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The World Trade Organization: Any Hope for Restoring Global Order?

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Image credit: WTO/Jessica Genoud

POLICY PERSPECTIVE

by Lawrence L. Herman
CGAI Fellow
July 2022

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The World Trade Organization: Any Hope for Restoring Global Order?

Last month’s meeting of trade ministers at the World Trade Organization (its 12th ministerial meeting, or MC12) can be assessed at different levels. The fact that ministers managed to cobble together a consensus package, pulling the WTO from the brink of chaos and disarray, is an accomplishment in itself. Several observers were predicting the opposite. Even Director General (DG) Ngozi Okonjo-Iweala had downplayed expectations.

In the end, MC12 managed to move ahead on some important trade matters. In that sense, at a high level, it shows that multilateralism may still survive the challenges of a world beset by the pandemic, surging inflation, economic slowdown, supply chain disruptions and the political spillover of the war in Ukraine.

Looking at things more closely, the meeting achieved at least two concrete results plus a handful of decisions to help keep world markets open in specific areas. The rest of the package consists of action plans for the WTO that will face tough slogging.

As to the concrete achievements, the first is an Agreement on Fisheries Subsidies, a deal concluded after an unconscionably long 20 years of tough and bitter negotiations. Once it comes into force after formal acceptance by 2/3 of WTO members, it requires governments to not subsidize illegal fishing activities and fishing of overfished stocks. Over time, the fisheries deal is expected to have a positive impact on food supplies, especially for developing countries. Because of vigorous backroom negotiating warfare, the deal is less than some governments had wished for. But as the first new WTO agreement in years, at least it represents some forward progress for the organization.

The second is a limited agreement – after over two years of the pandemic – to free up patents for COVID-19 medicines. Had the meeting not found common ground, it would have been an unforgivable failure of resolve. In the end, the meeting agreed on allowing departures from the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) so that, for the next five years, developing countries can produce and distribute patented vaccines within their own borders “to the extent necessary to address the COVID-19 pandemic” without the consent of patent holders.

On other matters, ministers agreed that governments should avoid restricting emergency food exports and not impose export prohibitions or restrictions on foodstuffs purchased for non-commercial humanitarian purposes by the UN World Food Programme. As well, the existing moratorium on preventing customs duties on electronic transmissions was continued.

While each of these is notable, the total package fell short of offering any optimism about the WTO entering some kind of new era. Even if the DG spoke of MC12 decisions being “unprecedented” in scope, most of the other things agreed to involve future work that will require huge collective effort and goodwill if anything is to come of them. The challenges the WTO faces in these areas are daunting, to say the least. A tough uphill climb.

One challenge is to find a path forward on reforming the organization to rescue it from its current moribund state of paralysis. In their final communiqué, ministers said that their respective governments: “. . .acknowledge the need to take advantage of available opportunities, address the challenges that the WTO is facing, and ensure the WTO’s proper functioning. We commit to work towards necessary reform of the WTO. While reaffirming the foundational principles of the WTO, we envision reforms to improve all its functions.”

On this issue, one major hurdle is to find a way to allow like-minded countries to negotiate new plurilateral  rules under the WTO’s umbrella. It means changing the current system that only allows the conclusion of trade agreements as “single undertakings,” meaning consensus, and which, in reality, means unanimity, a formula that’s become realistically impossible. It will be very hard to move the needle on this one.

The other huge challenge involves getting the WTO dispute settlement system working again. Starting with former U.S. president Barack Obama, then under Donald Trump and now under Joe Biden, the U.S. refuses to agree to appointments to the WTO Appellate Body, leaving the entire trade dispute adjudication process paralyzed.

In fact, because the Biden administration is, on the record so far, more protectionist than its predecessors, Trump’s removal hasn’t solved the problem. The Americans see institutional reform and the Appellate Body issue as linked. On the latter, the U.S. has been saying for years that the AB has unacceptably overstepped its mandate, departing from the original conception in the Uruguay round agreement that created it. That paralysis remains unresolved. While members agree that steps need to be taken, getting over the finish line is a distant goal.

