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The WTO in Crisis: Closing the Gap between Conversation and Action or Shutting Down the Conversation?

Published online by Cambridge University Press:  07 March 2022

Patrick Low
Patrick Low*
Affiliation:
Fellow, Asia Global Institute, University of Hong Kong, Hong Kong
*
Email: patricklow49@gmail.com
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Abstract

The multilateral trading system faces numerous challenges that are more profound than at any time in its seven-decade history. It has become commonplace to ask whether the system is in terminal decline. More than a dozen issues facing the WTO are identified in the paper, eight of which are defined as systemic. That is because they permeate and debilitate multiple facets of the workings of the WTO, including the capacity to negotiate, enforce disciplines, monitor policies, and ensure transparency. In no prioritized order, systemic issues arise in the areas of dispute settlement, development, decision-making, transparency, relations between states and markets, subsidies, emerging issues including climate change and digitalization, and trade and health. Other outstanding issues may not be as pervasive in impact, but can nevertheless undermine WTO relevance and effectiveness. All WTO members stand to lose in the absence of predictable multilateral trade rules that pre-commit parties to certain policies and processes. But in today's world, full convergence of all trade rules is a pipe dream. The system needs to balance convergence with managed divergence. Does the non-discrimination principle need to be layered by prior agreement in ways that ensure mutual gains from exchange?

Keywords

tradecrisisfailing WTO functionsrulesconvergencenegotiated divergence
Type
Original Article
Information
World Trade Review , Volume 21 , Special Issue 3: WTO at a Crossroads: The WTR 20th Anniversary Issue , July 2022 , pp. 274 - 290
Copyright
Copyright © The Author(s), 2022. Published by Cambridge University Press

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Footnotes

Patrick Low worked at the GATT from 1980–1987 and then for the WTO from 1995–2013. For the last 16 years of his tenure at the WTO he served as Chief Economist. He wishes to thank Petros Mavroidis, George Riddell, and Evan Rogerson for useful comments on an earlier draft.

References

1 Note that the WTO already allows departures from MFN for preferential trade agreements and for developing countries (albeit in a time-bound context).

2 These covered subsidies and countervailing duties, anti-dumping (revision of the Kennedy Round text), customs valuation, technical barriers to trade, import licensing, and government procurement.

3 Part IV, entitled ‘Trade and Development’ was added to the General Agreement in 1964. It articulated the principle of non-reciprocity among countries at different levels of development and was essentially a ‘best-endeavours’ set of undertakings. This was the beginning of institutional engagement with the challenges of development.

4 The agreement on government procurement, however, was discriminatory in that it restricted benefits only to those who had signed the agreement. This was not particularly contentious since government procurement was explicitly excluded from the GATT under Articles III (national treatment) and XVII (state trading).

5 The examples of the Committee on Technical Barriers to Trade and the Committee on the Application of Sanitary and Phytosanitary Measures, with their exercise of addressing ‘specific trade concerns’ are often cited in this connection. Accession negotiations with a number of countries have also continued along their own path.

6 For a recent analysis of these issues, see Bertelsmann Stiftung (2018), ‘Revitalizing Multilateral Governance at the World Trade Organization: Report of the High-Level Board of Experts on the Future of Global Trade Governance’, Global Economic Dynamics, Technical Report. The High-Level Board of Experts was chaired by Bernard Hoekman of the European University Institute.

7 Negotiations on various issues among a subset of WTO members, also referred to as inter se agreements, are discussed in more detail below in the context of decision-making in the WTO.

8 For a more detailed analysis, see B.M. Hoekman and P. Mavroidis (2020), ‘Dispute Settlement at the WTO: Now What?’, Centre for International Governance Innovation (CIGI), https://www.cigionline.org/articles/dispute-settlement-wto-now-what/

9 For an attitude survey on this, see M. Fiorini, B.M. Hoekman, P.C. Mavroidis, M. Saluste, and R. Wolfe (2020), ‘WTO Dispute Settlement and the Appellate Body Crisis: Insider Perceptions and Members’ Revealed Preferences’, Journal of World Trade 54, 667, https://scholarship.law.columbia.edu/faculty_scholarship/2753

10 Haberler Report (1958) ‘International Trade: A Report by a Panel of Experts’, GATT, www.wto.org/english/res_e/booksp_e/gatt_trends_in_international_trade.pdf

11 For more detailed analysis, see P. Low, H. Mamdouh. and E. Rogerson (2018), ‘Balancing Rights and Obligations in the WTO: A shared Responsibility’, Embassy of Sweden, www.swedenabroad.se/en/embassies/un-geneva/current/news/balancing-rights-and-obligations-in-the-wto-a-shared-responsibility/

See also A. Hoda (2021) ‘WTO Reform and Issues in Special and Differential Treatment (S&DT) of Developing Countries’, ICRIER Working Paper 406.

12 Other features of the Enabling clause included a relaxation of rules on preferential trade agreements among developing countries, recognition of the least developed country (LDC) category, and a ‘graduation’ principle that calls upon developing countries to participate more fully in the GATT's framework of rights and obligations as their developmental situation improves.

13 See P. Low (2021) ‘Special and Differential Treatment and Developing Country Status: Can the Two Be Separated?’, in B. Hoekman, T. Xinquan, and W. Dong (eds.), Rebooting Trade Cooperation: Perspectives from China and Europe. London: CEPR Press, https://globalgovernanceprogramme.eui.eu/rebooting-multilateral-trade-cooperation-perspectives-from-china-and-europe/

14 C.P. Bown and D.A. Irwin (2016) ‘The GATT's Starting Point: Tariff Levels circa 1947’ Policy Research Working Paper No. 7649, World Bank, Washington DC, License: CC BY 3.0 IGO,

https://openknowledge.worldbank.org/handle/10986/24223.

