The World Trade Organization reached its first trade reform deal on 7 December to a roar of approval from nearly 160 ministers on the Indonesian island of Bali who had decided on the agreement, which could add $1 trillion (€730 billion) to the global economy.
Since 2001, the WTO has sought to liberalise trade in agriculture and services under the so-called Doha round. Failure to reach any agreements had sapped confidence in the consensus-based organisation's ability to make progress in lowering global trade barriers.
Customs account for between 2 to 15% of the cost of products, according to the OECD. Simplifying rules could boost the world's annual GDP by close to $1 trillion, according to the Peterson Institute for International Economics, or about 1.4% of last year's output.
The approval came after Cuba backed off from a threat to veto the package of measures.
The talks, which began on 3 December, nearly derailed when Cuba refused to accept a deal that would not help open the United States embargo of the Caribbean island. That forced negotiations into Saturday morning.
Cuba later agreed on a compromise with the United States.
But there was skepticism on how much the deal had achieved.
“Dealing with the fracas on food security sucked the oxygen out of the rest of the talks,” said Simon J. Evenett, professor of international trade at the University of St. Gallen in Switzerland.
The talks began under a cloud because of India’s insistence that it would back an agreement only if there was a compromise on food subsidies because of its huge program for stockpiling food to feed its poor.
An eventual compromise was welcomed by India’s trade minister, Anand Sharma. While India had insisted on a permanent exemption from the W.T.O. rules, the final text aimed to recommend a permanent solution within four years.
The agreement is a milestone for the 159 members of the W.T.O., which was created in 1995.
It rescues the W.T.O. from the brink of failure and will rekindle confidence in its ability to lower barriers to trade worldwide after 12 years of fruitless negotiations.
The deal would speed the passage of goods through customs. Analysts estimate that it could eventually bolster the world economy by billions of dollars and create more than 20 million jobs, mostly in developing countries.
It still requires the approval of each member government.
Reuters columnist Ethan Bilby wrote that the Bali deal saved WTO from irrelevance.
“The latest deal to simplify customs rules lacks the drama of previous rounds. But after more than a decade of fruitless discussion, it suggests there is still a global appetite for lowering barriers to trade, writes Bilby, adding:
“The WTO's supporters point to the lack of new barriers erected after the 2008 financial crisis, when protectionist instincts were greatest. However, more subtle forms of protectionism, such as state bailouts, government procurement rules and consumer protection regulations, can have the same impact. The next challenge will be to harmonise regulations - like restrictions on genetically modified food - that keep producers from one country from reaching consumers in another. That is a more complex and more political task than lowering tariffs,” Bilby writes.