For decades, multilateral trade rules operated to keep government protectionist impulses in check. They provided a foundation of openness for international commerce, as well as a framework for liberalisation and integration. With the trade rules as a guarantor, capital and value chains spread across the globe.
The creation of the World Trade Organization (WTO) in 1995 saw these rules reinforced with a feature that is nigh unheard-of in international law: binding and non-optional dispute settlement. For the first time, an international panel of legal experts would have the final say on the legality of trade measures, whether those implementing them liked it or not. On 10 December 2019, a procedural blockade by the world’s largest economy, the United States, culminated in that 24-year experiment being put on hold, perhaps permanently.
The loss of the WTO’s Appellate Body does not mean the global trading system is in anarchy, but it does move it a significant step closer to unilateralism and transactionalism in trade policy. Moreover, the Appellate Body crisis is just one of the areas where the WTO is bleeding, and the WTO is just one symptom of a global trading system besieged.
Policymakers looking to restore predictability and order must grapple with a WTO that has struggled to negotiate new rules and enforce and monitor existing ones; which civil society distrusts; and on which business has largely given up as a source of solutions. The global consensus, based on the underlying wisdom of sacrificing some sovereign policy space to allow predictable, rules-based trade, has never been weaker. There are no easy answers, but one thing is certain: technocratic fixes from Geneva and ministerial press releases bereft of specifics will not be enough.
This Appellate Body crisis may abate, and the impending budget crisis may be averted, but the WTO’s challenges run deep. Unless the consensus on gradual liberalisation and rules-based trade can be rebuilt, the WTO will continue to fall short of the political will required to move beyond current impasses and inefficiencies. Ministerial calls for unspecified reforms, or reforms with no chance of securing consensus from the very players they target, will continue to sound hollow.
The United States has to be central to any future plan. No amount of technical work, statements of concern, or speeches in the General Council can fix a trading system to which the world’s largest economy is uncommitted. US allies and trading partners with an interest in maintaining a rules-based multilateral trading system will need to use collective and creative diplomacy to pressure the United States to return to a productive member of the WTO, if not a leader as it has been in the past.
Whatever the future of the WTO, governments who believe in rules-based trade must look inwards and begin rebuilding the interest and engagement of business and civil society. Business must be convinced to devote the time and resources to shape and inform trade policy, and civil society actors must be brought, however sceptically, into the tent. That is not going to be easy, but the decades of economic growth and prosperity enabled by predictable, rules-based trade, show that it is worth it.Grozoubinski,WorldTradeOrganisation
Dmitry Grozoubinski is a former Australian trade negotiator and diplomat, now based in Geneva where he serves as the Executive Director of the Geneva Trade Platform and founder of the consultancy ExplainTrade.
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