Some progress on dispute resolution has been achieved through the newly created Multi-Party Interim Appeal Arbitration Agreement (MPIA). While a step in the right direction, what’s notable is that this arrangement was put in place by a group of countries outside the WTO framework, reinforcing the view that the organization itself is in paralysis mode.

So, the result of MC12 is very much a mixed bag. Yes, the meeting did rescue the WTO from going over the brink and showed that in the face of all the challenges, the organization was capable – but only just – of achieving consensus on some critical issues. Yet the meeting also revealed fault lines of acrimony and disagreement, with countries like China and India playing the role of spoilers on many items.

China has benefited enormously from access to other markets under WTO rules, while protecting its own through various measures, including illegal copying of foreign intellectual property and empowering highly subsidized state enterprises in their operations at home and abroad. India continues to oppose attempts to launch plurilateral negotiations or to agree on efforts to liberalize services and agricultural markets, among others. All of this has revealed inherent problems bedevilling the WTO, including its outdated consensus/unanimity decision-making paradigm.

Whether the MC12 results indicate continued vitality in the multilateral system remains to be seen. While some, mostly insiders, have said the meeting made significant advances, the longer term reality is that the WTO’s future is much less rosy.

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About the Author

Lawrence L. Herman, Herman & Associates, Toronto, and Cassidy Levy Kent, Washington, Ottawa & Toronto, has practiced international trade and investment law and policy both inside government and in the private sector for over 45 years.

As an External Affairs office, he served in Canada’s mission to the UN and the GATT in the 1970s and in law practice has acted as counsel for Canada in the International Court of Justice and as an advocate before Canadian tribunals, courts and NAFTA panels. He advises governments, State agencies and international organizations on international law and policy. Mr. Herman is a member of the Canadian government’s Trade Advisory Council, the executive of the Canada-US Law Institute and a member of the North American Forum. He is a Senior Fellow of the C. D. Howe Institute and a Fellow of the Canadian Global Affairs Institute.

Together with his professional activities, Mr. Herman is currently on the board of the Canadian Council for Business and the Arts, is past vice-chair of Jazz FM19 radio and past chair of the Toronto Summer Music Festival. He has authored well over 100 articles, opinion pieces and commentaries in leading academic publications, periodicals and newspapers.

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Canadian Global Affairs Institute

The Canadian Global Affairs Institute focuses on the entire range of Canada’s international relations in all its forms including (in partnership with the University of Calgary’s School of Public Policy), trade investment and international capacity building. Successor to the Canadian Defence and Foreign Affairs Institute (CDFAI, which was established in 2001), the Institute works to inform Canadians about the importance of having a respected and influential voice in those parts of the globe where Canada has significant interests due to trade and investment, origins of Canada’s population, geographic security (and especially security of North America in conjunction with the United States), social development, or the peace and freedom of allied nations. The Institute aims to demonstrate to Canadians the importance of comprehensive foreign, defence and trade policies which both express our values and represent our interests.

The Institute was created to bridge the gap between what Canadians need to know about Canadian international activities and what they do know. Historically Canadians have tended to look abroad out of a search for markets because Canada depends heavily on foreign trade. In the modern post-Cold War world, however, global security and stability have become the bedrocks of global commerce and the free movement of people, goods and ideas across international boundaries. Canada has striven to open the world since the 1930s and was a driving factor behind the adoption of the main structures which underpin globalization such as the International Monetary Fund, the World Bank, the World Trade Organization and emerging free trade networks connecting dozens of international economies. The Canadian Global Affairs Institute recognizes Canada’s contribution to a globalized world and aims to inform Canadians about Canada’s role in that process and the connection between globalization and security.

In all its activities the Institute is a charitable, non-partisan, non-advocacy organization that provides a platform for a variety of viewpoints. It is supported financially by the contributions of individuals, foundations, and corporations. Conclusions or opinions expressed in Institute publications and programs are those of the author(s) and do not necessarily reflect the views of Institute staff, fellows, directors, advisors or any individuals or organizations that provide financial support to, or collaborate with, the Institute.

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