'Week Ahead' and trade agenda, WTO crisis and reform

Fighting against the odds: can the WTO recapture some momentum in 2022?

Another year dawns, and still the World Trade Organization refuses to die. A preview of what’s in store in Geneva by Chris Horseman and Rob Francis.

It is almost obligatory for pundits to write off the WTO as a crisis-ridden organisation which is ultimately destined to fade slowly into irrelevance. The challenges facing the WTO are undoubtedly formidable – but, for now, it is still standing.

The Geneva-based guardians of the rules-based trading system had been hoping to go into 2022 refreshed by an injection of political momentum from the ministerial meeting – MC12 – which had been scheduled for the first week of December 2021.

Frustratingly for all concerned, however, this meeting was a last-minute victim of the Omicron COVID-19 variant, whose sudden emergence forced WTO ambassadors to delay MC12 until an as-yet unspecified date in 2022. Whereas the director-general hoped to hold the meeting in March 2022, the Geneva bubble believes May or June are more realistic options.

Sceptics might argue that the postponement of MC12 at least ensured that the risk of possible failure to make progress on the key topics on the agenda was deferred, and that a full-blown crisis was thus averted.

The probable spectacle of global trade ministers failing to agree on the best ways of making Covid vaccines more widely available in the midst of a pandemic would indeed have been a dispiriting one.

On the other hand, there had been a genuine sense of momentum towards at least a deal on subsidies in the fisheries sector – and the risk now is that that momentum will have dissipated by the time ministers get a chance to reconvene.

Global rules-based system still under strain

Moreover, the strains on the global trading system more broadly are still as evident, and as troubling, as ever.

The world’s trade superpowers – the US, China and the EU – are increasingly talking the language of unilateral assertion of their interests rather than reverting to the multilateral rulebook.

This can be seen in the EU’s own proposed anti-subsidy and anti-coercion instruments, as well as the US’s now-moderated but still-active tariffs on steel and aluminium imports for purported ‘national security’ reasons.

There has still been no challenge to the US’s Trump-era trade agreement with China which did not even make a pretence of covering ‘substantially all the trade’ between the two countries, as required by WTO law.

And even if there had been such a challenge, it would probably have been toothless in light of the US’s continuing refusal to allow the WTO’s Appellate Body to be reinstated.

So what progress – or setbacks – can we expect in 2022?

IP waiver deadlock

2021 saw no progress on discussions in the WTO TRIPS Council on a revised proposal spearheaded by India and South Africa on a waiver from certain provisions of the TRIPS Agreement for COVID-19 vaccines and medical equipment.

There has also been no movement on an EU proposal tabled in response to the South African and Indian initiative, published on 4 June, which rejects such a waiver and instead calls for a broader approach prioritising voluntary licences and, where this is not possible, compulsory licences.

The postponement of MC12 has provided extra time for delegates to find consensus on this highly emotive issue, but even this seems unlikely, regardless of when the ministerial takes place.

Although all members are said to support the principle of increased access to vaccines, the key sticking points remain the scope of the waiver in terms of both products and TRIPS measures and the protection of undisclosed information.

The proposed duration of the waiver proposal – three years, after which the waiver can be ended by the General Council – has also come in for criticism, given that the WTO’s consensus-based model makes it difficult to reach decisions.

Achieving some form of result on the IP waiver is a major priority for WTO Director-General Ngozi Okonjo-Iweala.

She is insisting that a clean text be ready by the end of February, but given how text-based negotiations on the two proposals have not yet begun owing to the significant differences, this seems a tall order.

In parallel, discussions on a more general text on trade and health, led by Ambassador Walker, appear to be progressing more smoothly.

The document as it stands includes a placeholder for whatever is agreed in the TRIPS Council, but the DG herself is of the view that any outcome on trade and health that does not address intellectual property is tantamount to failure.

The chair of the TRIPS Council, Ambassador Dagfinn Sørli, has said he is willing to reconvene a TRIPS Council at short notice when and if there are indications that members might be closer to finding a landing zone. In the meantime, the smaller group meetings, which have been operating for most of 2021 on an ongoing basis, will continue up to MC12, and possibly beyond.

Fisheries: hope for a deal this year

The fisheries subsidies dossier probably represents the WTO’s best chance for a ‘good news’ story in 2022.

Following a whole year of intensive negotiations in 2021, WTO negotiators were within touching distance of a deal at MC12 to discipline the payments made by governments to their fishing industries – in the interests of preserving fish stocks.

A final draft of the fisheries agreement, tabled in late November, still included 26 pairs of square brackets, indicating areas where consensus had still not been reached. These essentially focused around fuel subsidies, and the extent to which developing countries should be exempted from the core disciplines of the agreement.

