.
Their efforts eventually paid off, with Cuba dropping its threat to veto the package, and a historic deal was reached, to conclude the marathon negotiation session.
While an agreement was reached, the other issues on trade facilitation – an agreement that would compell member countries to open their borders to the easy and fast transit of imported goods, and support for the least developed countries, like Ethiopia – were overshadowed by the issue of food security throughout the whole summit.
“There is nothing in the Bali Package for the people,” decried a statement issued by Pablo Solon, executive director of Focus on the Global South. “It delivers a legally binding agreement on trade facilitation that will open more borders for transnational corporations, and empty promises to the least developed countries.”
But, the EU’s Trade Commissioner argued that the promises from developed economies are not empty. He disclosed, in Bali, 400 million euros of support for five years to go to poor countries that will incur costs while facilitating their customs procedures and opening up their borders for imports.
“Much of these issues are about capacity,” said a trade expert working for the WTO. “Countries, like Ethiopia, with an observer position have the right to seek technical assistance from the WTO and other supporting facilities.”
One such support to poor countries comes through the Enhanced Integrated Framework (EIF) programme, with a fund to finance the capacity of their negotiators. It is chaired by Ethiopia’s Ambassador in Geneva, who addressed the WTO summit last week, on behalf of Mekonnen Manyazewal, chief of the National Planning Commission under the rank of a minister, and Ethiopia’s chief negotiator.
He failed to appear at the summit at the last minute, despite airline and hotel bookings, for reasons that remain undisclosed. In his absence, Minelik announced his country’s readiness to submit its offers on services to start the fourth round of talks, in its bid to join the organisation.
Joining the WTO is a long and arduous process for many countries. There are many, such as Sudan, Algeria and Bhutan, who started the accession process long before Ethiopia, but remain observers. Yemen, on the other hand, joined WTO this week as its 160th member, after 13 years of negotiations. It took China 15 years before it joined in 2001.
With some political reluctance, the Ethiopian government submitted its application for membership in 2003, under Girma Birru, Ethiopia’s current ambassador to the United State and a chief trade negotiator then. It begun its accession process two years later, with the government submitting a “memorandum on foreign trade regime” – a series of voluminous documents listing all of Ethiopia’s laws dealing with trade. However, the toughest phase began in February 2012, after it submitted initial offers on goods, listing all tariff rates for imported goods.
Ethiopia’s average weighted tariff rate of 17pc has not caused any distress to its negotiators, as the WTO rules allow countries to issue up to a 35pc tariff on agricultural imports and 50pc on industrial goods.
“That will no doubt give us a lot of policy room for manoeuvring,” said an Ethiopian trade negotiator, speaking anonymously.
Based on these offers, member countries, through a working group chaired by the Dutch citizen, Steffen Smidt, can enter into cutthroat negotiations with Ethiopia bilaterally and as a whole, according to the trade expert. So far, it is trade negotiators from Canada, the European Union and the United States who have carried out readings of the offers and returned with questionnaires that totalled into the hundreds.
“We’re very supportive of Ethiopia’s accession bid,” Froman told Fortune during a press briefing in Bali.
He met Prime Minister Hailemariam Desalegn and Trade Minister Kebede Chane in Addis Abeba during the summer, where he pledged his country’s support.
“It’s one we follow very closely,” he told Fortune.
However, reforms in telecoms and the financial industry are “very vital to the integration” of Ethiopia to the multilateral trade forum, according to Froman.
But, experts in international trade rules see the benefits that come from reforming domestic laws in order to become compatible with the WTO rules of transparency and predictability as being far more important to the national economy than simply joining it.
One of the texts agreed by member countries of the WTO last week, under trade facilitation, requires each country to upload online “a description of its importation, exportation and transit procedures, including appeal procedures that inform governments, traders and other interested parties of the practical steps needed to import and export, and for transit; the forms and documents required for importation into, exportation from, or transit through the territory of that Member and contact information on enquiry points.”
Accepting membership to the WTO has far more of an implication in rewriting all national laws to be complaint to WTO rules and translating them all into one of the international working languages. This is as well as making it available to be viewed by anyone interested, according to the trade expert at the WTO.
Indeed, Ethiopia’s Council of Ministers is currently reviewing the nation’s customs laws and is soon to refer it to Parliament for approval. There have been several amendments designed to comply the country with WTO rules, according to a senior trade official.
However, it is the combined offers on goods, services and the protection of intellectual property rights that will help the working group produce a draft report to be submitted to the Council of the WTO, comprised of ambassadors of member countries designated to it, according to the trade expert in the WTO.
“Ethiopia is firmly convinced that trade is an engine of growth,” Minelik told the summit. “Completing the accession to the WTO is consistent to Ethiopia’s development plans.”
He was short of disclosing when the offer on services will be sent to the working group, though.
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