The WTO – Doing It All Again

The WTO – Doing It All Again

Is it sensible for the World Trade Organization to have ministerial-level meetings every two years or so? It’s an open invitation for trouble makers to obstruct decisions in the intervals between meetings in order to build up tactical positions. It turns nearly every ministerial conference into a cliff-hanger, with serious risk of reputational damage if things go wrong. Contrast this with, say, the OECD which has uneventful, routine meetings every year. However, supporters of current practice argue that the WTO is a different beast and it’s necessary to create pressure points in trade negotiations.

Either way, they’re doing it all again. Another WTO ministerial conference will take place very shortly, in Abu Dhabi, from February 26th to 29th – the thirteenth such meeting, hence dubbed ‘MC13’.

What’s on the agenda, and does it matter?

Taking the last point first, it very much matters to business that the WTO should remain a viable organization. Seldom acknowledged, it is the custodian of a system of rules negotiated incrementally over the last 75 years, providing the basic plumbing of the global trading system from tariff ceilings to trade remedies, food and product safety, regulation of trade in services and patent protection. It has been estimated that at least 75 percent of world trade takes place on WTO terms. Regional and bilateral trade agreements also incorporate key elements of the WTO.

Countries by and large still respect the WTO rule book, providing a significant level of predictability for business. It’s rightly been said that, if the WTO didn’t exist, we would have to invent it. The problem, however, is that it would be impossible to build a new system from the ground up in today’s fractious world. So we should be careful not to take the WTO for granted, nurture what we have (imperfect as it is) while improving it whenever the opportunity arises.

The agenda for MC13 is extremely broad and there is only three and a half days for Ministers to find consensus. Many of the less controversial items will have been largely dealt with through assiduous preparation in Geneva but, as usual, a hard core of big-ticket items remains outstanding.

Getting it done?

Director-General Ngozi Okonjo-Iweala recently said that, while she was encouraged by members’ stamina and passion in advancing the MC13 preparations, “frankly speaking, we are still not where I would have wished us to be…” But, she went on “…we never say never. We are going to get it done.”

‘Getting it done’ can encompass a range of outcomes – from full to partial agreement, to rolling negotiations forward to the next conference. At the risk of over-simplifying, there are three major issues which will capture attention as the conference unfolds.

First, a partial agreement on fisheries subsidies was reached at the last ministerial but this excluded the thorny question of disciplines on subsidies contributing to overcapacity and overfishing. The crux is the extent to which countries which heavily subsidize distant-water fishing fleets (such as China, South Korea, the EU and Japan) are prepared to accept curbs, and on what basis. Another issue relates to the scope of carve-outs for developing countries. Positions going into the conference remain far apart.

Secondly, negotiations on the sensitive issue of agricultural trade have made very little progress, with sharp divisions between agricultural exporters, those with largely defensive interests, and developing countries. Market access, export restrictions which exacerbate food insecurity, and reforming farm subsidies are among the controversial topics.

A potential flashpoint concerns subsidies associated with public stockholding for food security. India is leading a major push for developing countries to have a free hand in this area but this is being strongly resisted by farm exporting countries, which are worried about the potential for trade distortion should such stocks get on to world markets. India has threatened to block any progress on agriculture if it doesn’t get its way.

It is therefore uncertain currently as to whether any outcome on agriculture can be delivered at MC13. Probably the best that can be hoped for is a roadmap for future negotiations leading to MC14.

Thirdly, the US has, since 2019, single-handedly blocked appointments to the Appellate Body, rendering the upper tier of the WTO’s dispute settlement system inoperative. The US was incensed at what it saw as judicial overreach but it had other criticisms as well, some of which were shared by other countries.

Heading towards a deadline

Intensive talks in Geneva have produced convergence on some areas of reform such as improving conciliation and mediation, streamlining of panel procedures, and guidelines for adjudicators. However, there is no agreement yet on the future of the Appellate Body and the US has signalled that it is not going to move at MC13 (especially since this is a presidential election year). Accordingly the outlook, once again, is that negotiations will be rolled forward after MC13.

