WTO at 30 after decades of challenges

Bangkok Post

5 days ago

When I sat down to write an article "WTO at 10" for a commemorative book for the occasion in 2005, little did I know of the huge challenges the WTO and the multilateral trading system would have to confront in the following two decades.
During its first decade in existence, the WTO basked in a mood of cautious optimism as its membership continued to expand and the process of globalisation was in full swing, also helped by the launch of the Doha Development Agenda and the joining of China in December 2001. The impact of China's WTO accession on the Chinese economy itself and on the global trading system has been unprecedented, part of which I have elaborated in my co-authored book (2002) with Mark Clifford on China and the WTO: Changing China, Changing World Trade.
During its first ten years, the WTO stood the test not only arising from the Asian financial crisis (1997-98), the massive protests at the third Ministerial Conference (MC) in Seattle in 1999, but also some sensitive and high-profile dispute settlement cases. The crisis-hit countries in Asia could find their way out of the predicament, not least because the rest of the world kept its markets open and absorbed their exports. Their current accounts became more balanced, and trade has proved itself to be a powerful remedy, more so than the counterproductive conditional IMF standby support.
In the meantime, the WTO's dispute settlement system has functioned as a remarkably efficient and effective mechanism for resolving trade conflicts between WTO members. Emeritus Professor Giorgio Sacerdoti, an international law professor at Bocconi University in Milan and former member of the Appellate Body offered in a book on the contribution of the dispute settlement system this comment: "The past ten years show the vitality of the dispute settlement system as had been envisaged, as well as its central position within the WTO as an element capable of ensuring respect of agreed rules."
Although the Cancun Ministerial Conference in 2003 could not advance the Doha Agenda, it significantly marked the emergence of developing countries as active participants in the negotiation process. They have become serious demandeurs, witnessing their joint group approaches, their consistent push on Special and Differential Treatment (SD&T) proposals, support for LDC accessions, and, most importantly, the technical assistance initiatives through the Aid for Trade programme, enabling developing countries to meet international standards and access global markets. The introduction of cotton as a specific commodity for negotiation at Cancun, with my consistent support, also helped to focus on an item of major export earnings for several LDCs in Africa.
Like several other negotiation issues, cotton, SD&T, and Trade-Related Intellectual Property Agreement (Trips) and its public health flexibilities would gain more traction going into the second decade of the WTO.
WTO discussions on cotton took up two tracks: one on trade aspects and another on development assistance to raise productivity and enhance its value chain. Agreement was reached at the 2015 Ministerial Conference to prohibit the use of export subsidies and call for a further reduction in domestic support for cotton products. Since the launch of the SD&T negotiations in 2001, the issue continues to be discussed at several ministerial meetings, with only a ministerial declaration to be adopted at the 13th Ministerial Conference in 2024 as the first outcome ever made on agreement-specific proposals applicable to all developing countries.
On Trips and public health, progress was made before the Cancun Ministerial to create flexibilities in using compulsory licensing beyond serving only domestic markets, but also allowing export of medicines to countries in need. This Trips amendment carries a humane face to WTO agreements in that countries with no manufacturing capacities in the pharmaceutical sector can now do parallel importing of the necessary medicines to deal with domestic health problems. This extension was given full legal effect in 2017 and further clarified at the WTO's 12th Ministerial Conference in 2022 in order to support equitable access to Covid-19 vaccines.
Although the Doha Agenda could not be brought to an end in the WTO's second decade, another significant milestone was achieved in the form of the Trade Facilitation Agreement (TFA), coming into force in 2017. This agreement facilitates the harmonisation of export and import processes, resulting in the speeding up of the movement, release, and clearance of goods, including those in transit. According to the WTO World Trade Report 2024, the implementation of the TFA has led to a substantial increase in trade, with agricultural trade among developing economies increasing by 16 to 22%.
The book The WTO at Twenty: Challenges and Achievements, published in 2015, concludes that the WTO has achieved much over its first 20 years, but the success of the WTO has inevitably given rise to new challenges. Indeed, the challenges came through thick and fast in the WTO's third decade. Multilateralism has come under threat as geopolitical polarisation began to take hold while the Doha negotiations dragged on with no end in sight. As trade tension grew between the US and China, the global trading system stuttered with rising uncertainty exacerbated by a growing number of trade restriction measures. Environmental concerns also contributed to border regulations that put more restraints on normal trade flows, such as carbon taxes and border carbon adjustment measures.
The Appellate Body that has been an effective mainstay of the WTO's dispute settlement system (DSS) has been disabled since December 2019 due to the US blocking the appointment of new judges. With no appeal quorum, the enforceability of WTO rules is rendered impossible.
Some alternatives to the existing system have been raised, such as the Multi-Party Interim Appeal Arbitration Arrangement (MP/A) with limited applicability. The US blocking has come with its concerns about the Appellate Body's interpretation of WTO rules, which has led to proposed reforms of the system, claiming the body's overstepping of its mandate. This US blocking is somewhat ironic, considering that the US has been the most prolific user of the DSB and gained positive rulings on a majority of complaints. When I was at the WTO, I made attempts to resort to arbitration as a means of dispute resolution. Now again we see this proposal being brought forward, recognising the possibility of applying "expeditious arbitration" under Article 25 of the DSU.
As the WTO moves into its fourth decade, it needs to prepare itself to counter an extremely disruptive period in the world trading system.
US President Donald Trump's 'liberation day' tariff hikes and subsequent retaliations or submissions are unprecedented and unpredictable. While the US will remain one of the world's most significant markets, its share in the world trade volume may gradually decline, while the share of South–South trade will continue to expand. But this chaotic situation should not really benefit anyone, and whether it will help to narrow the US trade deficit remains to be seen.
The essential role of the WTO as the guardian of the rules-based trading system will be more needed than ever before. In the words of the late Cuban president Fidel Castro, as spoken to me when I was at the WTO: "The world needs the WTO to bring order to this chaotic world."
In order to face up to this existential threat, the WTO must be able to seriously reform itself before it's too late. I fully concur with WTO Director-General Ngozi Okonjo-Iweala in her strongly prodding the members to agree on 'deep and thorough' reform proposals for the 14th Ministerial Conference in Yaoundé, Cameroon, next year, to ensure the WTO's relevance.
First and foremost are the reforms of the DSU to entice the US back into the system, which needs to be simplified and easily accessible. This could lead to subsequent WTO-backed orderly discussions and negotiations to bring back the wayward tariffs into an acceptable configuration.
In the meantime, the WTO may intervene to bring relief to the low-income developing countries injured by the tariff hikes. The chair of the General Council has been conducting informal consultations with the membership to ensure the impact of tariff escalations and to thrash out some joint actions to deal with the crisis. The process can help pave the way for focusing on the key reforms at the MC 14.
In view of all these ongoing efforts, I do have full respect and confidence in the management of the WTO with the pragmatic collaboration of the membership to successfully preserve and strengthen the rules-based trading system we all need. Time will tell whether the disruptive emergence of unprecedented tariff escalations will prove to be highly costly to all economies of the world and will ultimately fail to serve the corrective purposes they were intended for.
Supachai Panitchpakdi is a veteran Thai politician and former director-general of the World Trade Organization (WTO), as well as a former secretary-general of the UN Conference on Trade and Development (UNCTAD).