Trade and Investment

We can still save the World Trade Organization. Here's how

World Trade Organization (WTO) Director-General Roberto Azevedo (L-R) President of The World Bank Jim Yong Kim, Managing Director of the International Monetary Fund (IMF) Christine Lagarde, Angel Gurria, Secretary-General of the Organisation for Economic Cooperation and Development (OECD) and Guy Ryder, Director-General of the International Labour Organization (ILO) wait for the start of a meeting of leaders of economic and financial institutions with German Chancellor Angela Merkel, at the Chancellery in Berlin March 11, 2015.   REUTERS/Stefanie Loos/Pool (GERMANY  - Tags: POLITICS BUSINESS TPX IMAGES OF THE DAY)   - LR2EB3B1BSXOH

The WTO's 11th Ministerial Conference will take place in December 2017 Image: REUTERS/Stefanie Loos

Wallace S. Cheng
Head of Impact, Innovation and Development, Globethics Foundation
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Trade and Investment

Last week, at the World Trade Organization’s (WTO) Public Forum, I put this question to an audience: “Are you optimistic that WTO 11th Ministerial Conference (MC11) will be a success?”

Only one person responded yes.

The majority of officials and experts in the room were pessimistic and sceptical, partly because of surging economic nationalism, political nativism and radical protests against globalization. At a policy level, their lack of optimism may also have been because Uncle Sam had played down the possibility of any tangible outcomes from Buenos Aires when the MC11 takes place in mid-December 2017. Furthermore, it seems that ambassadors in Geneva have not yet formally kicked off negotiations regarding possible outcomes for ministers to chew over, despite there being fewer than 10 working weeks left before the meeting.

However, the audience and many of the public have missed two critical developments, which if recognized and acted on could lead to a successful MC11. One is the political messages from the G20 leaders’ discussion in Hamburg in July; the other is the high quality, technical works going on inside the WTO.

Image: WTO

Accounting for almost 80% of the world’s GDP and global trade, the G20 economies have taken the opportunity of their leaders’ summit to respond to public debates about the global economy and recalibrate the prime focus of the international trading system.

As Ricardo Melendez-Ortiz eloquently put it at a G20 session, where he commented on the complementary relations between the G20 and the WTO: “[The] G20 contextualizes the trade agenda that WTO needs to work on.”

Three political messages from the G20 Leaders Declaration in Hamburg could and should be furthered and materialized by trade ministers of G20 economies and other like-minded fellow members when conducting their conversations at the MC11.

First, safeguard the integrity of the international trading system. In Hamburg, G20 leaders underlined the “crucial role of the rules-based international trading system”, the principle of non-discrimination and the need to fight protectionism.

The rules-based trading system with a backbone provided by the WTO is under siege. At MC11, it is absolutely necessary to reaffirm the key principles of the rules-based trading system. It is crucial not to yield to power-based trade relations.

The second message is to recognize the shortcomings of the current trading system and commit to WTO reforms. G20 leaders stressed the urgency of “effective and timely enforcement” of trade rules and commitments and improving the WTO’s functions.

The enforcement of existing agreements and commitments and reform of the WTO’s three key functions of negotiation, monitoring and dispute settlement will certainly be a priority at the MC11.

The third relevant message from the G20 Leaders Declaration is the need to initiate a mandate for trade-related domestic policies. For the first time in the G20’s history leaders agreed to “exchange experiences” about adjustment policies, in the wake of trade and investment liberalization and technological change, and on “appropriate domestic policies”.

General view shows participants of the G20 taking their seats at the beginning of their third working session of the G20 meeting in Hamburg, Germany, July 8, 2017. REUTERS/Ludovic Marin/POOL - RC1C4C495040
WTO members should look to the political messages from the G20 meeting Hamburg Image: REUTERS/Ludovic Marin

It is important that the G20 leaders highlighted this point that many times trade was scapegoated for failed domestic policies including macroeconomic guidance, public services and social protection, redistribution arrangement, as well as trade adjustment policies. The automation and digitalization of the world’s economy drive home the urgency to exchange domestic policy experiences, which may bring positive energy to policy coordination in the future. If MC11 fails to act in this regard, the WTO will miss the boat.

In addition to political messages from the G20 leaders, an incredible amount of technical knowledge has been accumulated at the WTO. Within this knowledge are at least three low-hanging fruits which we can harvest, if we only decide to stand up rather than lying under the tree or sitting on our hands.

The first is to handle harmful fishery subsidies. This issue has been part of rules-based negotiations under the Doha Round negotiations since 2001. More importantly, in 2015, world leaders agreed on Sustainable Development Goals (SDGs), including a clear target of prohibiting or eliminating harmful fishery subsidies through the WTO by 2020. It is time for action at the MC11 as the window of opportunity is closing fast. If there is a deal on fishery subsidies at the WTO it will be the first WTO deal that doesn’t promote the commercial interests of its members but serves, as they should, the global public interest of sustainable development.

The second opportunity is to act on the legal clarity and regulatory coherence of e-commerce. The WTO established a work programme on e-commerce in 1998. In spite of high quality discussions that have covered almost all aspects of e-commerce and potential action that the WTO may take, it has not yet delivered any substantial outcomes except a moratorium on imposing customs duty on electronic transmissions. Twenty years later, we are already living in a digital age where the trade of non-digital goods has moved to the internet. Trade of digital goods is flourishing and some previously non-tradable services are tradable.

Whether MC11 is able to deliver a deal on e-commerce will be an indicator how relevant the WTO is in the 21st century, as the WTO’s stagnation on e-commerce is in sharp contrast to advancements at a regional level. About 20% of regional trade agreements that are notified to the WTO have e-commerce chapters and common provisions in regional deals include transparency, data protection, paperless trading, localization of computing facilities, affirmation of WTO rules and more.

The last piece of low-hanging fruit is the chance to address developing countries’ concerns relating to agriculture trade, in particular, public stockholding and special safeguarding mechanisms. The former is in response to the difficulties that some developing countries face under WTO rules when buying food at subsidized prices. According to an ICTSD report, the WTO Chair of agriculture negotiations recently said all members agreed on the need to have a “permanent solution” on public stockholding by MC11.

The issue of special safeguarding mechanisms for agriculture trade was seen by some as a deal-breaker at the Geneva negotiations back to 2008. Most recently, the proponents of this mechanism have proposed that WTO members at least agree at the MC 11 to establish a price-based or volume-based safeguard mechanism. Given the general imbalances in the agriculture trade rules tracing back to the Uruguay Round, which is believed to tilt in favour of rich countries, these two issues could once more be the deciding factor between success or failure of the ministerial conference in Buenos Aires.

Have you read?

Next week, more than 40 WTO members will hold a mini-ministerial meeting in Marrakesh, Morocco, which is expected to discuss a possible agenda for the MC11 in Argentina.

It is critical that these members engage in a similar stocktaking to this one, integrating both political messages from the G20 leaders two months ago and the technical knowledge work on the ground at the WTO into strategic thinking that can ensure the MC11’s has the right place in history.

In 1781, Immanuel Kant published the Critique of Pure Reason (Kritik der reinen Vernunft), illustrating his most profound philosophy of space and time. He described how time and space allow us to comprehend sense experience.

If success or failure is this kind of sense experience, then whether the WTO MC 11 is a success won’t be a guesswork. It is about doing the right thing in this specific time and place.

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