There is one hard deadline. This concerns a moratorium on imposing customs duties on electronic transmissions, which will expire at MC13 unless it is renewed. At issue is whether customs duties could or should be applied to the content of cross-border digital transmissions, for example an e-book or a set of architectural plans.

Some observers say this is impractical but countries such as India, South Africa and Indonesia want to have the policy space to be able to do so. A larger set of WTO members – including Australia, China, Japan and the EU – think the moratorium should be renewed.
It’s an important issue because the WTO could end up restricting trade rather than facilitating it. For the first time, customs duties could potentially be applied to trade in services, which would add yet another layer of bureaucracy for firms to deal with.

For these reasons the international business community is mobilizing. A ‘global services coalition’ is lobbying for extension. In the US, over 20 major trade and industry associations (including the Business Roundtable, Coalition of Services Industries, National Foreign Trade Council and US Chamber of Commerce) have written to senior administration figures expressing concern and urging action.

Related to the above, there will be a subplot in Abu Dhabi on so-called ‘plurilateral’ negotiations that have been taking place in the margins of the WTO in Geneva. These are not formally on the MC13 agenda but proponents will be looking to use the opportunity to advance their cause. One such item is a “Joint Initiative on E-commerce”, in which participation has now grown to 90 (out of 164) WTO members accounting for 90 percent of world trade.

This substantial group – which includes the US, EU and China – is within reach of an agreement. The main thrust is to facilitate e-commerce through providing a common basis for practices such as electronic contracts, signatures and invoices, while also promoting common approaches to other factors such as treatment of data and access to the internet. There is still work to do on some subjects such as electronic payments and on the scope of the agreement – significantly, whether it would cover financial services.

It’s worth noting that the ambition of this potential agreement had to be lowered last October when the US suddenly withdrew its interest in key areas under negotiation such imposing disciplines on restrictions on data flows and data localization, and on mandatory disclosure of source code. The US Trade Representative said there was a need to rethink policies in these areas. This is still controversial in Washington, while it also caused dismay among US allies in Geneva. The latter want to proceed with what is already on the table while, if possible, keeping the door open to come back to the missing elements.

What our research tells us

Indeed Penta’s 2023 policymaker research [add links to US federal and EU] revealed that policymakers in Brussels and DC recognised the negative effects of some US policies on US-EU relations, showing that there are limits to the assumed ‘shared values’ that form the foundation of an EU-US alliance as ‘like-minded countries’ and geopolitical allies, particularly against, for example, China.

The bigger institutional question is how ‘plurilateral’ agreements, such as that on e-commerce and a similar agreement on investment facilitation, developed among significant subsets of the membership, can be incorporated into the WTO legal framework. At present a consensus among the whole membership is required in order to do so. India and South Africa have voiced objections but many others think this is a pathway to rescue the WTO from negotiating paralysis.

Overall, taking a step back, we should recognize that the political context in many countries is currently hostile to international trade. Resilience and self-reliance are in vogue while international economic cooperation is out of fashion. Protectionism is infiltrating worthy causes. “The WTO” is not an actor in itself but merely a reflection of the trade policies – or lack thereof – of its constituent members.

In these circumstances it is unrealistic to expect MC13 to be a breakthrough meeting. At best, negotiations will be incrementally advanced. Hopefully a breakdown can be avoided.

Some may say that this is a missed opportunity and in a sense they are right. Modest progress, while welcome, may not excite the business community. However it’s a lot better than some of the current alternatives. The WTO sets a floor under dis-integration and will live to fight another day.

Stuart Harbison was Chief of Staff and later Special Adviser to two Directors-General of the World Trade Organisation. Previously, he was a lead trade negotiator for Hong Kong and head of its representation to the WTO. After that, he went on to serve as Special Adviser to the Secretary-General of the U.N. Conference on Trade and Development. With his in-depth knowledge of WTO agreements and processes, he advises Penta clients on international trade policy issues. To get in touch with our team in Brussels directly, please complete the form below. 

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