Quo Vadis, World Trade Organization?

When the Twelfth WTO Ministerial Conference (MC12) was—once again—postponed late in the evening of November 26, 2021, just days before the meeting was about to kick off and with many delegations already in town, some said that everything but war had happened to the organization.

Fast forward to late February 2022, when any hopes of reconvening the ministers in the spring were swept away by Russia’s invasion of Ukraine. International trade, already crippled by the supply chain crisis caused by the COVID-19 pandemic, has taken another hit with the parallel impact of global supply shortages of wheat, fertilizer, and, through secondary demand, other grains, as well as increasing energy prices. And this is all combined with chaotic policy responses and the never-ending pandemic-related shipping problems. The World Trade Organization (WTO) has lowered its forecast for merchandise trade volume growth to 3% in 2022 from its previous prediction of 4.7% and to 3.4% in 2023.

The WTO has never been as necessary as it is today. However, questions about the organization’s ability to deliver a rapid response to the global crisis seem even more valid after 2 years of discussions about its response to the pandemic that have yet to yield any outcome. Having brought 20-year-old fisheries subsidies negotiations to the finish line, WTO members will still need to prove that they can conclude the deal at the finally happening MC12.

WTO members might disagree about many things, yet one thing most seem to agree on is that the organization is in dire need of reform.

WTO members might disagree about many things, yet one thing most seem to agree on is that the organization is in dire need of reform. While even its harshest critics admit that if the WTO did not exist, it would need to be invented, most members see obvious problems with negotiating mandates that were never delivered upon, a dispute settlement system that has been crippled by the Appellate Body crisis, and even the failure of regular exchanges at the WTO committees to proceed as intended. Many members believe the organization’s negotiating agenda has been taken hostage by a group that wants to see its own priorities resolved first. Some developing countries believe the WTO could do much more to deliver on its development agenda, both through its negotiating priorities and through more down-to-earth issues such as technical assistance and capacity building, as well as by better arranging its schedules to ensure that small delegations can participate and allowing more time for resource-stretched members to better understand the issues at hand and get instructions from their capitals.

What Needs to Be Reviewed?

1. The negotiating function. The WTO’s consensus-driven nature has become both its biggest strength and its biggest curse. One member can block any decision and stop any negotiations from proceeding. This makes getting to a multilateral agreement extremely difficult. Since its establishment in 1995, the WTO has concluded only one new multilateral accord, the Trade Facilitation Agreement, though it’s very close to a second one if the fisheries subsidies negotiations are concluded at MC12. Many other negotiating processes have stalled as members failed to find a way to proceed in a 164-large group. In response to this perceived paralysis, “coalitions of the willing” have recently started to emerge on a broad range of trade-related issues, from e-commerce to the environment. Yet some members are deeply uncomfortable about these processes, which they feel, were not properly mandated to take place at the WTO. These members believe the full membership should instead focus on and sort out many of the Doha Development Agenda leftovers, in particular focusing on issues important to developing countries. Such a position, in turn, frustrates members who believe the WTO should be able to modernize its agenda and begin responding to the new challenges to international trade and sustainability.
   A sub-issue of the debate around the WTO’s negotiating function is the ongoing tension about the role of special and differential treatment (SDT) for developing countries in WTO agreements and which members should be allowed to use it. The United States, in particular, has pushed for strict limits on which members should be able to benefit from differential treatment. Other members argue that SDT is a principle of all WTO negotiations and that the current system (under which members can designate themselves as “developing” or not, and can also choose whether to avail themselves of SDT in a particular agreement, or not) should remain.
2. Dispute settlement system. The WTO’s dispute settlement system has been hobbled since the United States refused in 2019 to agree to the appointment of new members of the organization’s Appellate Body, which reviews dispute settlement decisions. The crisis remains unresolved, despite monthly statements about “the urgency and importance of filling the vacancies in the Appellate Body.”
   New Zealand’s Ambassador David Walker was asked to lead a process (dubbed “the Walker process”) that identified a number of principles in the functioning of the Appellate Body around which many views seemed to converge but which didn’t satisfy the strongest critics of the Appellate Body. However, members now seem to be ready to look into ways to revamp the WTO dispute settlement system to better serve the organization. It is not clear whether the Appellate Body—or any two-tier system—would be the outcome of such a discussion, but interest appears to be brewing again. In the interim, a group of members established the Multi-Party Interim Appeal Arbitration Agreement (MPIA) to resolve appeals of disputes between themselves. The first MPIA arbitration is now under consideration. However, in the longer term, a multilateral solution would still seem to be the preferred option for most members.
3. Regular committees’ work and transparency. While several of the WTO’s regular bodies have earned praise for their constructive technical work (in particular, the TBT Committee, the SPS Committee, and the Trade Policy Review Mechanism), many others have been challenged by the continuously disappointing record of the provision of information needed for their activities by the WTO members. While some members could make a good case about their lack of capacity to collect and submit such data, this cannot explain the vast amounts of information that never reaches such important bodies as the Subsidies and Countervailing Measures Committee, which collects data on members’ government support. It is important to note that developed countries are not always leading by example, opening up the question of how much should be expected from members whose administrations are facing even more challenges.
4. The Secretariat’s role. While the roles of members and the Secretariat have been very clearly defined since the WTO was created, questions are being raised regularly about the best ways to use the Secretariat’s broadly recognized competence to better assist the membership.

What Are Members’ Priorities?

Some members have already identified their WTO reform priorities. These include the European Union (revival of all three principal WTO functions, sustainable development, a new approach to SDT, modernization of WTO rules, and creating an empowering environment for plurilateral agreements), the United States (reviving the negotiating arm, promoting transparency, improving compliance, addressing level playing field issues, and global market distortions), the African Group, Cuba, and India (preserving the WTO’s consensus-based decision-making principle, safeguarding the SDT’s existing architecture and the unconditional rights to SDT of any developing country member, prioritizing development issues, restoration of the Appellate Body and two-tiered dispute settlement system, and no additional transparency requirements for existing agreements). For many other members, however, the discussion about the details of the WTO reform still seems to be in its early stages. A recent communication by the least-developed country (LDC) group brought a welcome reminder of the perspective of this group (inclusive negotiating processes, taking LDC capacity constraints into consideration, restoring the two-tiered dispute settlement system, and more assistance to LDCs, including in notification and transparency efforts), together with some technical suggestions about how to assist its members.

How Can Reform Happen?

While MC12 had been expected to kick off the process of reform discussions last December, the broad disagreements about how to move ahead have generated considerable frustration. Some members have announced that they will start the work on the reform “immediately.” It is not yet clear how this group intends to move forward, perhaps by tabling ideas or proposals for MC12. It is also possible that members will put forward a process for reform discussion that ministers will agree on at MC12. However, the disagreements on both the process and the targets remain large: while some countries prefer to move in a working group of interested members that would hopefully be able to prepare the reform proposals for ministers’ consideration by MC13, others prefer the General Council review process in dedicated sessions, led by the General Council Chair, who would report at MC13.

The choice before members is what sort of cooperation they want to pursue at the WTO and whether they are prepared to move past their frustrations into constructive dialogue with each other.

The WTO appears to be at a critical point on all of these issues. Members are frustrated—but for different reasons—that they have been unable to use the organization as a forum to advance their specific priorities. The WTO remains the only multilateral economic body with treaty-making power and has both the infrastructure and an extremely skilled secretariat that could be used to forge international cooperation on new issues, such as plastic pollution, as well as legacy policy issues, including agricultural subsidies. The choice before members is what sort of cooperation they want to pursue at the WTO and whether they are prepared to move past their frustrations into constructive dialogue with each other.