But the scope of the outstanding questions were sufficiently narrow to allow for cautious optimism that the issues could have been resolved in ministerial discussion.

The draft agreement remains on the table – but the big question now is whether or not the momentum towards a deal which had been generated over the course of 2021 can be carried through to the rescheduled MC12.

However, the process still has the backing of a UN Sustainable Development Goal mandate behind it, as well as the active support of Director-General Okonjo-Iweala, and the efforts of the fisheries negotiating group’s impressive chair, Colombia’s Santiago Wills.

A multilateral WTO agreement on fisheries therefore remains a distinct possibility for the year ahead.

Appellate Body to remain in cold storage

At the start of 2021 there was genuine hope that the Biden administration would re-engage the US at the WTO and begin to communicate what it wants from the dispute settlement mechanism.

The WTO appellate body consists – or is supposed to consist – of seven trade law experts who rule on WTO dispute settlement cases which have been appealed by the losing party.

But it has been in abeyance since December 2019 because of the US’ continuing refusal to approve new nominees.

To the chagrin of most WTO members, the first year of the Biden Presidency has been marked by an apparent reluctance to propose solutions to the current impasse.

In a speech in Geneva in October, incoming US Trade Representative Katherine Tai said she wants “to hear from others about how we can move forward”.

Yet the US itself seems unwilling or unable to communicate its own ideas, and there appears to be no consensus in Washington. Until there is alignment at home, no real movement can be expected in Geneva.

There remains the hope that MC12 could be the launchpad for future discussions on WTO reform, possibly in the form of a new working group, which would encompass discussions on the appellate body.

The success of any post-MC12 discussions is however dependent on US willingness to participate meaningfully and begin to propose ideas.

In the meantime, the provisional multi-party interim appeal arrangement, which is temporarily replacing the appellate body whilst it lies dormant, will continue to function.

The MPIAA is hampered by the fact that it is not a formal part of the WTO institutional architecture, and that not all members have signed up to the system. One prominent absentee – of course – is the US.

Plurilaterals: a new hope?

For all its travails, 2021 ended with some success at the WTO.

A plurilateral agreement on domestic services regulation – an unspectacular but functionally important aspect of international business – was signed off by 67 of the WTO’s heads of delegation in December.

The services text was the first negotiation to be concluded under the series of so-called Joint Statement Initiatives launched in December 2017 at the Buenos Aires WTO ministerial meeting.

And there was progress too on another of these plurilateral JSIs.

The discussions on a new trade framework for e-commerce, which now encompass some 86 members, made “strong progress” over the course of 2021, according to the co-convenors of the relevant negotiating group.

A pledge has now been made to “secure convergence on the majority of issues by the end of 2022”.

In addition, over 80 WTO members put their name to one or more of three ministerial statements covering environmental sustainability.

The statements concern Trade and Environmental SustainabilityPlastic Pollution and Environmentally Sustainable Plastics Trade, and Fossil Fuel Subsidy Reform.

They represent attempts from coalitions of the willing within the WTO membership to put environmental sustainability on the trade agenda in Geneva.

The statements were released with much fanfare, but the hype could not hide the fact that all three were rather vague and aspirational in nature.

2022 will be a test for the signatories of the statements, as they seek to agree on more detailed actions and deliverables in the next twelve months.

Only the trade and environmental sustainability statement includes a roadmap for work in 2022. Parties aim to adopt a workplan in February, followed by its implementation from April 2022 and stocktaking meetings in July and October.

The year culminates with a “high-level stocktaking event” in December to “review progress achieved…and adopt next steps towards MC13”.

Yet the process is not without its critics. Both South Africa and India are critical of the whole principle of plurilaterals, arguing that they are inconsistent with WTO rules.

Agriculture: no sign of the logjam easing

The postponement of MC12 in December may have come as some relief to officials who were facing the prospect of acrimonious arguments over key aspects of the WTO agriculture dossier, with little prospect of any substantial agreement.

Negotiations towards a series of agreements to limit government subsidies to farmers, impose disciplines on export restrictions, and improve transparency and data reporting, had made precious little progress over the second half of 2021.

The only element of the agriculture package on which there was any prospect of agreement at MC12 was a deal to prevent countries placing restrictions on goods purchased for emergency food aid by the UN World Food Programme.

On all other points, the ambition had been scaled back to little more than a commitment to keep talking and try and find a solution at MC13.

There seems little prospect of this state of affairs changing in advance of MC12 – whenever the much-delayed ministerial meeting eventually happens.

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