As the World Trade Organization Languishes, Tough Choices Lie Ahead


Image credit: OECD/Maud Bernos


by Lawrence Herman

A highly crucial meeting of World Trade Organization (WTO) trade ministers takes place from June 12-15 (the 12th ministerial meeting or MC12) to try to recover much lost ground and to somehow restore the organization’s relevance and authority in governing world trade. This is the first meeting of WTO ministers in five years.  

Leaving aside the political spillover resulting from the Russian invasion of Ukraine, there are doubts about whether MC12 will be able to agree on any of the tough issues facing the multilateral trading system. It took months of haggling to even settle on the June meeting date. The WTO Director-General has been downplaying expectations. Last month, former DG Roberto Azevedo admitted that finding consensus at the WTO has become “very difficult, if not impossible.” 

The WTO was facing challenges well before Russia’s invasion, trying to manage a trading order beset by the pandemic, supply chain disruptions, paralysis of its once-heralded dispute resolution system, lack of consensus on its future negotiating agenda and many other difficult issues. The political spillover of Russian actions has made all this much worse.  

The question is whether these problems will push the WTO into progressively reduced relevance, further weakening the multilateral trading order. If the WTO cannot administer current rules, cannot agree on new and urgently needed ones and cannot resolve trade disputes, what is its value proposition for the global community? In short, has the WTO reached the limits of its achievements? 

Under these hugely destabilizing factors, like-minded governments may need to consider adjusting to the WTO’s diminished role, meaning some gradual but fundamental change in its mandate and operations. In this regard, there is another body whose experience is relevant the United Nations Conference on Trade and Development (UNCTAD). Formed in 1964, UNCTAD was once a forum for international activism, with developing countries (the so-called Group of 77) in continual and often acrimonious battle with industrialized countries (known then as Group B).  

Facing disappointing outcomes in its treaty-making efforts, UNCTAD gradually changed course and today is much different, less a negotiating body and more a policy forum. It analyzes development and sustainability and issues well-researched and valued reports on economic trends, climate change, international investments and other relevant issues. 

The UNCTAD experience is not perfectly applicable to the WTO. But if one looks at the WTO’s institutional structure, with a skilled secretariat and sophisticated data-gathering and analytical expertise, there are similarities. Like UNCTAD, the WTO produces valuable reports on world trade issues. It collects information on the policies of member countries and issues publications in collaboration with various intergovernmental bodies, such as the World Bank, the IMF and others. WTO member committees collect information and publish their own reports on individual members’ trade-protective actions in subsidies, trade remedies, agricultural policies and others.  

The point is that, even if its dispute settlement system is paralyzed and even if its rule-setting function is hamstrung, the WTO can retain its place as a respected analytical, reporting and discussion body, much like UNCTAD. The WTO can evolve as a somewhat different institution, adding value through its analysis and reporting activities, and in the work of its various sub-bodies, providing for discussion and debate on pertinent international trade matters.  

But this raises a question. If the WTO’s prominence is reduced, what are the options for re-invigorating respect for and development of global trade rules and standards, much needed by the international community?  

In this regard, the Organisation for Economic Co-operation and Development (OECD), formed back in 1960, rises to the fore. While its membership is restricted to the world’s advanced economies, this gives it advantages by freeing it from the frustrating paralysis and political tensions at the WTO, allowing it to adjust its agenda to focus on key issues facing the global community. The OECD’s standard-setting role has been expanding over the decades to address things like medicines and the coronavirus, labour issues, human rights, climate change and decarbonization, digitization, international taxation, sustainable development and biodiversity. 

A list is one thing. It means nothing without a common set of values and objectives conducive to achieving agreement. Reflecting this essential advantage, in 2021 OECD members adopted a forward-looking vision statement on future endeavours “as an expression of these shared values … in promoting adherence to OECD standards and good practices …” 

Two conclusions follow from this discussion. First, notwithstanding its past accomplishments, the WTO seems afflicted with internal stresses – made more severe by the Russian war in Ukraine that seriously limit its functions as a global rulemaking and dispute settlement body. Second, with a progressive agenda and proven track record and without the heavy baggage that impedes the WTO, the OECD is the leading international body capable of filling the vacuum. Even with its limited membership, looking ahead in the years and decades to come, this is where like-minded governments and advanced economies should devote their attention.

About the Author

Lawrence Herman is an international lawyer with Herman & Associates, Senior Fellow at the C.D. Howe Institute and a Fellow of the Canadian Global Affairs Institute.

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  • Cgai Staff
    published this page in Commentary 2022-06-07 19:55:32 -0400

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