Green shoots for multilateral trade cooperation?
10 July 2022Author: Bernard Hoekman, European University Institute
After two COVID-19-related postponements, the World Trade Organisation (WTO) 12th ministerial conference (MC12) was held in Geneva from 12–17 June 2022. Expectations for a successful meeting were low given the Russian war with Ukraine, US–China geopolitical tensions and deep disagreements among WTO members that range from agricultural support policies to the US decision to block the operation of the Appellate Body in 2019.
The WTO press release characterised the outcome as an ‘unprecedented package’ that ‘underlines the important role of the WTO in addressing the world’s most pressing issues’. Notwithstanding the hyperbole, MC12 was a significant achievement relative to expectations and the previous meeting, where ministers could not agree to a joint declaration.
MC12 produced a new multilateral agreement on fishery subsidies — the second new agreement since the WTO began operations in 1995. Ministers exempted World Food Programme food purchases from export restrictions. They decided that developing countries may authorise the use of patented technologies to produce COVID-19 vaccines and supply these to other developing nations without the consent of rights holders. This decision showed WTO members were able to conclude an agreement on a highly contested subject and do so in a way that differentiates across developing countries. This is a long-standing problem in the WTO. The agreement includes a footnote encouraging developing countries with vaccine manufacturing capacity to commit not to avail themselves of this option. China did so, illustrating that developing country status in the WTO need not preclude differentiation in the application of rules.
The fisheries agreement is important because it addresses a global environmental concern and because repeatedly missed deadlines to conclude an agreement had undermined the credibility of the WTO as a negotiating forum. The agreement is an ‘early’ harvest of matters on which there was consensus — banning subsidies for illegal, unreported and unregulated fishing and overfished stocks. Because agreement was not possible on the coverage of other fishing subsidies disciplines, the treaty is provisional — a sunset clause states it will lapse unless comprehensive rules are adopted within four years of its entry into force.
MC12 did little to strengthen the WTO’s capacity to address pressing issues. Instead, Ministers called for work to establish a fully functioning dispute settlement system accessible to all Members by 2024. They also instructed the WTO General Council and its subsidiary bodies to develop proposals on how to improve all functions of the organization for consideration at MC13 — in principle to take place before the end of 2023.
Other work programs focus on small economies, sanitary and phytosanitary measures, identifying lessons from the COVID-19 pandemic to bolster trade cooperation during crises, enhancing resilience of net food importing countries, and reviewing trade measures favouring least-developed countries. These supplement open ‘dedicated discussions’ and dialogues among groups of WTO members on fossil fuel subsidy reform, plastic pollution and environmentally sustainable plastics trade, and trade and gender-responsive policymaking. These initiatives complement ongoing plurilateral negotiations on e-commerce and investment facilitation for development.
Whether MC12 marks a revival of multilateral trade cooperation depends on what materialises from these work streams. Much depends on the willingness of the large players to cooperate and generate substantive proposals. If they do not, MC12 could become a poisoned chalice.
There has been a shift towards unilateral trade-related regulatory measures in the EU under the banner of safeguarding strategic autonomy. The United States has made its disinterest in negotiating new traditional trade agreements clear, instead favouring issue-specific cooperation outside the WTO. If initiatives such as the EU–US Trade and Technology Council and the Indo-Pacific Economic Framework for Prosperity become the nucleus of ‘friend-shoring‘ at the expense of multilateral engagement, MC12’s green shoots may not take root.
A necessary condition for multilateral engagement at the WTO is ‘fixing the machine’ to strengthen policy transparency, use WTO bodies to defuse trade concerns and make dispute settlement more efficient. Progress on the institutional front is critical to enhance the prospects of concluding negotiations on long-standing subjects such as agricultural policies, which proved impossible at MC12, and matters not tabled at MC12. These include rules on the use of trade policy in combatting climate change, managing competitive spillovers of industrial subsidies, and regulating production processes and supply chains.
Ensuring that officials and decision makers in national capitals become more involved in WTO deliberations may help in crafting agreements. There are significant gaps between many capitals and their representatives in Geneva regarding priorities for action. Greater use of targeted surveys could elucidate views and preferences of stakeholders that do not have a seat at the table. Mandating the Secretariat to analyze the magnitude and incidence of cross-border spillovers generated by national policies would support identification of priorities for cooperation, complementing efforts to improve the timeliness and quality of information on applied policies. Periodic evaluation of the effects of implementing WTO agreements, as opposed to the current emphasis on monitoring implementation and enforcement of commitments, could guide deliberations to revise extant agreements.
The new multilateral fisheries subsidies agreement, ongoing plurilateral talks on e-commerce and discussions on trade and the environment illustrate members’ interest to engage on substantive policy matters. WTO reforms that facilitate such engagement and accommodate a wider range of cooperation, including non-discriminatory open plurilateral agreements among like-minded economies, will bolster the ability of the organisation to provide critical global public goods and contribute to managing cross-border policy spillovers.
MC12 provided a mandate and sketched out a road map. Much will depend on what the WTO membership does in the next 18 months to fill in the blanks.
Bernard Hoekman is Professor and Director of Global Economics at the Robert Schuman Centre for Advanced Studies, the European University Institute, and a research fellow at CEPR.