Green shoots for multilateral trade cooperation?
Author: Bernard Hoekman, European University Institute
After two postponements related to COVID-19, the 12th Ministerial Conference (MC12) of the World Trade Organization (WTO) was held in Geneva from June 12-17, 2022. Expectations for a successful meeting were low given of the war between Russia and Ukraine, the United States and China. geopolitical tensions and deep disagreements between WTO members ranging from agricultural support policies to the US decision to block the operation of the Appellate Body in 2019.
The WTO Press release called the outcome an “unprecedented package” that “underlines the important role of the WTO in addressing the world’s most pressing issues.” The hyperbole notwithstanding, MC12 was a significant achievement compared to expectations and the previous meeting, where ministers could not agree on a joint statement.
MC12 produced a new multilateral agreement on fisheries subsidies – the second new agreement since the WTO began operations in 1995. Ministers exempted World Food Program food purchases from export restrictions. They decided that developing countries could authorize the use of patented technologies to produce COVID-19 vaccines and supply them to other developing countries without the consent of rights holders. This decision showed that WTO members were able to reach an agreement on a very controversial subject and to do so in a way that differentiates developing countries. This is a long-standing problem at the WTO. The agreement includes a footnote encouraging developing countries with vaccine manufacturing capacity to commit not to avail themselves of this option. China has done so, illustrating that developing country status in the WTO does not necessarily prevent differentiation in the application of the rules.
The fisheries agreement is important because it responds to a global environmental concern and because repeated delays in reaching an agreement have undermined the credibility of the WTO as a negotiating forum. The deal is an “early” crop of issues on which there was consensus – the ban on subsidies for illegal, unreported and unregulated fishing and overfished stocks. Because it was not possible to agree on the coverage of other fisheries subsidy disciplines, the treaty is provisional – a sunset clause states that it will lapse unless rules complete are adopted within four years of its entry into force.
MC12 did little to strengthen the WTO’s ability to deal with pressing issues. Instead, ministers called for work to establish a fully operational dispute settlement system accessible to all members by 2024. They also instructed the WTO General Council and its subsidiary bodies to develop proposals on how to improve all functions of the organization for consideration at MC13 – in principle to take place before the end of 2023.
Other work programs focus on small economies, sanitary and phytosanitary measures, identifying lessons learned from the COVID-19 pandemic to enhance trade cooperation during crises, building resilience of net importing countries of food products and the examination of trade measures favoring the least developed countries. These complement open “dedicated discussions” and dialogues between groups of WTO members on fossil fuel subsidy reform, plastic pollution and trade in environmentally friendly plastics, and the development of trade and gender-sensitive policies. These initiatives complement ongoing plurilateral negotiations on e-commerce and investment facilitation for development.
Whether MC12 will mark a renewal of multilateral trade cooperation will depend on what materializes from these workflow. Much depends on the willingness of major players to cooperate and generate substantial proposals. If they don’t, MC12 could become a poisoned gift.
There has been a move towards unilateral trade-related regulatory measures in the EU under the banner of safeguarding strategic autonomy. The US has made clear its disinterest in negotiating new traditional trade deals, favoring cooperation on specific issues outside the WTO instead. If initiatives such as the EU-US Board of Trade and Technology and the Indo-Pacific Economic Framework for Prosperity become the core of ‘friend-shoring‘ at the expense of multilateral engagement, the green shoots of MC12 may not take root.
A necessary condition for multilateral engagement in the WTO is to “fix the machine” to enhance policy transparency, use WTO bodies to defuse business concerns and do dispute settlement more efficient. Progress on the institutional front is essential to improve the chances of concluding negotiations on long-standing issues such as agricultural policies, which proved impossible at MC12, and issues that were not presented at MC12 . These include rules on the use of trade policy in the fight against climate change, the management of the competitive fallout from industrial subsidies and the regulation of production processes and supply chains.
Ensuring that officials and decision-makers in national capitals are more involved in WTO deliberations can help shape agreements. There are significant discrepancies between many capitals and their representatives in Geneva with regard to action priorities. Greater use of targeting surveys could elucidate the views and preferences of stakeholders who are not at the table. Mandate the Secretariat to analyze the extent and impact of cross-border spillovers generated by national policies would support the identification of cooperation priorities, complementing efforts to improve the timeliness and quality of information on applied policies. Periodic Evaluation effects of the implementation of WTO agreements, as opposed to the current focus on monitoring implementation and compliance, could guide deliberations on revising existing agreements.
The new multilateral agreement on fisheries subsidies, ongoing plurilateral talks on e-commerce, and discussions on trade and the environment illustrate members’ interest in engaging on substantive policy issues. WTO reforms that facilitate such engagement and allow for a wider range of cooperation, including open plurilateral agreements between like-minded economies, strengthen the organization’s ability to deliver essential global public goods and help manage cross-border political spillovers.
MC12 provided a mandate and sketched a roadmap. Much will depend on what WTO Members do over the next 18 months to fill the gaps.
Bernard Hoekman is Professor and Director of World Economy at the Robert Schuman Center for Advanced Studies, European University Institute, and researcher at CEPR.