MC12, Perspectives, WTO crisis and reform

Perspectives: MC12 – What we need to hear is the message that the WTO has a future

The expected outcomes from the coming 12th ministerial conference of the World Trade Organization will likely be disappointing overall. But members of the global trade institution still have the chance to make a difference – through showing genuine support for its role.

So low are the expectations for the forthcoming ministerial conference that it is largely being forgotten that this is highest decision-making body of the WTO. In the past its meetings were the subject of global attention, notably around the 1999 ‘Battle of Seattle’ and in 2001 launch of the Doha Development Round.

This time round, what little focus there has been in general political or business news relates to the possibility or not of an agreement around an intellectual property waiver for COVID-19 vaccines and related medical products, with perhaps some headlines on the fisheries subsidies talks.

Both issues are clearly important subjects – but surely insufficient as headlines from the first global gathering of trade ministers in four years.

Not that the delegations will be idle, for there will rarely have been a year with such trade policy activity. Within the WTO there will be plurilateral initiatives to discuss and progress, on e-commerce, investment facilitation for development, MSMEs, trade and gender, and sustainability (climate, plastics pollution and fossil fuels). An agreement among 66 members on ‘services domestic regulation’ will be formally announced in Geneva early December.

All these initiatives are in turn shaped and influenced by a flurry of policies and announcements made outside the WTO. China, Taiwan, the UK, and perhaps Thailand may seek conversations with the eleven members of CPTPP, the Asia-Pacific trade pact. The EU’s Carbon Border Adjustment Mechanism will inevitably be of interest, as will the recent steel and aluminium deal with the US. Then there is the Agreement on Climate Change, Trade, and Sustainability, nearing conclusion and potentially looking for new members.

We could add more to the above list, but the point is clear enough: there is much that is happening in world trade, but little of it at a multilateral level.

Thus, the most positive contribution that ministers gathering in Geneva next week could make next week is to find some forward path for global trade rules.

The success criteria in turn would be that we can see in the future a route towards a revived WTO, rather than an organisation dwindling away.

Certainly, an agreement on fisheries subsidies or covid IP would contribute, but more is really needed, a reaffirmation perhaps of the fundamental global trade rules and the WTO system, a genuine roadmap to a long-term solution for the Appellate Body, an acceptance of the need to make the basic parts like notifications work effectively.

In essence, we need to hear from ministers, particularly from the major players, that, collectively, they understand the challenges but see a future for the multilateral trading system, based on shared rules and compromise.

A good place to start would be to reflect the successes of trade in 2021.

Trade helps resilience

It might be a good idea for officials preparing their ministers’ Geneva trip to include in a briefing pack the Executive Summary of the WTO’s 2021 World Trade Report.

This report sets out starkly the way in which global trade has helped deliver a response to the COVID-19 pandemic, and how government intervention in supply chains may in fact reduce economic, trade and societal resilience.

The foreword by the WTO’s director-general Ngozi Okonjo-Iweala points out that “globalization was also at the heart of why this virus was met with vaccines in record time.”

Later in the report it is pointed out that “even a crisis as devastating and unprecedented as COVID-19 has not resulted in the wholesale unravelling of trade and integration…”

Of relevance to many debates is the balance between trade and resilience, which this report shows to be a false dichotomy.

“A basic binary assumption underlies much of the current debate – namely, the notion that there is an inherent trade-off between global trade interdependence, on the one hand, and domestic economic security, on the other, and that the pursuit of economic efficiency is incompatible with the pursuit of economic resilience”, the authors say.

“The report suggests that these objectives are often interconnected and mutually reinforcing.”

Perhaps starkest of all is the statement that “economic self-sufficiency is an illusory goal” not least when backed up later in the report with the statistic that “one major US vaccine manufacturer depends on sourcing 280 components from 19 different countries to manufacture the final product.”

There is much more to consider in both the Executive Summary, and a somewhat sprawling full text.

But little more is needed to see the contrast between the report and the actions of major players in the WTO.

The anti-trade narrative is winning in major capitals

Trade diplomats and the WTO secretariat are frequently criticised for the lack of progress in negotiations, or in restoring the Appellate Body. But ultimately, they cannot do what WTO member governments don’t want them to do. It is in Washington, Brussels, Beijing, Delhi and London – not Geneva – that the WTO negotiations are failing.

These governments will mostly suggest the theoretical premise of the benefits of free trade. However, for varying reasons they will spend more time on what they see as the problems of trade.

For the EU that would probably be different forms of unfair trade given weaker regulations, for the US unfair trade vis-à-vis China, for the UK the problems with neighbours, for India a system tilted against them, and for Beijing the need to protect a distinct Chinese economic approach.

The overall impact is that governments reflect and amplify a growing public sense of trade as a problem. That is not a promising basis for any kind of multilateral agreement requiring compromise, that would in turn be criticised domestically.

Yet all is not lost. For outside of multilateral settings, the same countries are talking and finding agreements. USTR Tai has just been in India, who are in turn also talking to UK and EU about future agreements. China has agreed the Regional Comprehensive Economic Partnership with the likes of Australia. Even the EU and UK are starting to establish their official dialogues under the Trade and Cooperation Agreement.

If not the WTO, then what?

We are now in a situation in which countries tacitly accept the need for global trade and accompanying rules, but reject setting them at a multilateral level for reasons that are both domestic and connected with geopolitical rivalries. This could in theory bring some sort of uneasy stability – but at economic cost and considerable future risk of further system fragmentation.

It is this that ministers could most usefully discuss, rather than the minutiae of fisheries subsidies. For recognising the difficulties could actually provide the political confidence that for all the challenges in concluding agreements, the major players actually want a World Trade Organization.

We know the US does business with China, the UK likewise with the EU, and that the EU will calibrate trade against a domestic regulatory model. India is not going to stop being the most awkward player when it comes to negotiations, but it does want international investment.

Ultimately, none have a better solution than an imperfect WTO.

A message that the WTO has a future is the one we need to hear from its 12th ministerial conference.

 

 David Henig runs the column ‘Perspectives’ on the politics of global trade for Borderlex. He is also a UK director at the think tank ECIPE.

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