There’s Another Way of Looking at the WTO

As the WTO’s next ministerial conference at the end of November comes into view, many commentators portray it as another “make or break” moment for a troubled organization in decline. It’s become trite to describe it as in crisis, dysfunctional and irrelevant.

Let’s take these in reverse order. Irrelevant? A survey of the issues which WTO members suggested as worthy of attention at the ministerial conference reveals a potential agenda at least twice in terms of size and scope compared with that of, say, ten years ago.

There is of course the overarching issue of the WTO’s response to the pandemic. Then there are various ongoing negotiations on important subjects like fisheries subsidies, agriculture and others. The future of the moratorium on imposing customs duties on electronic transmissions will have to be addressed. There is a range of what the WTO describes as “member-led“ initiatives on subjects like services domestic regulation, e-commerce and investment facilitation for development. And there is a huge agenda on trade and environment coming down the line. This is not to mention the cause célèbre of WTO reform.

The potential agenda was at one point so extensive that even the energetic director-general Dr. Ngozi Okonjo-Iweala had to plead with members to focus on a limited number of priority issues, otherwise the conference would be unmanageable.

There are many reasons why this should be so, including a sizeable list of legacy issues, geopolitical shifts causing trade friction, and governments wanting to push their domestic agendas on the international stage. The (partially) binding nature of commitments also makes the WTO an attractive forum for many “trade and…” subjects.

But it’s hard to avoid concluding that there is a growing realisation that the big global issues confronting the world today require global solutions. Only the WTO can deliver on that. Preferential trade agreements among groups of countries are all very well but they have limitations in terms of coverage, scope and international coherence. In any case, many of them simply restate basic WTO commitments.

The demand for the WTO’s services is clearly not only still there, but it continues to grow. This is not the agenda of an irrelevant organization.

Let’s turn now to the second charge – that the WTO is dysfunctional.

Any inter-governmental organization of 164 members operating a decision-making system based on consensus is almost by definition going to be inefficient. But what’s the alternative? Are major economies prepared to fall into line on politically sensitive trade rules just because they have been out-voted in Geneva? Some may regard that as a desirable aim in the long term, but in the short term it’s a recipe for disintegration.

That’s not to say that nothing can be done to improve the WTO as an institution. The current system too easily rewards blocking and hostage-taking of issues. Inherited practices in areas such as special and differential treatment, transparency and the committee structure need an overhaul.

The current inability of the dispute settlement system to operate fully is a major issue. This was once known as “the jewel in the crown” of the WTO, but was that really so? Was a system in which there were on average 25 trade disputes per year while negotiations floundered sustainable, or what the founders of the WTO in the Uruguay Round had in mind?

The imbalance, for reasons to do partly with the attitude of governments and partly with the appellate body itself, almost inevitably meant that the system would run into the buffers, as it eventually did. It turned out that the world – or at least some important parts of it – wasn’t ready for a supra-national international trade court. The good news, however, is that we now have the opportunity for a reset of dispute settlement. The exact shape may take some time to emerge but the chief antagonist (the U.S.) is now signalling that it will engage when it thinks the time is right.

Then there is also the inability of the organization to update its rulebook. Here too there may be light at the end of the tunnel. Large groups members, frustrated at their inability to make progress through the normal negotiating channels, have launched a number of “open plurilateral” or “member-led” initiatives at the WTO. All members can participate, even if they do not subscribe to the aims.

A case in point is the initiative on services domestic regulation. Stymied in the official WTO committee, 65 members have developed and agreed a “reference paper” incorporating additional, streamlined disciplines (thereby cutting compliance costs to business) which they intend to implement on an MFN basis through their WTO services schedules.

Other similar, well supported initiatives on e-commerce and investment facilitation for development are in the pipeline. Various initiatives on trade and the environment have recently started. These may not all be susceptible of full implementation on the same basis as services domestic regulation but, usually, where there is a will there is a way.

It’s also conceivable that over time these developments will play back into the WTO’s negotiating dynamics, free up the system and possibly even affect the architecture of its constituent agreements.

In addition, there are realistic expectations that the long-running negotiations on fisheries subsidies can be wrapped up at the ministerial conference.

Nor should we forget that the WTO is only a forum, not an actor in itself. Its difficulties essentially reflect conflicting trade policies among its member governments. More honesty is needed in this regard.

For example, there has been a repeated tendency for the G20 (evident again in the G20 trade ministers’ statement of 12 October 2021) to regard the WTO as a broken institution for which there is a procedural fix. While its attention to trade is undeniably helpful, the G20 is long overdue moving beyond ritual protestations of willingness to strengthen the institution to finding common ground or joint leadership on specific issues.

Lastly, there is the meme of the WTO being in crisis. This rested to a significant extent on its near-death experience at the hands of the Trump administration. That threat has receded somewhat with the Biden administration now indicating its willingness to engage in a limited way at the WTO.

We should acknowledge that the WTO is not a major factor in U.S. trade policy. In a possible straw in the wind, some influential actors in Washington have proposed a new “trade compact” among developed market-oriented economies as a competitor to the WTO. On the other hand, it was encouraging to see the U.S. recently joining the services domestic regulation initiative.

The WTO itself plays counter-productively into the “crisis” scenario by ramping up expectations whenever a ministerial conference is on the horizon. It has done so again this year: we are told that it will lose all credibility if the conference does not produce meaningful results on the trade response to the pandemic and fisheries subsidies. Perhaps this is so, but it is also a time-honoured tradition to use these conferences as pressure points to try to force issues to conclusion. Would it be more sensible to treat them as routine stock-taking events and concentrate on producing results incrementally in Geneva?

The “crisis” may not have gone away entirely but it will dissipate if the WTO is seen as relevant and functional (even if still intrinsically somewhat inefficient). There is certainly a very strong case to be made for its continuing relevance, and there are grounds for believing that it is on the way to regaining more functionality.

Unheralded, under-appreciated and often unnoticed, the WTO remains the lodestar around which international trade revolves.