India plans to adopt a balanced approach at the upcoming World Trade Organisation (WTO) ministerial scheduled to be held in Nairobi, Kenya on December 15-18 without taking any hard stance that can come in the way of any agreement, after being blamed for blocking a deal last year. The roles and responsibilities of WTO should not be lost sight of. WTO is not a mere agreement but an institution where 163 members take part in doing right things that are beneficial to the global trade flows and thus the global economy. According to WTO’s World Trade Report 2015, facilitating cross-border trade by simplifying and rationalising trade-related procedures could bring down the time to import by one and a half days, and the time to export by two days. Governance reforms can save 37 per cent time spent on importing while automation can cut down 30 per cent time. The average trade cost reduction for all goods could be 14.3 per cent, with the decrease in the case of manufactured goods being 18 per cent and in agricultural goods 10.4 per cent. Of course, all this will come only if the WTO’s Trade Facilitation Agreement (TFA) is implemented in full by the member-countries. The TFA is all about simplifying and harmonising trade-related procedures by individual countries. The report holds out that a number of benefits are set to flow from the full implementation of the TFA. Global exports could increase by between $750 billion and $1.0 trillion, according to one econometric model. Another model pitches the gains even higher – between $1.1 trillion and $3.6 trillion. It claims the developing countries and the least developed countries (LDCs) will benefit more. If the developing countries implement the TFA, their exports are likely to increase by as much as $1.9 trillion, accounting for 53 per cent of global trade expansion. And they will add 0.9 per cent annually to economic growth, against 0.25 per cent in the case of developed countries. The report also promises that the TFA could help the developing countries enter new markets and diversify their export markets — new products exported could increase by nearly 20 per cent, get the small and medium enterprises (SMEs) integrated with global markets and pull in more foreign direct investment (FDI). On this score, however, the report speaks of implementation costs as well. It does, however, point out that the benefits far outweigh the costs and that some of the specific trade facilitation measures may be less costly than broader initiatives like customs modernisation and upgrading transport infrastructure. Easier import and export procedures will help domestic manufacturers and traders — cumbersome procedures are affecting the competitiveness of the developing economies’ exports. On the other hand, this trade facilitation agenda could benefit the developed countries more inasmuch as it is trade-related obstacles that hamper their access to developing country markets. It has been rightly pointed out that India and other developing countries may have a point when they want to use the TFA as a bargaining chip to get their own demands met. The Geneva-based WTO itself has lowered its latest estimate for world trade growth by 0.5 per cent and 0.1 per cent for 2015 and 2016 respectively, thus clouding the outlook for the world economy in 2015 and beyond. Accordingly, world merchandise trade volume is expected to rise 2.8 per cent in 2015, down from the previous estimate of 3.3 per cent, and to 3.9 per cent in 2016, down slightly from the last estimate of 4 per cent. Gloomy forecast. Reuters Especially for Asia, the WTO lowered its estimate for exports from 5.0 per cent in April, 2015 to now 3.1 per cent (attributed mostly to the slowdown in the Chinese economy, as intra-regional trade as a consequence has fallen). Side by side, the downward revision for Asia on the import side was even stronger— from 5.1 per cent to 2.6 per cent — partly due to lower Chinese imports. The trade volume for exports in Asia in 2016 is projected to go up to 5.4 per cent and for imports to 4.3 per cent. A number of factors that weighed on the global economy in the first half of 2015 remain still alive — falling import demand in China, Brazil and some other emerging economies; falling prices for oil and other primary commodities plus significant exchange rate fluctuations. The financial instability arising out of interest rate rises in the United States and costs associated with the migration crisis in Europe are also grim realities that have been leaving effects on the global economy. Though the latest assessments identify that world trade growth would pick up to 3.9 per cent from 2.8 per cent in 2016, yet the same would remain below the average rate between 1995 and 2015 (5 per cent). For the fourth consecutive year the annual trade growth registered a fall below 3.0 per cent. Director General of WTO Roberto Azevêdo is right when he says its members can help in setting trade growth on a more robust trajectory by seizing initiatives on a number of fronts, notably by negotiating concrete outcomes at the ministerial conference in Nairobi in December.
