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TIME TO REFORM (AND RENEW) THE WTO

wto

TIME TO REFORM (AND RENEW) THE WTO

Reflect and Appreciate

The window to enjoy the bountiful cherry blossoms in the Washington DC area briefly opens and closes every spring. It would be easy to take them for granted. The show is a fleeting, but a reliable harbinger of spring renewal. Cherry blossom trees have proliferated such that one need not venture to the famous Tidal Basin to enjoy them.

If we find the trade angle in everything, as we are prone to do here at TradeVistas, one could liken the World Trade Organization (WTO) reform process to the Japanese ritual of hanami (flower viewing), where everyone takes pause to appreciate the gift of the sakura cherry blossoms as a community. The current global trading system has generated opportunities for every member to pursue growth and prosperity through increased trade. That’s beautiful and impressive, too. We’ve come to rely on it and rarely stop to appreciate it. As evidenced by the results of our July 2020 poll, the public has very little understanding of the institution’s role.

For the Japanese, the cherry blossoms represent both a recognition of the impermanence of good things, but also renewal and optimism. Viewing parties are organized to lie under the blossoms, stare at the sky, and reflect on whatever calls to mind.

Basho Haiku

Free Trade is Not Inevitable

In his book, The World America Made, scholar Robert Kagan makes the case there is nothing inevitable about either democracy or the prevalence of the global free trade system. World orders are transient. They reflect the beliefs and interests of its strongest powers. History tells us this state is indeed reversible. It can be undone. As Kagan says, “The better idea doesn’t have to win because it’s the better idea. It requires great powers to champion it.”

While the WTO was sown from the seeds of democratic, free-market ideals, WTO members have been unable to cultivate trade deals to counter China’s state-directed economic approach. The WTO’s detractors are free to plant doubts that, left untended, will grow like weeds.

Over the last year, WTO members have initiated serious discussions about how to reform the WTO. But now the organization must choose a new director general, adding a new layer of complexity to the process. Looking ahead at the future of the WTO, perhaps “renew” would be a better term to inspire a renewed appreciation for what global trade agreements have achieved, a renewed communal commitment to its future, and a renewed vision to match that of its founders.

There are at least three areas under discussion by members to renew the purpose and functioning of the WTO.

Fix What’s Wrong

Achieving transparency through timely and meaningful notifications is an important function of WTO committees. Members have an obligation to share information about regulations, policies, and other measures that affect market access for companies seeking to do business in those markets. In the case of subsidies, those measures can affect the volume and prices of commodities trade globally, affecting businesses who may even be selling primarily in their home market. But many WTO members are years behind in reporting and offer incomplete or unverifiable information, which denigrates the integrity of the process and causes other members to query whether WTO violations are being obscured. Some members are so frustrated with this delinquency they are suggesting penalties for failure to meet notification requirements, even creating an “inactive member status” in the most egregious cases.

Another core function of the WTO is to promote the resolution of disputes among members, including through the WTO dispute settlement system. The United States and other members are concerned that the Appellate Body, which can review decisions made by regular dispute settlement panels, has created rights and obligations not agreed by the members through the process of negotiation. The system is now a quarter of a century old. Experience with it offers insights into procedures that can and should be improved as an investment in the system.

Concede that Consensus is Stifling Innovation

WTO members can self-declare as “developed” or “developing” for the purpose of undertaking commitments or availing themselves of exceptions. Despite the underlying validity of acknowledging different levels of capacity or differing economic priorities, this loosey-goosey system has tilted negotiations to focus on what members won’t do, rather than what they commit to do. The United States has called it a self-declared state of paralysis.

Discussions in the WTO are beginning to focus on various data points that can be used to determine who is developed versus developing, but even those exercises might miss the larger point that lowering barriers in a country’s own market will generate economic gains worth pursuing. Take one example: opening one’s market to competition in the provision of telecommunications services creates opportunities to extend broadband access and leverage faster internet connections so that companies can be “born digital” and find their niche in global supply chains. The tendency to opt-out of liberalization commitments can conversely hold countries back in their development pursuits. There’s a philosophical disagreement here that could get glossed over as members dive into data and formulas.

