The World Trade Organization is not dead yet
By Robert A. Manning, Opinion Contributor
In a year of grim uncertainty and looming global economic realities, a beacon of hope has appeared where it was least expected: in an era of growing protectionism and economic nationalism, the World Trade Organization (OMC), often described as moribund, shows significant signs of life.
At its ministerial-level meeting in June, the WTO, with 164 member states representing 98% of world trade, put forward an impressive and much-needed set of issues, from pandemic response for less-developed countries and digital trade , fisheries subsidies and, critically, reform.
If we are serious about a rules-based order, the WTO matters. With the exception of the United States, with its bipartisan trade phobia, most of the world – and especially US partners in Europe and Asia – is deepening economic integration with burgeoning bilateral and regional trade agreements – 577 d ‘between them are in force.
Despite all the protectionist measures adopted around the world, global trade has recovered from COVID-19 and reached $28.5 trillion per year in 2021. The danger lies in the absence of up-to-date global rules and standards , economic fragmentation in an era of great power competition, separate standards among major players, and distorted markets in the US, EU and China.
In this context, the new measures taken at the June meeting take on added importance. For example, the impetus given to the fight against COVID-19 as new variants spread came after a long and complex political battle in which, ultimately, the intellectual property rights to COVID vaccines were lost. hectic for developing countries. While critics argue that manufacturing capacity more than patents is the problem of developing countries, this may give a boost to developing countries with strong pharmaceutical manufacturing capacities, such as India and South Africa. South.
Fears of a tax moratorium on digital trade transaction tariffs having expired have been eased as the WTO meeting renewed the moratorium. While global e-commerce standards and rules are still lacking and the free flow of commercial data is hampered by digital nationalism and claims of “internet sovereignty”, this ruling has maintained a level playing field in taxation for start-ups and e-businesses globally. But talks on global standards for e-commerce, hampered by digital nationalism, have yet to reach the finish line.
No less important was an agreement to reduce fishing subsidies that underpinned the overfishing that led to dwindling fish stocks. According to the UN Food and Agriculture Agency, biologically sustainable fish stocks have fallen from 90% in 1974 to less than 66% in 2017.
The talks on fisheries subsidies have dragged on for two decades and are seen as a test of credibility at the WTO. The agreement prohibits WTO members from granting subsidies to any operator fishing in illegal, unreported or unregulated waters or fishing an overfished stock. The possible sanctions that would be imposed are unclear and deeper subsidy cuts are needed.
But on the big questions that will determine the likelihood of a rules-based order, things have gotten vague. The good news is that WTO ministers have signed a consensus statement that the shaky institution needs sweeping reforms. Even if the political will exists to shape a viable agreement, it will be a tortuous process to modernize it.
Most important was an agreement to fix the now crippled crown jewel of a rules-based economy: the WTO’s dispute settlement mechanism. This body, in effect, the global arbiter, is essential in resolving trade disputes. The United States and China have used it to arbitrate trade disputes – and have mostly respected the results. But he has been crippled since the Trump administration blocked the appointment of new judges.
Why? The WTO’s ability to enforce trade rules rests on the seven-judge Appellate Body that hears and adjudicates appeals in trade disputes. US administrations since Obama have mostly had complaints based on the fact that the Appellate Body greatly exceeds its authority. Thus, the Trump administration has blocked the appointment of new judges, as has the Biden administration. As the judges’ terms have expired, there are no longer enough judges to convene a three-judge panel. So the arbiter of the rules-based economic order is missing.
The good news is that the Biden administration — months before the June meeting — had quietly begun still-ongoing talks to fix the broken appellate body. This led to a commitment at the June WTO meeting to have a “full and functioning body” by 2024.
Few hold their breath for any of these ambitious goals of updating and modernizing the WTO. New trends of de-globalization, ascending regional blocs, and reorganized supply chains triggered by COVID-19 and the economic decoupling between the United States and China are serious headwinds to reform.
But failure to do so would be a lose-lose for member states and a slow return to the 1930s. The recent developments add up to a hopeful sign that major trading nations are not sleepwalking into a bleak future, but focus instead on how to avoid it.
Robert A. Manning is senior fellow of the Scowcroft Center for Strategy and Security and its New American Engagement Initiative at the Atlantic Council. Follow him on Twitter @Rmanning4.