Perspectives, WTO crisis and reform

Perspectives: The WTO survives, in limited form

Since a deal was reached at the World Trade Organization last Friday the trade policy community has been debating if has been achieved is only patching up the system or a good outcome that proves global deals can be reached.

What is clear is that the WTO will never solve all or even many of the issues facing world trade. More radical thinking will be required to genuinely bring the institution forward.

Ministerial summits tend towards the dramatic, with stories of rescue from potential failure.

In the case of last week’s WTO 12th ministerial conference in Geneva, it was the failure of Swiss airspace IT infrastructure that apparently prevented the plans of India’s trade minister Piyush Goyal to leave, allowing time for deals to belatedly emerge by the early hours of Friday. We can never know the counter-factual – which could have been an even more dramatic return from the airport.

What we do know is that on the Wednesday of the ministerial conference week there were serious indications of failure to agree on anything. But by Friday there was an outcome substantial enough to be debated as to its weaknesses and strengths.

The 1998 e-commerce moratorium on duties was extended again. Agreements on fisheries subsidies and a TRIPS waiver for COVID-19 vaccines were delivered and various other statements were agreed upon.

There was even a commitment to find a solution on WTO reform – including full restoration of the dispute settlement system by the next meeting in eighteen months. Nobody is banking on that last commitment being delivered – but equally it doesn’t quite look completely out of reach.

There is no question that the WTO has survived, and this against an increasingly problematic geopolitical background. The long-simmering tensions between US and China, the invasion of one member by another, and stronger-than-expected Indian exceptionalism were all reasons for which we may have been writing the obituary for trade multilateralism.

It is equally far too early to declare that the WTO is fully back in business. The celebratory tweets from the WTO citing ‘unprecedented’ outcomes – while understandable – seem rather overblown. No new ground was covered, and little that was agreed will make significant difference to businesses and countries.

The ministerial seems to have left us is with an organisation of 164 countries that want it to survive, but which remain deeply divided on how it should operate. That is something to build on as we analyse what happened and think of the next steps.

Low ambition is the global norm

Fine print of the agreements that were reached on fisheries subsidies and a COVID-19 vaccines TRIPS waiver are still being intently studied by experts and stakeholders. What can be said with some certainty is that the level of ambition of both was reduced to ensure all members countries could sign up.

Much of the work over the COVID-19 vaccines intellectual property waiver seems to have been done in the small group consisting of the US, EU, India, and South Africa in the months leading up to the Geneva ministerial. This led to protests from two other major pharmaceutical manufacturers, the UK and Switzerland – which were largely ignored.

Fisheries subsidies talks by contrast had seemed to be heading to agreement before India’s intervention sought to significantly lower the level of ambition. The resulting agreement has been the most controversial among experts: defended by some as going further than fisheries disciplines in agreements such as the Asia-Pacific trade pact CPTPP, criticised by others as leaving out major issues.

All this may be as good as it gets.

The days in which the US and EU could between them direct global trade rules are long gone, and differing points of view inevitably mean that there are limitations on what can be achieved.

That has already been recognised by members that have chosen to reach deals in smaller groups at the WTO – referred to as plurilaterals – such as the one on services domestic regulation concluded late last year.

The big question should now become: What is essential to the functioning of the global trading system? What is possible for all members to agree on in multilateral setting? And what will be taken forward by some in other ways and institutional settings?

Trade issues too wide-ranging and complex as base for global consensus

A list of all the issues that concern global trade, where the WTO could play a role in setting rules, monitoring implementation, and adjudicating disputes, would be very long.

It would start with the well-established disciplines on trade in goods, where divisions in the institution are so entrenched that there could simply be no meaningful action on food security in the wake of Russia’s invasion of Ukraine.

Services trade disciplines have yet to keep up-to-date with e-commerce let alone the ‘servicification’ of our economies. Data increasingly makes the world go round, but not so much at the WTO.

Climate-and-trade issues, including the emerging carbon border adjustments, are rapidly growing in importance.

Each individual issue is complex, in many cases much more thinking has to be done as to what global disciplines could deliver, even before contemplating any multilateral agreement. The WTO as venue for discussion may be the best one can expect in some cases at the moment, for example on the model of the Trade and Environmental Sustainability Structured Discussions – TESSD. Such discussions could lead further to an enhanced monitoring function of member activities, without seeking additional rules.

Constructing any sort of agreed, coherent framework will not be easy: even seasoned trade professionals are struggling to keep up with today’s policy landscape.

Setting priorities and thinking the unthinkable

For the WTO and member countries this is now a case of thinking through their realistic priorities for the multilateral system: what can be done in what format to deliver as much as possible a global system of rules. In doing so, a big question is whether all that is now set continues to be so.

Take two examples: the e-commerce moratorium and the Appellate Body. The first is such an article of faith that we have barely stopped to ask whether it is worth the effort. Most countries would not in fact impose tariffs on electronic transmissions, so should we worry so much about those few that would?  The moratorium also provides India with a powerful lever in their threats to veto it at every ministerial conference.

Equally, while we would undoubtedly prefer a fully functioning dispute settlement system, a number of countries have chosen to put an alternate in place after the US veto, and in other cases are finding ways around issues such as appeals-into-the-void that put litigation on hold – perhaps dealing with them bilaterally. Given that the US doesn’t seem to be certain about what it wants, the effort of second-guessing them could be a wasted one.

There is a certain inertia around groups and institutions, and it is always a big ask to move beyond the way things have always been done. The evidence from last week is that the WTO will survive this. Moving forward, though, might require more radical thinking.

 

 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.

Leave a Comment

Your email address will not be published.

*

This site uses Akismet to reduce spam. Learn how your comment data is processed.