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Perspectives: Future of the WTO system: less action, more talking needed

 ‘It is Time for Action’ was the WTO Public Forum’s motto this year as negotiators in Geneva start working on reforming the institution. But current actions of major players undermine the global trade rules. Perhaps we need less ‘action’, but more big picture thinking and more long-term system fixes.

The rules of trade are increasingly being set outside Geneva.

The US Inflation Reduction Act, the EU’s freshly announced anti-subsidy investigation into electric vehicles from China, national security measures, EU environmental measures such as its new deforestation regulation are undermining the WTO.

There are however also first signs of hope. There is movement in the trade policy community from hoping the established system recovers, to realising we will need changes.

Trade policy community’s best minds start grappling with system challenges

Some of the best minds in trade policy are grappling with the need to rise to the occasion.

These come mostly in the form of weighty written contributions, in which it was possible to see emerging thinking on more fundamental ways to reconcile national interests and global rules in changed environmental and geopolitical circumstances.

Rather ‘time for action’, current times actually provide the opportunity for an improved discussion about where to take the system, in turn leading to a plan of action with some chance of being adopted.

Keeping up with the latest trade policy papers is always a tough job, there are so many now published.

Three contributions from some of the most experienced trade policy professionals on both sides of the Atlantic seemed to particularly catch the systemic nature of current challenges to the world trade system, and the need to think broadly in response.

Former WTO appellate body member Jennifer Hillman and Inu Manak from the Council of Foreign Relations produced a lengthy report Rethinking International Rules on Subsidies.

Veteran European University Institute trade professor Bernard Hoekman and others have an e-book on Non-economic Objectives, Globalisation and Multilateral Trade Cooperation.

There was is a new report on Principles of International Law Relevant for Consideration in the Design and Implementation of Trade-Related Climate Measures and Policies from an International Legal Expert Group for the Forum on Trade, Environment & the SDGs also known as TESS.

On top of these came a number of new books, some of them launched at the WTO Public Forum, such as that by former Spanish foreign minister Arancha González, The Trade Handbook: Making Trade Work for Prosperity, People and Planet, and former WTO deputy director-general Alan Wolff’s Revitalising the World Trading System – to name but two.

Synthesising their key recommendations and discussing their application will inevitably take time.

But this is a job worth doing.

Whether the new recommendations can be agreed in time is another question.

Unilateralism is creating new rules… which will make future global consensus more difficult

It is not the first time that new trade rules have been created outside of the WTO, for example in bilateral trade agreements. What is new is the increasing number of mostly unilateral measures now being enacted which appear to breach WTO rules.

Highly questionable subsidies contained within the US Inflation Reduction Act have pushed the extent to which countries will brazenly demonstrate their support for national production or that from free trade agreement partners.

The EU’s CBAM and deforestation rules are extending precedent not least for the way process and production methods are treated by trade rules.

Even within the EU, an announced French scheme to incentivise electric vehicle purchase looks likely to subtly discriminate against Chinese production, even before the EU investigation into subsidies is concluded.

Countries will and do argue that China’s cheating was so widespread, and the climate crisis so important, that such action is necessary. But underlying the measures is a generalised belief that the WTO is an ineffective venue for such conversations.

All of this deepens a system of parallel trade systems, the core WTO rules and then everything else, increasingly without either having obvious superiority.

That isn’t a sustainable situation. And there is already pressure to bring such conversations back to try to recreate a single global legal reference. Countries will however want to retain what they have already legislated, making agreement all the more difficult.

More serious discussion needed, now

At difficult times such as this for the world trade system, there is a tendency to clutch at anything remotely positive. Renewed discussions on reforming and reviving the WTO dispute settlement system may be such an example.

After considerable frustration, there seems to be some progress. There isn’t enough yet to be confident of a result by February’s WTO 13th ministerial conference, but at least to think that a solution is a possibility.

There is perhaps some sense of necessity and urgency growing among countries.  This would be in keeping with the common behaviour across governments and companies alike which consists of only taking action when there is a real ‘burning platform’.

Yet, the perceptible progress on dispute settlement does reflect considerable efforts of a number of people over recent years to resolve the impasse, as well as many conversations and serious policy papers.

Repeating this more broadly would seem to be a good idea. Experts need to be coming together with officials, NGOs, businesses and many more to start to scope the solutions to today’s trade policy challenges – in particular on climate change.

Perhaps this year’s WTO Public Forum was too early, the major papers are only just being presented. But they now need to be the subject of intense discussion, so that foundations can be found for a new consensual alternative to unilateral action.

 

 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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