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Bali talks to decide fate of WTO

By Tom Miles and Randy Fabi

GENEVA/JAKARTA (Reuters) - Crisis is the natural state of world trade negotiations. But this week will be different.

Ministers meeting in the Indonesian resort of Bali from Tuesday until Friday will decide the fate of the World Trade Organization, with two possible outcomes: a global trade agreement, the first since the WTO was created in 1995, or a failure that kills off the Doha round of trade talks and casts the WTO into obsolescence.

The 159 WTO members have pushed the crisis to the brink by failing to finalize the text of a deal in Geneva, leaving a Swiss cheese of a draft after marathon talks that WTO Director-General Roberto Azevedo finally halted at 7 a.m. last Monday.

Azevedo had repeatedly said the text must be settled in Geneva and there could be no negotiations in Bali. Ministers indulging in political point-scoring and rhetorical grandstanding are thought unlikely to succeed where their Geneva-based trade negotiators have failed.

"Will they or won't they negotiate in Bali? Some will try but the recalcitrants will hold out unless they get overruled by their heads of government," said Simon Evenett, professor of international trade at the Swiss University of St Gallen.

"For that to happen, enough prime ministers and presidents are going to have to be convinced to pick up the phone and call their peers and, given what little is left on the table, why should they bother?"

The WTO has already significantly lowered its sights since a decade of Doha talks broke down, forcing the body to focus on a much less ambitious set of reforms. The agenda for the Bali meeting has already suffered one big loss: talks on free trade in technology goods, slated for agreement at the meeting, collapsed last month after China insisted on a large list of exemptions.

But Azevedo has refused to abandon the deal on the table, working the phones to narrow bilateral differences.

"The remaining obstacles are very few, well-defined and not difficult to solve if we have political engagement and political will," he wrote in a Wall Street Journal op-ed on Sunday. "That is what we are looking to ministers in Bali this week to provide. A successful outcome is still possible."

INDIA IS KEY

Supporters say the deal would be felt globally, with most impact in the poorest countries, since it would set standards for handling the cross-border shipment of goods, making customs authorities help instead of hindering business.

Estimates of the value to the world economy vary, with some as high as $1 trillion. Experts say it would be much more important than abolishing import tariffs globally, since bureaucracy and opaque rules are a bigger brake on trade.

Bayu Krisnamurthi, Indonesia's deputy trade minister, said last Wednesday that there were only four issues to be settled.

Negotiators say Argentina and Cuba are among those with issues outstanding, but that the key stumbling block is India.

"If the Indians can do a deal, the others who are left will find it very difficult to stand in the way," said one diplomat.

Indian Trade Minister Anand Sharma has promised "no compromise" on India's policy of subsidizing food for the poor.

But it is not clear if he will accept the draft Bali deal, which would permit the subsidized food policy for four years, or if he will push for a permanent exemption, which risks leaving India exposed to massive legal claims if Bali fails.

"Final positions will be known when ministers make their country's statement," he said on Friday.

More than 100 nations, including the least developed countries and the African, Arab and Southeast Asian groups, have said they support any effort to make Bali a success.

If it fails, the WTO may see its role as global custodian of the world's trade rules being eroded by regional trade agreements now being negotiated, such as the U.S.-led 12-nation Trans-Pacific Partnership and a U.S.-EU tie-up known as TTIP.

But there is little to be gained from picking a fight with any country that causes a collapse in Bali, said Evenett.

"Why give the enemies of the WTO another public relations coup? Smart officials should let this meeting sink without a trace and then go back to the drawing board about the WTO's future work program," he said.

(Additional reporting by Manoj Kumar in New Delhi, writing by Tom Miles; Editing by Stephen Coates)

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