The Road from Bali

Will the new world trade agreement create a fairer and more robust global trading system for developing countries?

The WTO agreement should strengthen the multilateral trading system and help reduce “power politics.”

The WTO agreement should strengthen the multilateral trading system and help reduce “power politics.”

Recent World Trade Organization (WTO) talks have yielded an agreement that could benefit world food security, but will it be enough to please developing countries?

The answer, according to IFPRI Visiting Senior Research Fellow Eugenio Diaz-Bonilla, is: Stay tuned.

The so-called Bali Agreement is the WTO’s first comprehensive multilateral trade package since the organization was launched two decades ago. Although the agreement emerged from the WTO’s Ninth Ministerial Conference in December 2013, it wasn’t finalized until November 2014.

A Mixed Bag

The result is a mixed bag for developing countries. In an IFPRI working paper called “The Bali Agreement, at Last,” Diaz-Bonilla and IFPRI Senior Research Fellow David Laborde say that, on the positive side, the agreement will reduce the amount of time traded goods spend languishing in customs—which could make it easier for developing countries to market their perishable agricultural products.

Additionally, it promotes exports from the least-developed countries by asking importing countries to grant them duty-free and quota-free access, simplifying regulations on the rules of origin of traded goods, and easing the process by which least-developed countries export services.

The Bali Agreement also reinforces the WTO as the multilateral anchor of the global trade system. “It is always good to have a legal framework that disciplines the behavior of the bigger players,” says Diaz-Bonilla. Without it, he says, “it will be power politics.”

Subsidies Remain

On the other hand, Diaz-Bonilla points to lost opportunities. Nothing changed, for example, on the key issue of rich countries’ agricultural export subsidies, which many developing countries sought to ban completely. Although export subsidies can make food cheaper for food-importing countries, they also disrupt markets and deter investments there. Moreover, they exacerbate price volatility in world food markets, to the detriment of the least-developed countries.

What did change in Bali was the negotiation dynamic. Developing countries have increased their share in global agricultural production and trade. In recent years, 5 of the top 10 net agricultural exporters have been developing countries. According to Diaz-Bonilla, the political economy of the negotiations is now more complex, with changing potential alliances among WTO members that developing countries will have to consider carefully when seeking agreements that are in their interest.

As for the Bali Agreement, he says, “It’s a work in progress. There are still things that need to be done, but it was another step.”

Photo credit: Panos/A. D'Amato

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