The Doha Round of negotiations collapsed in part due to insistence on a “single undertaking” – that every aspect of a large package deal must be agreed before any single aspect could be agreed and implemented. Members did free an agreement to streamline customs procedures from this consensus capture. On the topic of agriculture, members agreed to move ahead with the elimination of agricultural export subsidies and adopt new disciplines on export credits, international food aid and agricultural exporting state trading enterprises absent a larger deal.

Incrementalism should be welcomed over inaction. Members are now offering papers describing how new negotiations could create agreements among interested members to begin with, with eventual agreement by some or all members. This approach will probably need to apply to the WTO “reform” process itself, with some down payments made and problems fixed without holding up progress.

Negotiate on Issues Relevant to Today’s Economy

In the same vein, willing members should be unencumbered to move ahead with negotiations on “new” issues relevant to today’s economy. For example, the United States, European Union, and Japan announced they would cooperate to develop new rules to address the practices of forced technology transfer and industrial subsidies. A significant subset of WTO members have agreed on the need to facilitate growth of the digital economy in part by ensuring that electronic commerce can flourish. They will begin negotiations and work to bring along other members as talks advance.

What Role Will the U.S. Play?

Questions remain about what role the United States will play in this process of renewal. In spring 2020, the U.S. Congress faced the possibility of a vote – the first since 2005 – on whether the United States should withdraw from the WTO, a body it helped create.

While that vote was eventually scuttled, it amplified growing criticism of the WTO by the Trump Administration – and the general public’s indifference toward the institution. A July 2020 TradeVistas poll found that more Americans either support leaving the WTO or feel “indifferent” or “unsure” about whether to withdraw.

The poll also found that Americans overwhelmingly want the United States to be “leader of the global economy”. They just don’t see membership in the WTO as critical to that goal. But – once they receive some basic information about the WTO’s role, many Americans also see how the organization can benefit U.S. companies.

These results make it clear that trade policymakers should position the WTO’s role more prominently in Americans’ understanding.

The Petals Will Fly Off

The cherry blossoms are impermanent. A strong gust of wind will force them off their branches just at their peak. The leaves fill out, the trees grow, and the blossoms seem to reappear as vibrant as ever the following year. Some trees can survive a century but most cherry blossom species live just 15 to 20 years. New seeds must be planted and the trees cared for. We’ve already lost nearly a generation of progress in the WTO. Now seems as good a time as any for reflection and renewal.

Editor’s Note: This post was originally published in April 2019 and has been updated for accuracy and comprehensiveness. 

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Andrea Durkin is the Editor-in-Chief of TradeVistas and Founder of Sparkplug, LLC. Ms. Durkin previously served as a U.S. Government trade negotiator and has proudly taught international trade policy and negotiations for the last fifteen years as an Adjunct Professor at Georgetown University’s Master of Science in Foreign Service program.

This article originally appeared on TradeVistas.org. Republished with permission.

Shipping

Five Important Ways to Negotiate Better Shipping Terms

The final price of your product or service depends on a wide range of factors. Shrewd people in business know there is more to making profits than keeping your buying price low and selling price high. Additional business expenses can reduce your final margin. These include shipping, marketing, storage, and a range of legal expenses.

Negotiating a low price from your manufacturers is just the beginning. Supply chain negotiation training seminars can teach you several ways to gain value before your products reach your customers.

The shipping industry can offer you notable savings opportunities. To identify these, you have to have a keen eye. In this article, we look at five ways you can apply negotiation training skills to obtain better shipping rates.

Understand the Shipping Terms

Global trade has thrived on the back of shipping and logistics companies for hundreds of years. As a result, the shipping industry has developed a unique culture and language. Whether you are dealing with local or multinational shipping companies, there is a range of terms that you should know.

Terms such as CIF (Cost, Insurance, and Freight) and FOB (Free on Board) are used freely in the shipping industry. If you are new to the business, you can learn shipping terms by attending a seminar on the essentials. If you don’t understand the industry’s regular terms, you risk making a deal that can be negative for your business. 

Negotiation training seminars can teach you how to prepare before sitting down to make a deal. You can improve your position by researching the industry before meeting companies. Also, you can carry out mock discussions with shipping company agents. This can give you a feel of the language and questions that may come up during a real negotiation.

