In a shock decision, India has blocked ratification of the Bali trade deal. Ironically, emerging markets have the most to lose from neo-protectionism as this will create a two-speed trading regime, with the EU, US and other economic powerhouses creating their own free trade alliances.
The very existence of the World Trade Organisation is now being called into question, following India’s decision to block ratification of the Bali Trade deal agreed in December 2013.
The failure to agree on a trade deal which involves the WTO’s 160 members is a further blow to the credibility of an organisation which was already facing intense scrutiny.
The deal in Bali last year surprised many, and gave new impetus to the organisation, which had faced marginalisation as groups of like-minded countries embarked on their own trade deals, such as Trans Pacific Partnership (TPP) and Transatlantic Trade and Investment Partnership (TTIP).
The decision of India’s new, nationalist government means that other countries will inevitably focus on trade agreements which involve fewer and more willing participants. However this will have major implications for the developing world which will be the biggest loser from the failure of the WTO agreement. Many countries in Africa and Asia will be left out of agreements involving the global powerhouses such as the EU and USA.
It had been estimated that the WTO Bali agreement would have added $1 trillion to the world’s economy and created 21m jobs. Many had believed that all the parties would rubber-stamp the deal, but last minute objections by India relating to agricultural stockpiling frustrated these hopes.
The solution seen by some is to create a fundamentally new organisation comprising economies such as US, EU, Australia and other developed countries which would engage in plurilateral rather multilateral talks. This would essentially cut loose countries, such as India.
The long term implications for emerging markets are evident. They can either align themselves with neo-protectionist countries, or they can continue to integrate their markets with the global economy. International logistics companies will be hoping that the latter occurs, as otherwise the world risks breaking into regional blocs, reversing many of the benefits of globalisation.
Ironically, India’s decision strikes a serious blow to the very organisation which has helped to lift so many people out of poverty throughout the emerging world.