With the World Trade Organisation (WTO) Doha Round of negotiations stalled nearly 20 years after its launch, it takes an optimist to see the prospect of the multilateral rules-based trading system being brought back from the brink.
Dramatic shifts in geopolitical and economic weight across the WTO membership have played into differences that threaten the survival of the organisation’s negotiating and arbitration functions. Deeply entrenched disagreements and grievances are held over existing rules and procedures in areas such as dispute resolution, eligibility for special developing country concessions and the application of rules to state trading enterprises. A major rules update is needed to recover trust and confidence in compliance.
The rules system, giving voice to small and large economies alike, is especially important for trade-exposed countries like Australia.
Resumption of in-person leaders’ diplomacy at the G7 meeting in Cornwall this month has kindled some hope for the return of multilateral collaboration on critical global issues. Focus on the Covid-19 pandemic and vaccine distribution, as well as the steps forward on global tax reform, climate change and infrastructure investment in developing countries captured headlines and encouraged optimists.
Leaders also stepped up to champion reform of the rules-based multilateral trade framework as part of a commitment to rebuilding resilient economies. After a few depressing years of slide towards nationalism and protectionism amid bitter differences between the world’s two largest economies, these are welcome signs. The time is right to steady and rebuild a system that has driven economic growth and poverty reduction on an unprecedented scale. The rules system, giving voice to small and large economies alike, is especially important for trade-exposed countries like Australia.
The task is huge. On the plus side, President Joe Biden is telling the world “America is back”. The WTO has installed by consensus its new Director-General, former Nigerian Finance Minister and World Bank economist, Ngozi Okonjo-Iweala. She told WTO selectors her mother had survived a kidnapping in Nigeria by vested interests wanting to send Okonjo-Iweala a message about her reforms. That sort of grit might be needed now in Geneva.
On the other side of the ledger, the Biden administration has been cautious about signalling readiness to pitch in for the multilateral trade system – one of the greatest American post-Second World War initiatives. The president’s domestic social recovery commitments include “buy American” obligations. Trade sceptics abound on all sides of politics and neither the huge hike in US tariffs on Chinese products, nor the national security justification for their imposition has been withdrawn. No US nominee has yet been announced for WTO Ambassador and critical Appellate Body appointments are still blocked.
The impasse in agriculture, despite commitments made to continue the reform process, has been a big contributing factor in the broader stalemate.
While the idea might be surprising, prioritising re-engagement in the intractable agriculture negotiations might help. The impasse in agriculture, despite commitments made to continue the reform process, has been a big contributing factor in the broader stalemate.
A “New Pathways” proposal for restarting agriculture negotiations, recently launched by an independent group of international experts of which I am a member, puts forward a “fresh start” package of initiatives. The recommendations are designed to shift countries from long-held positions by using fixes, simplifications and clarifications to known problems in the current WTO Agreement on Agriculture. They take account of movement in economic weights as well as hikes in agricultural production and support measures, particularly in some Asian emerging economies, including China. The proposal nudges countries towards less wasteful, inefficient and environmentally damaging policies that would reduce spill-over damage in agricultural markets.
A graduated range of ambitious reform options is set out for market access improvements and reductions in trade-distorting support. Changes are suggested for permitted subsidy (Green Box) rules to more strongly constrain European-style income payments and input subsidies. The proposal also identifies rule changes to help developing countries achieve legitimate food security and social support payments for low-income households. The urgency and scale of environmental challenges including climate change, loss of biodiversity and depletion of critical resources such as water and soils also guide the package. Proposed rule changes provide more flexibility for support to targeted environmental objectives and further constrain policies encouraging harmful intensification.
The summit season ahead, including the WTO Ministerial Conference (MC12) in November, offers opportunities to push forward.
The New Pathways proposal deliberately focuses exclusively on the detail of necessary agriculture reforms, although observations are made on broader challenges for the trading system. While recommendations are confined to the mandate for agriculture negotiations, they could also contribute to resolution of the broader problems. Re-engagement on agriculture would be difficult, for example, without indications that the WTO’s dispute settlement system can be recovered through parallel reform efforts.
The summit season ahead, including the WTO Ministerial Conference (MC12) in November, offers opportunities to push forward. Asia-Pacific Economic Co-operation (APEC) trade ministers recently agreed on language supporting WTO reform in both its negotiating and dispute settlement functions, for conclusion of fisheries subsidies negotiations and for a “meaningful outcome” on agriculture at MC12.
The coming months will show whether tentative re-engagement in Geneva at officials level will be supported by political leaders. We would all benefit.
More detail about the WTO reform proposal can by found at the newpathways.fr website.