Research Possible Hidden Costs

One of the things that can diminish your profits is hidden logistics costs. The final price for your products should factor in all the costs you expect to incur before delivery. Talking to the different authorities that can come into contact with your products in transit can clarify your overall costs. Knowing the factors affecting your shipping rates can help you negotiate to reduce hidden costs.

By working closely with your shipping company, you can identify smart ways to cut down your costs. Many companies have different shipping rates based on weight as well as box dimensions. If you use the standard boxes the shipping company provides, you can save a few dollars on each load.

Develop Your Negotiation Strategy

Once you have understood the market and options available, negotiation training can help you plan your strategy. Writing down your strategy and goals can give you an overview of the entire process. The points listed below are some of the elements taught in negotiations seminars that can help to strengthen your strategy.

Budget

Based on your business model, you should have a price you are not willing to go above. Your strategy should include the ideal and maximum price you are willing to offer for the shipping service.

BATNA

A BATNA is your Best Alternative to a Negotiated Agreement. It refers to a set of alternative options you can take if you cannot reach a viable deal in your negotiations. A well-planned BATNA can help you to recognize a bad deal and give you the confidence to walk away.

Timelines

Time constraints can have a significant impact on your negotiations strategy. The earlier you start discussions with shipping companies, the less pressure you will have to close a deal. Beginning your negotiations early can give you more time to reach a mutually beneficial agreement.

The Urgency of Delivery

Your strategy should state how fast you need the products to be delivered once ordered. Same day deliveries often cost more than two or three days of delivery. The delivery time constraints depend on the nature of your products and promises made to your customers.

Payment Terms

Although one-off payment offers come with attractive discounts, they can also be quite risky. Making payments in installments is safer and keeps the shipping company committed until the final payment. Offer well-balanced payment terms that enable your shipping company to deliver your products on time while limiting your financial risk.

Concessions

Well-trained negotiators plan the concessions they are willing to give before discussions begin. In your research, find concessions that can create value for the shipping company and present them in your meeting. The negotiation process can become very challenging if you are too rigid.

Use Third Party Logistics Providers (3PL)

According to the World Shipping Council, the intermodal shipping network plays a significant role in the cost and rate of service delivery. An intermodal network is made up of ships, airplanes, trucks, and trains. The connection points where cargo is transferred between modes of transport are also part of the network. Many companies depend on intermodal networks for the inland dispersal of cargo from harbors and airports.

Third Party Logistics Providers (3PL) provide a useful service by shipping your cargo via their own intermodal networks. A trusted 3PL provider can save you time and money while allowing you to focus on your core business.

3PLs allow you to negotiate with one service provider who can manage all the regulatory and intermodal networking issues you may face. Further, your 3PL can help you connect and share shipping costs with other dealers in your vicinity.

Negotiate with Other Shipping Companies

Before signing off on a deal, make sure you have exhausted your other options. If you only deal with one shipping company, you may miss a better option. In a comprehensive negotiation seminar, you can learn how to leverage competitive bids to secure better deals.

Additionally, training to negotiate with multiple companies feeds into your research. It teaches you more about the existing challenges in the shipping industry. The knowledge you acquire can help you create value as you deal with the shipping companies.

Round-Up

The shipping industry presents smart people in business with a wide array of chances to negotiate better deals. The techniques in this article are not exhaustive. However, they can set you on the right track and feed into your strategy.

Negotiation training seminars are designed to maximize your potential and spur you into action. However, there is no strict rule book that is applicable in every case. As you grow in business, you can develop your own strategies based on your training and personal preferences.

White House ‘Optimistic’ on Pacific Trade Deal

Los Angeles, CA – The White House is optimistic on the chances that negotiators can forge a strong, comprehensive Trans-Pacific Partnership (TPP) deal that would impact 11 countries and encompass nearly 40 percent of the world economy.

“I’m much more optimistic about us being able to close out an agreement with our TPP partners than I was last year,” said President Barack Obama at a recent meeting of the President’s Export Council.

Confident that the administration could make a “strong case” in Congress for a TPP, Obama added, “It doesn’t mean it’s a done deal, but I think the odds of us being able to get a strong agreement are significantly higher than 50-50.”

