South Africans will remember the second and last business week of 2015 for a long time to come as a week characterized by unprecedented drama in South Africa`s governance structures. This follows the sacking of Finance Minister Nhlanhla Nene and the brief appointment of David van Rooyen. As is already common cause, the firing of Minister Nene led to a shock in the markets which worsened the rand`s already externally induced market volatility. Due to a market outcry President Zuma had to revise his decision and appointed seasoned Finance Minister Pravin Gordhan. South African media was therefore awash with President Zuma`s decisions vis a vis his Cabinet during the second week of December. The media`s attention shifted focus away from one rather important event in not only South Africa`s biennial calendar but that of the world. This was the World Trade Organization’s Ministerial Conference in Nairobi, Kenya, which was being held for the first time on African soil. Despite the event being overshadowed by events at home, South Africa sent a strong delegation led by Minister Davies.
The WTO Ministerial brings together Ministers of Trade from more than a hundred and sixty countries. The 2015 WTO Ministerial had the unenviable task of concluding the Doha Round or pulling the plug on it. When the Ministerial finally ended the Ministers had not overtly pulled the plug on the trade negotiation round which had been underway for a solid thirteen years. However, a conclusion can be made that the conference has pulled the plug by omission. With the Doha Round dead, international trade policy makers now have to pave the way for a post Doha WTO.
It is important to note that the death of Doha has nothing to do with any particular country. To the contrary, the still birth of the round is reflective of the changed global geopolitical architecture in which there is no pure hegemony. The Doha Round was conceived when the US was totally and willingly in charge of global economic affairs. However, since then, the world has entered into a vortex with power shifting from the US towards China. The ambivalence resulting from being in transition has led to the delay and consequent death of the Doha Development Agenda. Losers of this round are definitely developing countries that had hoped to extract development outcomes from the negotiations. However, the whole idea of development within an international trade realm remains contested.
Dearth of Global Leadership
Different potential scenarios remain for the future if the multilateral trading system is to remain viable. These range from a business as usual approach in which traditionally key WTO members such as Canada, the European Union, Japan and the United States pursue the alternative paths of Mega Regionals that they are already undertaking. Another possibility is for the United States and possibly China to take a leadership role and exercise that leadership at the WTO. This could be done in two ways. Firstly, they could do so by rallying their respective constituencies to return the primacy of the WTO on multilateral trade issues. Secondly, considering that most of the key players in the multilateral trading system had already started negotiating mega regionals due to frustration with the lack of progress in the Doha Round, another way of keeping the multilateral trading system relevant could be by ensuring that those mega agreements are brought back to the WTO so that they can become a package of future trade rules.
Single Undertaking and Consensus Rulemaking
Thirdly and maybe importantly is to implement a strategy that is informed by the lessons drawn from the failure of the Doha Development Agenda. One of the main lessons to be drawn is that the single undertaking rule (‘nothing being agreed until everything is agreed) is unviable in a world which is in a vortex, moving from one hegemony to another. This rule worked quite well when the WTO membership was composed of fewer member states which had a generally similar economic value system. Intertwined with the single undertaking rule is the consensus principle. The Doha Development Agenda has exposed serious structural flaws of the consensus rule. However, the failure of these rules should offer new opportunities in strengthening the multilateral trading system.
The way forward would be for the WTO membership probably led by the US and China to make the WTO regain its position as the epicenter for multilateral trade. This could be done by bringing all the mega regionals to the WTO as plurilaterals. As this approach might face resistance, member states could find a way of using the WTO dispute settlement understanding. The DSU has proven to be one of the enduring pockets of excellence in the multilateral trading system. Member states can therefore link their mega regionals such as the Trans-Atlantic Partnership and the Trans Pacific Partnership to the WTO dispute settlement mechanism. Such a linkage would therefore assist in regulatory harmonization. It will avoid or remedy the fragmentary effect that mega regionals have had on the multilateral trading system.
Furthermore, WTO member states should consider unpacking the Doha Development Round issues and negotiate them as plurilaterals. Such a sectoral approach would enable members to focus on issues that are most relevant to them. Already there are some success stories in this regard such as the International Technology Agreement. Member states will therefore negotiate a plurilateral with a view that those that want to join can do so at a later stage. The plurilateral approach would go a long way in moving forward the new issues such as investment within the WTO.
African countries together with other developing countries have been the main demanders in the Doha Development Agenda. These countries had hoped that they will benefit more from the conclusion of this particular trade round. They had hoped this would happen through getting more market access concessions especially in agriculture. However, due to developing countries having been emboldened by changing geopolitical shifts and being more familiar with the WTO, the round took too long. What also emerged from the Nairobi Ministerial was that the division among member states is no longer based on the traditional North South divide. Instead, countries’ interests have become complex. For instance, the perennially thorny issue of agricultural subsidies and domestic support are no longer confined to the US and the EU; instead China, Brazil and India have become some of the biggest culprits. This means that there is a need for reconfiguration within developing countries to reflect and deal with the new reality. Countries such as South Africa need to change their approach to the WTO by beginning to embrace and push for plurilaterals that have a bearing on developing countries.
The overall picture is that the multilateral trading system will survive post Nairobi with the Doha Round having been presumed dead. It is up to the US and China to exercise leadership by rejuvenating one of the most important institutions of the 20th century. Maybe it is time to reflect on the connection between trade and global security. Countries should not forget that the WTO in many ways helps to maintain peace and security in the world as trade issues are dealt with in a less politicized setting.