International Trade and Finance Law: The Bali Agreement - Essay Example

International Trade and Finance Law Number Department Introduction After over a decade of trade negotiations, the high-level conference in Bali organized by the World Trade Organisation (WTO) eventually reached an international trade Agreement. The WTO’s 160 member states adopted the Bali Agreement based on three pillars: Trade Facilitation, Least Developed Countries development and Agricultural issues. The Agreement means a lot to developing economies on issues ranging from food security, to market prices for agricultural produce, to economic growth boosted by liberal trade within and among the countries. The endorsement of the Bali Agreement in 2013 paved the way for member states to begin concentrating their energies on handling the implications. This paper is a critical analysis of the Bali Agreement. The Agreement According to Baldwin, Kawai and Wignaraja (2014), the Bali Agreement forged a consensus on the following issues: a development program for Least Development Countries (LDCs), more Agricultural production and Trade facilitation. First, the LDC program was the least contentious of the three areas of negotiation, principally because the letter and spirit of these programs are best attempts to improve the economic status of the underdeveloped world rather than prompting the member states to agree to binding commitments. King (2013) noted that WTO members restated their determination to eliminating unfavourable trade tariffs, quota freedom and better market access for the LDCs. However, the real developmental benefits continue to be questionable. A limited export opportunity for LDCs implies anything less than absolute coverage will be immaterial in practice. Regardless, tariffs are declining rapidly, so the benefits of Duty-free and quota-free (DFQF) regimes are following the same trend. In Amoco Oil Company v The United States, United States Court of Appeals [1984] 749 F.2d 1576, for instance, the court used the platform provided by the case to eliminate trade barriers in its decision that tax duties on imports should not be calculated based on the content of the shipments (Baldwin, Kawai, & Wignaraja, 2014). As such, improvements of regulations in countries of origin for products and non-duty hindrances would have generated better outcomes to LDCs, considering that these are the hindrances to free market access. After one-decade-and a half of service waiver occasioned by WTO members providing preferential market opportunities on service business to the underdeveloped world without having to affect the position of their developed partners was passed in 2011 by WTO Ministerial Conference held in Geneva (King, 2013). As such, Bali has resulted in setting the stage for a roll-out process of more liberal laws. In general, however, judging by the modest developments in the LDC program since 2011, the future of this program is grim. Clémençon (2008) noted that despite the pitfalls that accompanied the Doha Round, LDC issues continued to be an imperative pillar of the deliberations and the eventual Agreement as they steadily support a freer environment with opportunities to enable them bolster their role in global industry. Although LDCs only represent one per cent of the total worldwide trade, the internal framework is important for their development, considering that business industry amounts to a massive 62 per cent of the LDCs’ total gross domestic product (GDP) (Young, 2013). Roy and Lee (2014) noted that nurturing trade and investment programs has long been perceived as an imperative trigger of economic growth, hence the potential for better outcomes for LDCs in the future. The global economic downturn that witnessed 9.5 million individuals degenerate into abject poverty amid substantial declines in revenue by between one-quarter to one-third in LDCs, bolstered the need for special treatment of the underdeveloped world economies in terms of exports. The WTO through the Bali Agreement believed, however, that by endorsing the Treaty, LDC development would be boosted, and thus have better per capita economic development in relation to other growing economies. Consumers in advanced economies are also negatively affected by limited access of LDCs to developed markets (Mace, 2008). Given the extra costs that underdeveloped countries incur in delivering their exports to these markets, these expenditures are passed over to consumers in developed countries who eventually have to buy the products at higher prices. As such, whereas the LDC issues resolved through the Agreement may bolster opportunities for companies in LDCs, the outcomes remain questionable. Trade Facilitation Deliberations on Trade Facilitation (TF) and how it reduces the trade expenditure involve making enforceable commitments in favourable tax procedures and laws (Nedumpara, 2014). Enhancements of TF are simple, but there is need to differentiate between modifications of and commitments to this package. Commitments made under the auspices of the WTO are enforceable and subject to remedy by judicial processes in case of non-compliance. Meeting commitments to improvements to trade will need massive investments in terms of capital, which many investors are wary about by virtue of unpredictable market forces (King, 2013). However, developing economies, and in particular those that are found at the bottom of economic scales, will require money and technological advancement in order to effectively support TF. In light of this, Section II of the Bali Agreement is particularly important as it provides assurance that emerging economies and LDCs will receive constant support to create the infrastructure for enforcement of the agreement; but just how follow-up will be conducted in order to ensure that every party performs as per their promise, remains challenging. The endorsement of member obligations on Aid for Trade (AfT) is also a positive measure whose welcoming is highly expected. Following its initial evaluation in at the July 2013 Global AfT in Geneva, many members were keen on pressing for its reaffirmation at the very least. The newly developed AfT schedule of work under the auspices of the global trade regulator is to be influenced by the global economy beyond the 2015. Global trade beyond the 2015 development agenda is likely to witness a significant involvement of technology and pecuniary investments in AfT than is being witnessed in the current world. The Agreement has also provided a chance for the prospects of AfT to be more rationalized and more thorough in terms of handling the high expenditures that come with LDCs’ trade (Wilkinson, Hannah, & Scott, 2014). In spite of the economic benefits of clear and swift risk assessment processes which accelerate the import and export of important commodities alongside unhindered movement of goods, promoting the welfare of consumers is arguably