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Prospects for reforming/strengthening the WTO


Prospects for reforming/strengthening the WTO

Prospects for reforming/strengthening the WTO

Media coverage of the discussions at the recent World Economic Forum in Davos (which combined globalization issues with the “Fourth Industrial Revolution”) sketched a mixed and at times nervous picture of the future of the global economic order. The United States (US) – China trade war, protectionist trade policies, disagreement about the suitability of the liberal consensus for national and international economic policies, the inability to agree on climate change remedies, the increasing prospect of a “hard” Brexit, and a crisis in the World Trade Organization (WTO) are all evidence of issues which merit urgent joint attention but are avoiding easy solutions.

It is unrealistic to put all of these issues on one single agenda. And the WTO is not the right forum for addressing all of them. Some of the urgent global problems (e.g. climate change) need to be resolved elsewhere. We take a look here at the difficulties presently faced by the WTO and some of the proposals about how to tackle them.

In October 2018, the Canadian government convened a high-level meeting billed as the Ottawa Ministerial on WTO Reform. Representatives from Australia, Brazil, Chile, the European Union (EU), Japan, Kenya, Korea, Mexico, New Zealand, Norway, Singapore and Switzerland joined Canada in discussions on how to “strengthen the multilateral trading system”.[1] Their aim is to identify concrete proposals to improve the WTO over the short, medium and long term. Discussions will focus on efficiency and effectiveness, safeguarding and strengthening the dispute-settlement system, and reinvigorating the WTO’s negotiating function.

On 25 January 2019, this group issued a second statement. They then emphasized the importance of the WTO’s deliberative and monitoring functions and “ability to solve trade concerns without litigation”. They urged “all Members to constructively engage in negotiations over the coming months to achieve a comprehensive and effective agreement on fisheries subsidies in 2019”.[2]

The Ottawa Groups is composed of important players, but the US and China are absent, while only one African nation (Kenya) participates. The US and China are bogged down in their own bilateral tussle. In December 2018 Washington agreed to a 90-day truce. This period comes to an end on 1 March 2019 and no bilateral deal is in sight. Some arrangement will presumably be reached but there is little sign that China will make all the concessions the US is seeking, such as regular reviews of China’s progress on pledged trade reforms as a condition for a trade deal.[3]

The African Group issued a statement at Davos in which they called for an end to “WTO-inconsistent unilateral measures”, the need to resolve the Appellate Body impasse, and advancing the longstanding matters of importance to Africa, notably on trade distorting domestic support, cotton, public stockholding, net food importing developing countries, fishery subsidies, Special and Differential Treatment, and desisting “from making demands on African countries in accession that are inconsistent with their levels of development and capabilities”.[4]

Could we see more new trade deals outside the multilateral framework, in the form of new Partnerships like the one concluded between the EU and Canada a while ago? If a hard Brexit is the final outcome of an already messy divorce from the EU, the UK will in future trade under Most Favoured Nation (MFN – also referred to as WTO terms) rates and principles. New and comprehensive Free Trade Agreements for the UK will be inevitable but not easy to conclude. The claims by some Brexiteers that the UK will soon be able to engage in robust trade with the rest of the world are simply unrealistic.

There will be attempts to conclude other regional trade deals too, but if the main stakeholders are involved, they take a long time to negotiate and are difficult to conclude. Brussels recently told the US that a comprehensive bilateral trade pact between them is unlikely. The EU’s objectives for trade talks with Washington are narrow and focused on lower tariffs on industrial goods and the harmonization of some regulations. A full-fledged free trade agreement which will include agricultural goods and SPS standards is not on the cards.[5]

What strikes one about the debate about the future of the WTO is how nations and regions differ in their expectations about the priority areas to be reformed or strengthened and the organization’s future role. Some emphasize the need for “strengthening” existing multilateral structures and a return to normal working procedures (in particular on dispute settlement and the functioning of the Appellate Body); others want bold new disciplines about the challenges posed by the “Fourth Industrial Revolution”. Africa prefers a return to the Doha Development Agenda, while others point to deficiencies in the tool kit of the WTO. The latter claim that the WTO cannot cope with the unique challenges posed by new technological developments and Chinese trade and commercial practices.

These divergent expectations and different priorities suggest that meaningful WTO reforms should not be expected soon. Global trade structures seem to be in a transitionary phase.

[1] pdf Joint Communique of the Ottawa Ministerial on WTO Reform (34 KB) , 25 October 2018

[2] pdf Joint Communique of the Ottawa Group on WTO Reform: Communication from Canada (94 KB) , 25 January 2019

[3] U.S. demands regular review of China trade reform. Reuters, 18 January 2019.

[4] pdf African Group Statement at the Informal WTO Ministerial gathering, WEF, Davos (154 KB) , 25 January 2019

[5] No Sweeping Free Trade Deal, Brussels Tells Washington. Foreign Policy, 18 January 2019.

About the Author(s)

Gerhard Erasmus

Gerhard Erasmus is a founder of tralac and Professor Emeritus (Law Faculty), University of Stellenbosch. He holds degrees from the University of the Free State, Bloemfontein (B.Iuris, LL.B), Leiden in the Netherlands (LLD) and a Master’s from the Fletcher School of Law and Diplomacy. He has consulted for governments, the private sector and regional organisations in southern Africa. He has also been involved in the drafting of the South African and Namibian constitutions. He grew up in Namibia.

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