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Modernisation of the multilateral trading system – WTO reforms


Modernisation of the multilateral trading system – WTO reforms

Modernisation of the multilateral trading system – WTO reforms

The multilateral trading system and the World Trade Organisation (WTO) are today under threat. The system is being shaken by increasing protectionism and the imposition of non-tariff barriers and more specifically, in recent times, tariff barriers, notably by the largest trading nations – the United States (US) and China. Trade negotiations have reached more than an impasse – and the dispute settlement system may well come to a grinding halt unless appointments to the Appellate Body are made.

These developments, among others, have brought into sharp focus broader issues such as the relevance, legitimacy and effective functioning of the WTO and the implications for global trade governance. Consequently, WTO groups and members (and international organisations) who support the multilateral trading system have begun to rethink and propose solutions to this deepening crisis.

Part of the proposals include addressing systemic issues of the WTO such as dispute settlement, the negotiation process and the need for WTO rules on 21st century trade issues (e-commerce, investment facilitation, domestic regulation of services, gender and disciplines for fisheries subsidies and micro, small and medium enterprises), among a host of other issues. Other proposals include a case-to-case application of special and differential treatment, and WTO rules on transparency.

It is beyond doubt that strengthening and modernising the multilateral trading system is urgently needed to ensure that the system is adapted to keep up with the realities of the 21st century as well as support inclusive development and growth. This is needed to restore confidence in and maintain the relevance and legitimacy of rules-based multilateral trading system.

The multilateral trading system has demonstrated its capacity to facilitate and safeguard trade and foster ‘global prosperity, growth, and job creation around the world, though the benefits from trade have not always been evenly distributed’.[1] The global economy has however evolved since the establishment of the WTO. A new cluster of substantive and complex issues has emerged, WTO membership has multiplied. Geopolitical economics and powers have noticeably shifted.

The appointment of Appellate Body (AB) members is being blocked by the United States (US). If appointments are not made, this could soon render the AB dysfunctional and incapable of hearing and resolving disputes between trading partners. There are proposals being made to address this impasse including changing the procedural requirements for AB vacancy filling.

An effective dispute settlement system is needed especially now that trade tensions between key WTO members (e.g. US and China, EU) are rising. It ensures that trade disputes are resolved, preserves WTO members’ rights and obligations and that the trade rules are enforced, and prevents power-based behaviour. It builds confidence amongst members in the multilateral trading system.

WTO members and international organisations have also called for the revamping of the decision-making in negotiation process. The WTO decision-making process is founded on the core principles of consensus and single undertaking. Single undertaking requires members to agree to the complete package of issues and that nothing is agreed until everything is agreed.

Over the years, WTO members seem to be committed to the single undertaking approach; but we have seen some moving away from this towards plurilateral approach. The single undertaking approach has arguably stalled many multilateral trade negotiations (e.g. Doha Round). Pursuing new issues through multilateral agreements is important but where impossible adopting variable geometry agreements like plurilateral or critical mass agreements is commendable. Plurilateral agreements apply only among participants but are also open to non-participants. For instance, plurilateral approach has worked in negotiating the WTO Government Procurement Agreement.

Plurilateral negotiations may be more appropriate to accommodate divergent positions on new issues like e-commerce, investment, domestic regulation of services and disciplines for fisheries subsidies. These approaches could reinforce and achieve progress in the global trading system.

As further negotiations, especially in the Doha Development Round, floundered, major trading states have opted to pursue bilateral and mega-regional partnership agreements covering new generation trade issues outside the WTO. The EU-US Trade in Services Agreement, EU-Canada Comprehensive Economic and Trade Agreement, Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the African Continental Free Trade Agreement (AfCFTA) are typical examples.

Worth noting is the nature of obligations or commitments that countries have agreed upon in these agreements. State obligations or commitments are implemented gradually/progressively and through cooperation frameworks especially in areas of competition policy, investment and intellectual property rights (e.g. AfCFTA, CPTPP). Such provisions ‘are compromise formulations resulting from negotiations involving parties with different needs and expectations’.[2] All these compromises are necessary to bring about comprehensive and modern trade agreements while respecting the diverse interest and needs of member states, but the legal nature of such obligations is vague and could be difficult to interpret and enforce.

The WTO trading system remains critical to maintaining rules-based governance for multilateral trade and economic prosperity. Reforming and modernising the multilateral trading system may not be easy considering the (political and economic) power asymmetries and divergent interests among members, but it is necessary and urgent. WTO members or groups should continue to push for reforms to restore the legitimacy and relevance of the multilateral trading system. Equally important is that the reforms should not only focus on making the multilateral trading system efficient and relevant, but also to ensure that trade contributes to sustainable and inclusive development; i.e. trade benefits are equally shared.

[1] Joint Communiqué of the Ottawa Ministerial on WTO Reform, 25 October 2018, available at https://www.tralac.org/news/article/13623-joint-communique-of-the-ottawa-ministerial-on-wto-reform.html

[2] See the tralac Working Paper, Implementing the AfCFTA: Obligations, Qualifications and Exceptions, available at https://www.tralac.org/publications/article/13388-implementing-the-afcfta-obligations-qualifications-and-exceptions.html

About the Author(s)

Talkmore Chidede

Talkmore Chidede holds a Doctor of Laws (LL.D) degree in International Investment Law from the University of the Western Cape. Talkmore also holds a Master of Laws (LL.M) degree (Cum Laude) in International Trade and Investment Law and a Bachelor of Laws (LL.B) degree, both from the University of Fort Hare. His research interests include international investment law, international trade law, regional economic integration and international commercial arbitration.

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