A $1 Trillion Trade Deal

Drezner calls the deal signed in Bali over the weekend a “game changer” for world trade:

Bali helps to demonstrate the surprising forward momentum on trade liberalization.  The deal in Bali comes on the same week that Congress nears approving trade promotion authority — or “fast-track’ for President Obama.  If that passes, then the United States will be able to negotiate the Transatlantic Trade and Investment Partnership (TTIP) with Europe and the Trans-Pacific Partnership with a passel of Asia/Pacific economies (indeed, U.S. trade negotiators went from Bali to Singapore to continue talks on that deal).  Fast track will signal to U.S. negotiating partners that Washington is committed to finishing a deal.  Combine these negotiations with ongoing services negotiations, as well as a bilateral investment treaty with China, and you have the most ambitious trade agenda for the United States since the first year of the Clinton administration.

Robert Read is less excited:

Bali represents progress. It might not be particularly significant in the context of the original ambition for these talks, but it is still a major step forward for multilateralism. The package is likely to have very limited benefits for many countries but, more importantly, it signals a renewed commitment by WTO member countries to working together at a time of profound global recession.

Catherine Traywick unpacks the deal:

The deal is expected to increase global trade income by $1 trillion and add 20 million jobs, most of which would be in developing countries.

But critics were quick to highlight the deal’s shortcomings. Jeronim Capaldo, a senior researcher at Tufts’s Global Development and Environment Institute, argued in a policy paper this month that estimates of the deal’s potential benefits are overstated and “depend on too many unjustifiable assumptions.” While a trade facilitation agreement may create more jobs in exporting industries, he contends, it would also likely lead to higher unemployment in non-export industries. He also argues that income and savings projections do not take into account the high costs of implementing trade facilitation, which would naturally offset gains for poorer countries. The latter point is one that India brought up prior to last week’s trade talks, when its Confederation of Indian Industry called for the WTO to fund implementation costs for developing countries.

Simon Lester is lukewarm on the agreement:

It’s important to understand … that this agreement is not an agreement under which all countries will lower tariffs or barriers to trade in services, which is the traditional kind of trade agreement.  My colleague Dan Ikenson wrote about trade facilitation here. Reading through a draft of the agreement, it seems to cover two things.  First, it tries to achieve “good governance” in customs procedures, such as through requiring an appeals process for customs decisions.  And second, it requires governments to speed up the import process where possible, for example by letting frequent traders use expedited procedures. These are all good things, but it is not the same as using trade agreements to rein in protectionism.

The Economist weighs in:

[A]griculture proved the sorest subject, as ever. Disagreement spanned several issues, the most contentious of which concerned agriculture subsidies. India, its government facing a general election next year, spearheaded an effort to prevent emerging markets from facing challenges at the WTO over subsidies granted to farmers under the aegis of “food security” measures. In the months leading up to the Bali meeting India wrung substantial concessions from rich-world economies, including a four-year “peace clause” that would have granted developing countries protections from such challenges. Not satisfied with that, India later threatened to derail talks unless the issue was reopened. India ultimately won an indefinite waiver, good until a permanent solution can be reached.

Several other disputes received similar papering over. Indeed, while trade facilitation counts as a meaningful achievement, the deal is unlikely to convince sceptics that the multilateral process can produce ambitious reforms—not while those least committed to progress, like India in this case, can threaten to sink an entire agreement unless their demands are met.