15 Agriculture and textiles and clothing products were also effectively exempted from mainstream GATT disciplines until an attempt to rectify this was made in the Uruguay Round. Even then, MFN tariffs on these products remained much higher than average (see Low (2021) ‘Special and Differential Treatment and Developing Country Status).

16 A major reason why the Doha Round floundered is because none of the parties was committed to the depth of tariff cuts that found their way on to the negotiating table via a tariff-cutting formula approach.

17 WTO Document WT/COMTD/W/239, 12 October 2018

18 This may be in the singular or plural depending on the context.

19 WTO Document WT/GC/W/757/Rev.1

20 Article IX:1 of the WTO Agreement.

21 A particularly flagrant example of veto-empowered cross-conditionality took place some two decades ago, when a Geneva-based ambassador's term was coming to an end. The ambassador's spouse was working in Geneva and the ambassador was looking for ways to secure regular family visits to Geneva. The solution was to secure a chairpersonship of a WTO body that would justify trips from the capital to preside over the relevant committee. The ambassador was able to displace the incumbent and secure the position in exchange for a promise not to veto a crucial negotiating process going on at that time.

22 A consensus can only be blocked through a formal objection by a member present at a meeting when a decision is to be taken.

23 It should be noted that while inter se agreements are defined as agreements among less than the full membership of an organization, there is no presumption in the definition as to whether these are discriminatory or non-discriminatory among the membership of the ‘parent’ agreement.

24 As noted earlier, the Declaration on the Conclusion of Negotiations on Services Domestic Regulation was signed in December 2021. This was in the wake of the cancellation of the 12th Ministerial Conference to be held form 30 November 2021 on account of the pandemic.

25 See Document WT/GC/W/819, 19 February 2021.

26 Specifically, the objections relate to Article III.2 of the WTO Agreement (new negotiations), Article IX.1 (consensus decision-making), Article X.1 (amendments).

27 H. Mamdouh (2021) ‘Plurilateral Negotiations and Outcomes in the WTO’, Mimeo, 6 April 2021

28 H. Mamdouh (2021) ‘Legal Options for Integrating a New Investment Facilitation Agreement into the WTO Structure’, International Trade Centre, www.intracen.org/uploadedFiles/intracenorg/Content/Redesign/Events/If%20Legal%20options%20Mamdouh%20as%20of%20Sept.%2017%20final.pdf

29 A.B. Zampetti, P. Low, P.C. Mavroidis (2022) ‘Consensus Decision-Making and Legislative Inertia at the WTO: Can International Law Help?’, Journal of World Trade 56(1), 18–19.

30 Mamdouh (2021) ‘Legal Options for Integrating a New Investment Facilitation Agreement’.

31 The aborted Trade in Services Agreement (TiSA), which was a non-inclusive negotiation that was taking place outside the WTO could in principle have been proposed as an addition to Annex 4. Given the strong likelihood that consensus support for such a move would not have been forthcoming, the only way TiSA could have found any sort of home in the WTO would have been as a GATS Article V economic integration agreement.

32 WTO document G/SCM/W/546/Rev.12, 31st March 2021.

33 EU, WTO Modernisation – Introduction to Future EU Proposals, https://trade.ec.europa.eu/doclib/docs/2018/september/tradoc_157331.pdf

34 WTO document JOB/GC/148, 30 October 2017.

35 WTO document JOB/GC/204/Rev.8, 11 November 2021.

36 S. Evenett and J. Fritz, ‘Subsidies and Market Access Towards an Inventory of Corporate Subsidies by China, the European Union and the United States’, The 28th Global Trade Alert Report, GTA28 Oct2021 finalised_SUBSIDIES.pdf (October 2021).

37 For a comprehensive analysis, see P.C. Mavroidis and A. Sapir (2021), China and the WTO: Why Multilateralism Still Matters. Princeton University Press.

38 For a United States critique of China's trade policies, see ‘US Statement on the Trade Policy Review of China’, 22 October 2021, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2021/october/us-statement-trade-policy-review-china

39 See footnote 36.

40 See B. Hoekman and D. Nelson (2020) ‘Rethinking International Subsidy Rules’, Working Paper, Bertelsmann Stiftung, www.bertelsmann-stiftung.de/fileadmin/files/user_upload/MT_Rethinking_Subsidy_Rules_2020_EN.pdf

41 See, for example, OECD, ‘COVID-19 Emergency Government Support and Ensuring a Level Playing Field on the Road to Recovery’, www.oecd.org/coronavirus/en/themes/global-economy

42 See W.A. Reinsch, E. Benson, and C. Puga (2021) ‘Environmental Goods Agreement: A New Frontier or an Old Stalemate?’, Center for Strategic and International Studies, Washington DC. Difficulties arose over how to define environmental goods, https://csis-website-prod.s3.amazonaws.com/s3fs-public/publication/211028_Reinsch_Environmental_Goods_0.pdf?QkV7SYIFwwxpGM0DdiDst4CuNPk4.ayI

43 See, for example, ‘The EU Green Deal – a Roadmap to Sustainable Economies’, www.switchtogreen.eu/the-eu-green-deal-promoting-a-green-notable-circular-economy/

44 See D. Lawder (3 December 2021), ‘USTR Backs Efforts to Strengthen US EV Industry Despite Objections’, Reuters, www.reuters.com/business/autos-transportation/us-trade-agency-backs-proposed-ev-tax-credit-despite-mexicos-objections-2021-12-03/