Border line

WTO's small victory saves it from irrelevance

The World Trade Organisation has saved itself from irrelevance. The Geneva-based talking shop limped into negotiations in Bali on life support, and emerged in a still-serious but stable condition. The latest deal to simplify customs rules lacks the drama of previous rounds. But after more than a decade of fruitless discussion, it suggests there is still a global appetite for lowering barriers to trade.

Just getting its 159 members to sign up should restore some confidence in the WTO. That will boost its credibility as a forum for resolving international trade disputes. But the Bali package is more than just a face-saving deal. Easing the passage of goods through borders is a boon to rich and poor countries alike. Customs account for between 2 to 15 per cent of the cost of products, according to the OECD. Simplifying rules could boost the world's annual GDP by close to $1 trillion, according to the Peterson Institute for International Economics, or about 1.4 per cent of last year's output.
 
Yet the ability of lone countries to hold the WTO hostage is problematic. Indian objections removed part of the deal that would have eliminated some farm subsidies. While subsidies have fallen in the European Union and the United States, they are on the rise in emerging economies.

The WTO's supporters point to the lack of new barriers erected after the 2008 financial crisis, when protectionist instincts were greatest. However, more subtle forms of protectionism, such as state bailouts, government procurement rules and consumer protection regulations, can have the same impact. The next challenge will be to harmonise regulations - like restrictions on genetically modified food - that keep producers from one country from reaching consumers in another. That is a more complex and more political task than lowering tariffs.

Moreover, the WTO is no longer the only game in town. In the last few years, the United States, EU, China and other Asian nations have launched a series of overlapping and at times competing discussions outside the WTO's multilateral framework. Though the Bali agreement has given the organisation a reason to carry on, it still faces an uphill struggle to show it can be relevant in future negotiations.