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Trade

WTO Bali agreement expected to boost growth

At a conference in Bali, the World Trade Organization has agreed on a package to liberalize global trade. Experts see this as a chance to boost growth but caution that further steps are needed in the future.

Roberto Azevedo, head of the World Trade Organization (WTO) described the Bali agreement as a historic moment. With tears in his eyes he said that "for the first time in our history, the WTO has truly delivered."

World Trade Organization WTO Genf Generaldirektor Roberto Azevedo

"For the first time in our history, the WTO has truly delivered," said Azevedo

The Bali package agreed on by the WTO plans to tackle trade barriers. Especially bureaucracy is to be the target of the reforms: fewer receipts, official documents and certificates – in other words, changes that would make trade easier.

Import taxes and agricultural subsidies are also to be lowered as they make it more difficult for poorer countries to compete with Europe or the US. "This will boost world trade," said Jürgen Matthes of the German Institute for Economic Research.

Boosting growth

The new export opportunities should give a welcome boost to global growth in light of the current slow economic development. "It will take a while until customs standards will be implemented in poorer countries, but there will be assistance for that," explained Rolf Langhammer, former vice president of the Kiel Institute for the World Economy.

The attempt to finally do away with limits on agricultural trade is a positive sign, he believes. In future, trade barriers for agriculture could be replaced with customs duties. That means that a country could export as much as it wishes, but additional tariffs would be charged for exports exceeding the former limits.

Harvest in Germany

Subsidies for agriculture were among the most contenious points

On Thursday, the situation at the conference did not look promising. India wanted to make sure that food would remain affordable for its 800 million poor and therefore had insisted on a permission to subsidize rice and grain. The United States in particular wanted to grant this exception on a temporary basis only. The compromise that was eventually reached allows India to subsidize food within clear limitations and under close monitoring.

Langhammer has mixed feelings about that compromise, however. "The problem is that India could now distort trade." He thinks the compromise is not the right deal as "subsidizing products is always bad." But there wasn't really an alternative for the WTO. "India remained firm. Without the compromise, there wouldn't have been an agreement in Bali at all."

Good news for German exports

Aside from the poorer countries, Germany also stands to profit from the agreement. The foreign trade chief of the German Chambers of Commerce and Industry, Volker Treier, described Bali as an important signal.

The WTO deal could boost the German economy by 60 billion euros per year. Generating more than seven percent of all exports worldwide, Germany is ranked third after China and the US. One in four jobs in Germany is linked to the export industry.

Border posts in the EU

The goal of the Doha process is to give developing countries easier access to global markets

For the WTO, the agreement was seen as almost vital for the organization's survival, Langhammer explans. "A failure to find an agreement would have rendered the WTO insignificant."

The negotiations had been put on hold for seven years. During that time only regional negotiations took place, such as the talks about a free-trade agreement between the US and the EU, Langhammer says.

First step on the agenda

Langhammer is confident that the agreement could set the course for further negotiations of the Doha round. The Bali package is a part of the development agenda initiated in 2001 but dropped in 2006.

The goal of the Doha process is to tackle the economic problems of developing countries by making it easier for them to get access to the world markets.

While Bali might be a step in the right direction, "the grand agreement is still ahead of us," Langhammer says. "But we now have a signal." He hopes that over the years there will be a patchwork of several agreements that eventually might form a proper Doha agreement.

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