Wendy Cutler is senior vice-president at the Asia Society Policy Institute.
US Trade Representative Jamieson Greer could not have been clearer regarding his views on the World Trade Organization (WTO). Having just returned from a critical four-day meeting of the world’s trade ministers in Cameroon, he did not mince words in a recent op-ed for the Wall Street Journal, calling the WTO “ineffective and dysfunctional” and on a path to irrelevance.
To many observers, his cutting words were not a surprise. In this and other recent engagements, he has consistently raised concerns regarding the core WTO principles and rules governing a range of issues, including decision- making, developing country status, the most-favoured nation (MFN) approach, and dispute settlement.
He has also emphasised that the WTO is ill-equipped to address the cutting- edge matters facing the international trading world today, leading the United States to pursue its own path on trade policy outside of the WTO.
THE WTO IS IN TROUBLE
Ambassador Greer makes points that are hard to refute in principle. We cannot deny that the WTO is facing a myriad of challenges and has been unsuccessful in delivering on needed reforms.
Some of this was inevitable. Consensus-based decision-making worked well for many years when countries shared trade liberalisation objectives and there were way fewer members. Fast forward to today. The WTO membership has grown to 166 economies with diverse interests, competing priorities and geo- political differences. Critics will also claim that the US deserves its share of the blame for weakening the WTO by effectively shutting down the dispute settle- ment process.
While some WTO members may view Ambassador Greer’s critique as harsh and extreme, others probably can relate to some degree to his candid assessment, particularly in the aftermath of the Cameroon ministerial meeting.
Despite a modest agenda, WTO ministers failed to step up to the plate and deliver meaningful results. They were unable to reach consensus to extend the customs duty moratorium on digital transmissions for four years even though all but two WTO members signed on to it. They failed to incorporate into the WTO framework the plurilateral agreement on investment facilitation with over three-quarters of WTO membership participating. And they did not greenlight a WTO reform work programme despite months of intense work in Geneva among developed and developing country members.
The worst part? Even if agreed upon, these potential deliverables would not have been earth-shattering. Given the enormous challenges currently facing the global economy, including blocked transportation routes, economic secur- ity concerns, trade imbalances, increasing non-market practices and supply chain vulnerabilities, such outcomes would have been considered by many to be a blip on the radar screen.
Nevertheless, they would have delivered some benefits to certain stakeholders, while providing needed momentum for the WTO going forward, had they been endorsed. Now, members return to Geneva with the monumental task of trying to pick up the pieces. But if ministers were unable to find landing zones, why should we expect WTO ambassadors, who report to the ministers, to achieve any breakthroughs on these matters?
It’s time to face the reality that the WTO is no longer playing a leading role on trade – it’s more of a supporting actor. Its ability to tackle existing and emer- ging trade matters and update its operating principles and rules for today’s world is under strain, at least for the time being.
ACT 2 FOR THE WTO
But diminished does not mean disposable. Notably, Ambassador Greer did not say in his op-ed that Washington should exit from the organisation. Regard- less of US criticism, Ambassador Greer and his team clearly still see value in continued US participation.
The WTO still performs functions no other institution can easily replicate. This includes promoting transparency on trade-related measures, early notification and opportunity to comment on new trade actions, exchanging views in the standing technical committees, monitoring the implementation of WTO com- mitments, and broader conversations on serious and emerging challenges facing the global trading system. While unglamorous, this is critically import- ant work that reduces uncertainty, surfaces potential points of disagreements early and prevents tensions from getting out of hand.
In other words, while the WTO has lost most of its rule-making power, it still plays an important role as the global trading system’s information and coordination hub.
This is valuable work. For example, WTO members have reduced the discrim- inatory impacts of certain industrial and agricultural regulations of individual countries through discussions in standing technical committees. Additionally, the WTO notification system is an important source of information for trading partners negotiating free trade agreements and sectoral deals.
This also doesn’t mean that WTO reform efforts should be abandoned. But they must be grounded in realism, with creative and achievable suggestions encouraged. Silver bullets or grand bargains to break the reform logjam are unlikely.
Members could focus on narrower and easier issues as building blocks for broader reform. A practical approach is to explore applying new, limited rules to smaller groups of countries first, and expand coverage over time. Strong leadership supporting the reform agenda will be crucial, and this will rely on both countries and personalities that can bridge differences to drive efforts forward to a conclusion.
The urgent need for WTO reform is widely acknowledged. But endorsing the concept in principle is different from agreeing on priorities and the all- important details that follow. That’s where these discussions get stuck. This should not be surprising. Many members have a stake in the status quo and meaningful reform would require them to give up longstanding benefits.
Take developing country status: in the WTO, countries can self-declare as developing countries to access special and differential treatment, such as longer transition periods for commitments. Without any defining guardrails, over two-thirds of WTO membership claim this status. Tightening this eligib- ility – for example by introducing objective thresholds such as a GDP cut-off or a GDP-to-trade ratio – would strip many of special flexibilities and softer obligations.
SUPPORTING TRADE
The WTO and its precursor, the General Agreement on Tariffs and Trade, played the leading role on trade for many years. Those days seem over. The recent ministerial meeting only reinforced the point.
Now, most trade negotiations happen outside Geneva. That said, most trade is still conducted according to the MFN principle. The question then is not how the WTO can reclaim the lead but how Geneva can best support that work even if it no longer directs it.
Its core functions – the notifications, transparency, monitoring and commit- tee work – remain essential to a credible supporting role. Transitioning from being the lead actor to joining the supporting cast is not always easy. But for the WTO, it may be the most realistic and responsible route forward.
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