sacrificed. Roy and Lee (2014) suggested that consumers are the most affected lot when costs accruing from strict trade regulations and other business operations come to bear. In addition, Mace (2008) noted that trade facilitation also triggers a direct consequence on the welfare of consumers because it influences the accessibility, pricing and access to goods. Consumer interest is of special importance when it comes to handling humanitarian commodities such as select medical supplies and food. As Mace (2008) said, with the effective enforcement of Articles VIII and IX in the TF Agreement, regulating the handling of fragile goods and inventory management, the TF Agreement will trigger more consumer access to goods and services. The implementation of these rules will therefore be of great importance in advancing the consumer interests. Nonetheless, protecting consumers under the TF arrangement would mean sacrificing the business interests of producers and or limiting government revenues generated from exports and imports. Besides, TF has the potential to create disparities between consumers in developed countries and those in developing economies as the former group will likely enjoy the windfall triggered by relaxed rules in an environment with developed infrastructure (Wilkinson, Hannah, & Scott, 2014). By contrast, LDC consumers will be negatively affected by inferior supply chains and even claim violations of WTO regulations where there is none. In a 2008 dispute between United States and Mexico over the former’s requirement to attach a “dolphin safe” sticker on tuna products before allowing the product in the US market, WTO through its dispute resolution mechanisms intervened to uphold liberal trade between the two parties. Specifically, the body established that a US’s requirement of a label and a report showing how and where the tuna were caught applied across board, and thus it did not contravene the General Agreement on Tariffs and Trade (GATT) 1994 Articles I: 1 and III: 4 1994 or the Technical Barriers to Trade (TBT) Agreement under Article 2.1, 2.2 and 2.4 (Hu, & Vanhullebusch, 2014). Agriculture Deliberations on agricultural products, particularly on food supply, are of great importance to the Bali Agreement. Two schools of thoughts came up regarding the standard price for use in valuing the amount of stocks of food allowable for holding by countries. India supported the status quo of the prices (Nedumpara, 2014). The proposal prompted a repeal of the Agriculture Treaty endorsed at the Uruguay Round. Other member states plainly rejected the position. Alternatively, India suggested the endorsement of provisional measures pending the creation of a more lasting solution. At that point, the United States came up with an interim clause that would have allowed the status quo to remain for duration of four years (van den Bossche, 2013). Some members led by India refused the proposal. In the end, an agreement was hammered out, which was to have a provisional mechanism until the members reach a lasting solution. Nonetheless, consumers around the world have a broad range of interests in issues touching on agricultural trade, particularly those which impact on the access to and pricing of foodstuffs (Wilkinson, Hannah, & Scott, 2014). The enforcement of government subsidies, on the other hand, interrupts global trade in and production of agricultural products. The end result is that farmers in least developed economies feel the crunch. These subsidies spawn inefficiencies and pass heavy costs in tax burden to consumers in the countries relying on them. According to Young (2013), subsidies are known to have negative outcomes on less-privileged exporters of agricultural products by limiting their income from the exports. While such famers may have general welfare benefits in importing economies with lesser self-sufficiency on food, agricultural liberalisation ought to be implemented by prioritizing consumer interests. In Canada v European Union (2006), Canada reached a mutual agreement with the European concerning the former’s attempt to waive taxes on alcoholic beverages manufactured by locally-produced crops. Under the agreement, Canada’s trading partners are now enjoying part of the tax reductions as provided for under GATT Article III: 2 and 4 limiting preferential treatment of local companies, and Articles 3.1(b), banning domestic content subsidies (Nedumpara, 2014). Generally, WTO seeks to override unfair national laws by imposing a uniform regulatory environment where countries enjoy equal trade opportunities. Conclusion In general, the Agreement in Bali has effectively helped member parties to rejuvenate the Doha Development Round on the previously contentious issues of FT, Agriculture and the economic development package for LDCs. Although the symbolic nature of the Agreement was important because it brought together traditional market foes, its practical solutions to the wider agenda of the Doha Round of talks is more important as it seeks to liberalize global trade even more. Nonetheless, a lot still needs to be done to remove trade barriers and guarantee unhindered distribution of commodities at fair prices. Various protective or stimulus regulations implemented by nation-states to bolster their active participation on the global market are the primary hindrances to liberalized trade, but with Bali, member states are expected to shift their focus to the wider economic opportunities provided by the global economy. References Baldwin, R., Kawai, M., & Wignaraja, G., 2014. A World Trade Organization for the 21st Century: The Asian Perspective. London: Edward Elgar Publishing. Clémençon, R., 2008. The Bali Road Map A First Step on the Difficult Journey to a Post-Kyoto Protocol Agreement. Journal of Environment & Development, 17(1), pp.70-94. Hu, J., & Vanhullebusch, M., 2014. Regional Cooperation and Free Trade Agreements in Asia. Delhi: Martinus Nijhoff Publishers. King, M., 2013. Major Advances for Global Trade in WTO Trade Facilitation Agreement. JoC Online, p.1. Mace, M.J., 2008. The Bali Road Map: Can it deliver an Equitable Post-2012 Climate Agreement for Small Island States? Review of European Community & International Environmental Law, 17(2), pp.183-195. Nedumpara, J.J., 2014. Indias Food Security Concerns and the WTO Bali Ministerial Decision. Air & Space Law, 39(2), pp.177-181. Roy, R., & Lee, C. E., 2014. India, U.S. Reach Agreement on Food Stockpiling, Clearing Way for WTO Deal. Wall Street Journal, p.1. van den Bossche, P., 2013. The Law and Policy of the World Trade Organisation: Text, Cases and Materials. Cambridge: Cambridge University Press. Wilkinson, R., Hannah, E., & Scott, J.2014. The WTO in Bali: what mc 9 means for the Doha Development Agenda and why it matters. Third World Quarterly, 35(6), pp.1032-1050. Young, I., 2013. Industry welcomes WTO deal, urges tariff reductions. Chemical Week, 175(31), p.17. Read More