World Trade Organization

Reforming the Unreformable

As the COVID-19 pandemic appeared to enter its final phase, trade ministers of the 164 member states of the World Trade Organization (WTO) planned to meet in Geneva to discuss the future of the multilateral trading system. The twelfth Ministerial Conference (MC12) from November 30 to December 3, 2021 would have been the first meeting of WTO’s topmost decision-making body since the beginning of the pandemic. Another concerning variant of the virus, however, forced ministers to postpone the meeting again. The challenges for the organization remain tremendous. The pandemic has struck at a time when most economies were still recovering from the last global financial crisis. The Economist has coined the term “Slowbalization” to describe a decade that has been characterized by stagnation or decrease of global flows of goods and capital. The WTO at the heart of the multilateral trading system has been weakened in its three core functions – providing a forum for trade negotiations, settling trade disputes and monitoring trade policies. Since 2013, it has not been able to conclude trade negotiations and since 2019, the WTO’s dispute settlement mechanism lacks an appellate body as the Trump administration has blocked the appointment of new judges, leaving the body without a minimum of three judges to hear cases. Over the course of the pandemic, the WTO secretariat struggled to provide transparency over trade rules as the notification system does not work properly with member states.

With the new Director General Ngozi Okonjo-Iweala and a new president in the White House, the ministerial conference provided the opportunity to achieve progress on a reform of the WTO and move forward in ongoing negotiations including fisheries and e-commerce. Facing another postponed ministerial conference, negotiators could now use the delay to agree on certain issues to demonstrate to the world that the organization is still relevant. A first success has been achieved as a group of 67 nations in the WTO reached an agreement to cut red tape in services trade. While the signatories, which include the United States, China and the EU, are a minority of the WTO's members, they represent 90% of all services trade and more members are free to participate in the agreement. Apart from agreement on specific issues, the WTO and its members need to send a strong commitment to open markets as well as free and fair trade that creates opportunities and prosperity across the globe.

In this policy paper, the Friedrich Naumann Foundation for Freedom brings together experts from its global network of liberal partners to address key challenges for the global trading system. In his analysis of the WTO’s negotiation process, Manzoor Ahmad proposes several steps the WTO’s members could take at the upcoming MC12 to improve how the WTO facilitates international trade agreements. Meanwhile, Mihailo Gajic and Mat Cuthbert both provide potential solutions to solve the current WTO Appellate Body crisis. Guillermo Peña presents ideas for the WTO to tackle at the MC12 regarding improving supply chains and to assist developing economies in taking advantage of the rise of economic digitalization. Bridget Masango analyzes the damage that protectionist trade policies during the pandemic have wreaked on both emerging and developed economies, while urging the WTO to act to change these policies. Finally, Matthias Bauer proposes a “NATO for Trade and Technology” (NATO-TT) that could serve as a catalyst for transatlantic trade agreements, while also serving as an example for broader trade cooperation within the WTO.

This impulse paper deliberately presents different perspectives on the future of the WTO. While all authors present their own views and may disagree on some issues, they all share the belief in a rules-based multilateral trading system and the potential of the World Trade Organization. As more than a decade of Slowbalization has demonstrated, the global economy and particularly developing countries need more rather than less globalization. The dialogue on the future of globalization will continue to occupy us as the FNF’s World Order and Globalization Hub works with liberal-minded partners across the globe to promote open societies, free and fair trade and market-based solutions for global challenges.

 

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Helena von Hardenberg
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Phone: +49 30 288778-565