Impasse at WTO seen as boosting appeal of bilateral deals for China

The World Trade Organisation's failure to reach a significant multilateral deal may prompt countries such as China to accelerate talks on bilateral and regional pacts in a bid to rejuvenate sluggish trade growth, analysts say.

In December, WTO members had cheered on reaching a trade facilitation agreement (TFA) to simplify customs procedures by reducing costs and improving their speed and efficiency, in what was dubbed as one of the biggest reforms of the organisation since its establishment in 1995.

But Roberto Azevedo, the director-general of the WTO, announced on Thursday that member countries had failed to bridge the gap by the deadline to put the text into the WTO's rule book after India demanded concessions on agricultural stockpiling.

"The WTO is a victim of flawed procedural requirements. A single government can block progress across the board," said Patrick Low, a vice-president of research at Fung Global Institute and former chief economist of the WTO.

"Paralysis at the WTO is likely to reinforce the view that preferential trade arrangements are a substitute for inclusive multilateralism rather than a complement. That would be bad news for the world economy."

The stalled deal dealt a blow to countries big and small, Frederic Neumann, a co-head of Asian Economic Research at HSBC, told the South China Morning Post.

"China, as the world's biggest exporter, has the most to lose from the lack of agreement on simplified customs procedures and trade facilitation," Neumann said. "From a global perspective, trade liberalisation through the WTO would still be preferable but the political reality and the complexity of trade issues nowadays are such that progress is more easily made when fewer participants are involved."

The benefits of the TFA to the world economy had been estimated by the WTO at up to US$1 trillion annually.