According to the Office of the U.S. Trade Representative, the White House has held more than 1,500 meetings with members of Congress on TPP, including sharing negotiating text, and would continue to consult closely.

U.S. Representative Sander Levin of Michigan, the senior Democrat on the House of Representatives Ways and Means Committee, which has jurisdiction over trade, has said there was still a long list of “major issues” impacting the final make-up of the proposed trade pact.

Levin is calling for Congress to have more input into the deal, asserting that workers’ rights, access to medicines in developing countries and the phase-out period for U.S. tariffs on Japanese cars top the list of of major issues still to be resolved.

With the ongoing talks wrapping-up this week in Washington, D.C., negotiators may meet again next month in either the U.S. or Australia.

The 11 countries included in the TPP are Australia, Brunei, Canada, Chile, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the U.S.

12/16/2014

Economist: India ‘Scuttles’ WTO Trade Talks

Los Angeles, CA – India “has apparently chosen to scuttle the ‘good ship’ WTO-Bali, the first truly multilateral agreement achieved since the founding of the WTO in 1995,” says Dr. Kent Jones, professor of economics at Babson College in Massachusetts.

“This is not the only ship in the WTO fleet, but it is the only one of its kind that has been successfully floated under its multilateral negotiating mandate. It is now taking on water, thereby endangering the entire multilateral trading system,” says Jones, a published author and an acknowledged expert on trade and policy issues who served as a senior economist for trade policy at the US State Department.

India, said Jones, “agreed last December to accept a deal in Bali that combined new rules on trade facilitation with a 2017 timeline on reconciling WTO agricultural rules with India’s food security policies.”

Trade facilitation provisions, he said, “would combine reductions in red tape and improvements in customs logistics with aid for developing countries’ trade infrastructure. The lion’s share of economic welfare gains, estimated at $1 trillion, would flow to developing countries, most of which are not amused at India’s decision to renege on the deal at the last minute.”

India’s system of food subsidies and stockpiling, Jones asserts, “currently runs afoul of WTO agricultural rules, but beyond that requires a wasteful domestic bureaucracy and market distortions that cannot help the poor in a sustainable manner. In addition, it cannot improve agricultural productivity, which is what is really needed for a lasting solution to its food security problem.”

Nonetheless, he adds, “the Bali deal set a moratorium on challenges to such policies until 2017, by which time negotiations on reforming the rules could take place. In the interim, alternatives and compromises could be considered that could allow India’s food security policies to coexist with WTO rules for global markets.”

The new government “feels that this timeline is not good enough, and hopes to hold the globally popular trade facilitation deal hostage in order to force a global agricultural deal immediately that will make its current policy legal under WTO rules. India professes to support trade facilitation, which only lays bare its cynical strategy to renege on its earlier commitments and blame everyone else for failing to re-negotiate,” Jones says.

“DESTRUCTIVE BRINKMANSHIP”

India’s “strategy of brinkmanship appears not only destructive to the WTO’s credibility as a negotiating forum, but to India’s global interests as well. Most major trading countries are so furious at India for breaking its word at Bali that many are planning to implement trade facilitation outside the regular WTO framework, through bilateral, regional or ‘pluritaleral’ agreements,” he says. “Global WTO agreements are the best way to expand trade, but countries have already shown that they will strike their own deals if WTO negotiations break down.”

According to Jones, “These initiatives outside the WTO would deprive India of any leverage in pursuing agricultural rules reform in its favor, while forfeiting its potential leadership role among developing and emerging economies. Brazil and China, in particular, reportedly criticized India’s veto.”

Without a deal forged in Bali, the “peace clause” preventing disputes against India’s agricultural policies would be suspended, which could lead to trade sanctions. India’s export industries would also suffer from abandoning the WTO negotiations. It stands to lose a lot from this misadventure,” he asserts.

“Indian trade diplomats insist that they have presented viable compromise measures that could lead to a new deal in September,” says Jones.

“Diplomats can always walk back from the brink, but it seems clear that there will be no fundamental renegotiation of what was agreed in Bali last December. By throwing rocks in its own harbors, India’s economy will remain tethered to a costly protectionist regime, while the rest of the world will seek other shores—and negotiating venues.”

08/07/2014