At the tip of February, 4,000 delegates from 164 countries met in Abu Dhabi for the World Trade Organization’s most vital decision-making meeting. The international organization is facing an extended list of sensitive issues: a few of them are everlasting, similar to dispute settlement mechanisms and agricultural subsidies, others are novel, similar to AI and data management in global trade.
Ministers met for 4 days after which granted themselves a two-day extension. There were some significant successes, similar to an agreement to facilitate foreign direct investment in developing countries. However, ministers largely agreed to proceed talking ahead of future meetings. Unfortunately, there was no discussion of AI or the use of information, two of the most popular topics in the mean time.
The consequence of the thirteenth Ministerial Conference (MC-13) was removed from the excellent package of reforms that WTO observers like me consider are urgently needed to enable the trade organization to proceed to operate and reply to the urgent needs of today’s global market. And it’s a disappointing consequence after two years of exertions because the last Ministerial Conference in June 2022 and months of intense negotiations within the run-up to Abu Dhabi.
Trade representatives could now shrug their shoulders and begin planning the subsequent ministerial conference in Cameroon in two years. But that will be fallacious. The failure of MC-13 shows that the WTO is becoming increasingly disconnected from the true world of trade.
Negotiations on latest standards for the digital economy have reached an impasse. Guidelines on cross-border data transfers and server localization are still vague. The assessment of the impact of generative AI has not even begun.
Take, for instance, the restructuring of world supply chains as countries pursue ‘friendshoring’ and ‘onshoring’ agendas. This has turn out to be a serious item on the agenda for a lot of governments, pursuing each legitimate and questionable policy objectives.
And yet the WTO stays silent on this fundamental issue of world trade, although it goes to the guts of the organization: the long-held principle of non-discrimination. Governments are confident enough to publicly admit that they need to alter the principles of world trade.
But the WTO still doesn’t respond.
The 1994 Uruguay Round designated the WTO as a worldwide governing body with binding legal norms and a powerful dispute settlement mechanism. But its early successes have steadily been overshadowed by its inability to resolve complex and thorny disputes. It is fighting a losing battle against sovereign states unwilling to cede their regulatory sovereignty, resulting in infinite talks and negotiations as AI, Bitcoin and other digital technologies threaten to rework the worldwide economy.
Unfortunately, the WTO in its current form cannot meet the demands of the brand new global community. Doing without it will not be an option; that will only result in more chaos and confusion.
The value of the WTO is that it provides a platform where countries can come together and speak about trade. So how can we redesign the WTO? How it really works to guard that?
Some trade issues – customs procedures, sanitary regulations, anti-dumping enforcement, etc. – can still be addressed under the present WTO model of enforcement of international rules with a powerful dispute settlement mechanism.
These are issues which have long been clarified and understood. The WTO could have a unique How it really works for the brand new problems with the digital economy, similar to AI regulation, subsidy policy, supply chain redesign and the scope of national security.
In this case, the WTO should step back and tackle the role of a facilitator relatively than an organisation that actively promotes change.
This will probably not result in comprehensive global agreements, but to plurilateral agreements, where states form their very own blocs with like-minded countries. The WTO can then monitor and control these various agreements, facilitate the negotiation of future agreements and offer its dispute settlement mechanism to the states participating in these blocs.
It is not any mere coincidence that two of the three agreements adopted by the WTO since its creation have the word “facilitation” of their titles: the Trade Facilitation Agreement of 2013 and the Investment Facilitation for Development Agreement of 2024. Perhaps “facilitation,” not “measures,” is the one thing an increasingly polarised global trading community can agree on.
Alternative dispute resolution could offer latest ways to resolve complex, politically charged trade disputes, similar to the US-China semiconductor dispute or the EU-China dispute over electric vehicles. Mediation could prove useful in helping countries move away from strictly binding legal norms and find more flexible and artistic solutions. These solution-oriented dispute resolution processes are proving useful in resolving complex interstate disputes where the legal norms were outdated, vague or just nonexistent, similar to the Gulf Cooperation Council’s brokering of the Qatar-Saudi Arabia reconciliation in 2021.
Becoming an advisory body wouldn’t mean that the WTO gives up its claim to drive global policy. Just consider the OECD’s recent success in adopting global rules on digital tax. The international body managed to succeed in an agreement on digital taxes in October 2021, joined by no fewer than 137 countries. Crucially, each the US and China agreed to the framework, which is notable given their confrontations in the worldwide economy.
Why has the OECD been successful while the WTO has not even begun the discussion? Perhaps the OECD, as an advisory body, has created an area during which states can discuss sensitive and sophisticated issues more openly, truthfully and creatively.
A less ambitious, more consultative WTO could provide significant leadership in tackling emerging global problems. Sometimes less is more.
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