Is the WTO Losing its Relevance?
During recent years, the capacity of the World Trade Organization (WTO), as the supreme body of trade rules, has been questioned on several occasions. There is increasing debate about the WTO losing its relevance to address many of the modern trade issues and resolve disputes among its members. A growing number of members, primarily from the developed world, started questioning the ability of the trade body to resolve matters which had been hovering for a long time. A similar feeling also emerged among the developing nations as they feel the WTO largely failed to protect their interests. The same thought was expressed in the recently concluded G20 meeting in Japan.
The establishment of GATT, and subsequently the WTO, brought about a massive development in the regulatory framework of world trade. It initiated a rule-based order for trade, instated an automatic legal dispute settlement system for its members, and a mechanism to support the interests of developing economies. The WTO has largely been successful in achieving its primary goals. However, the foundations of the WTO have been shaken over the last few years for several reasons. The WTO got its first setback with the failure of Doha in 2015. In 2001, the ambitious DDA was launched with the aim to substantially lower trade barriers, support poor nations and resolve difficult issues like agricultural subsidies among others. The failure of this program seriously undermined the credibility of the multilateral trading system and put developing nations in peril.
Since the establishment of the WTO, only a few multilateral trade negotiations have been concluded. So far members have not been able to reach a consensus on vital issues like agricultural subsidies, food security, banning subsidies for illegal fishing, intellectual property rights, and trade in services among others.
Countries could not find a solution to issues like e-commerce even after having had a decade long discussion. Frustrated with the speed of development in the WTO, 76 member countries launched an informal discussion on this topic. Developing countries led by India, South Africa, and others are held responsible for this deadlock by their developed country counterparts.
In the Trumpian era, the WTO was further despoiled as President Donald Trump threatened to pull out of it. Trump withdrew the United States from the Trans-Pacific Partnership Agreement on his first day as president claiming that the US had been victimised by its trading partners. The United States unilaterally imposed tariffs on much of the industrialised world rather than bringing these disputes to the WTO. Contrasted with the Obama administration which relied on the WTO process and filed 25 enforcement complaints with the WTO between 2009 and 2017. The number of complaints made by the US was higher than any other nation during that time period. Interestingly, sixteen of these complaints were against China.
The Trump administration’s discontent on the dispute settlement mechanism of the WTO and its refusal to appoint judges to the Appellate Body has created uncertainty as to its future. If judges are not appointed by December 2019, the dispute settlement body can no longer remain functional.
The WTO also faces the problem of having too many unresolved issues. There has been pressure from some members to include many non-trade issues like labour and environment standards, foreign investment, competition, government procurement, investment facilitation and trade.
It is high time for member states to unite and adopt corrective measures and halt the WTO from losing its relevance. WTO member states should immediately strike a deal on the vital issue of the dispute settlement mechanism, thereby averting the acute danger of the WTO falling apart. Failure of the WTO would be a severe shock not only to the multilateral trading system but also to the global economy as a whole.