166 Trade Ministers are gathered from February 26-29, 2024, in Abu Dhabi, UAE to make important decisions about the multilateral trading system and the World Trade Organization (WTO). Past Ministerial Conferences were action-forcing events that provided political pressure to resolve differences and conclude open negotiations. But this year’s Ministerial Conference (MC13) comes amid backlash to global trade and alongside a slew of new challenges. Rapid technological advancements and increasingly fragmented patterns of trade and investment require innovative and flexible mechanisms for policy coordination. Future-proofing the WTO so that it can handle these challenges will require ongoing dialogue, adaptation, and institutional reforms. Most urgently, the ministers need to re-boot the WTO’s negotiations and dispute settlement processes so they can address food security, climate change, and digital trade. Indeed, it is becoming increasingly difficult to keep extending a moratorium on digital tariffs which benefits the US.
The backdrop to MC13
Ministers have gathered to discuss a series of critical issues including environmental issues like fisheries and climate change; digital trade; investment facilitation; and new negotiations on agriculture and industrial policies. In addition, the WTO is adding two new members, Timor-Leste, and Comoros, demonstrating that countries continue to see value in joining the WTO.
Yet within the WTO, members disagree on the form and prioritization of potential agreements—with more advanced economies pushing for forward-leaning issues like digital and climate change negotiated with a subset of members, while less developed countries push for work on issues such as food security as well as special and differential treatment. As the WTO rules require unanimous approval, countries’ willingness to use their veto power as a bargaining tool creates complex negotiations. Ministers must advance their country’s and citizens’ priorities, but increasingly narrow, nationalistic policies such as tariffs, export restrictions, import bans, and discriminatory non-tariff barriers make finding middle ground and compromise in negotiations more challenging than in the past. At MC13, the WTO’s consensus driven process will require ministers to find a balance in addressing these divergent but connected issues and finding common ground where possible.
While the substantive issues are important, the most critical issues ministers must address are the structural deficiencies that undermine the future health and functioning of the WTO. The WTO has undertaken many reforms since MC12, with improvements implemented via changes in the WTO’s typical practices. However, critical areas remain unresolved within the four primary areas of work within the WTO: (1) negotiations, (2) technical assistance, (3) reviews, and (4) dispute settlement. Currently, both the negotiation and dispute settlement functions are broken and not working to their full potential. Before tackling additional issues, the WTO members must first make the WTO functional and fit for purpose.
Negotiations
Reviving the negotiating function of the WTO is the most important outcome of MC13. In the past thirty years, the Doha Development Round talks collapsed and have remained dormant. The WTO members concluded a plurilateral agreement on Trade Facilitation in 2013, and the first phase of an Agreement on Fisheries Subsidies in 2022, but members have concluded no other agreements. The Fisheries agreement took more than twenty years to negotiate and despite heroic efforts by several dedicated chairpersons, members agreed to kick some unresolved issues into a Phase 2 agreement that is still being negotiated. Today’s world requires that the WTO and its members move faster on dynamic and urgent issues.
In 2019, a sub-group of countries tried another approach, launching three new plurilateral negotiations on (1) domestic regulations for services, (2) e-commerce, and (3) investment facilitation, in a new format known as the “Joint Statement Initiatives (JSIs).” India and South Africa have challenged the legal basis for these agreements as outside Annex 4 of the WTO Agreement and argue that they undermine multilateralism. With agreements concluded on Services Domestic Regulations (67 signatories) in December 2021 and Investment Facilitation for Development (130 supporters) at MC13, a small group of countries continue to oppose including them as official plurilateral agreements to the WTO.
Innovative approaches to negotiations could strengthen the multilateral trading system while accommodating the diverse interests of WTO members. If the WTO remains confined to negotiating only on issues that all 164 members (soon to be 166) can agree upon, this prevents the institution and its members from updating or adapting trade rules in a timely manner. Without such flexibility, the WTO will become brittle and irrelevant, with countries moving to other fora such as regional or bilateral agreements. At MC13, it is critical to resolve this issue and find a path forward.
Dispute settlement
The second important reform is revisions to the WTO’s dispute settlement. Ensuring that WTO members comply with their obligations instills fairness and confidence in the global trading system. Due to concerns with previous rulings, the United States blocked appointments to the dispute settlement’s appellate body since 2017. The EU led the creation of an alternative system, but countries have appealed dozens of cases “into the void”. Members must discuss meaningful reforms to the dispute settlement system at MC13 and outline either a new process or reforms to correct imbalances in the previous process. There are glimmers of hope for progress at MC13 with members constructively engaged.
Priorities for MC13
If these reforms received meaningful progress at MC13, the WTO could move to work on forward-looking global issues where it can make meaningful contributions. The UAE, as host of MC13, will present a strategic report on trade and trade policy in 2050, providing a vision for the WTO. This report will try to marry the forward-looking issues such as technology and climate change, with the needs of less developed members who still need assistance to develop and cover the basic needs of their citizens. Future-proofing the WTO will necessitate ongoing dialogue, adaptation, and institutional reform to remain relevant in a rapidly changing world. Providing a common vision for 2050 will require the UAE to be an active and engaged chair.
The WTO has a lengthy list of other issues that ministers will discuss at MC13, especially with the e-commerce moratorium generating attention. This agreement on duty-free cross-border digitally delivered services will expire, and members need to decide whether to extend or retire the moratorium. The United States and China agree with extending the moratorium, a rare occurrence. And they’re right about it: As governments grapple with how to fund their activities when economic activity shifts online, study after study has shown tariffs are an easy but inefficient and counter-productive method of raising revenue.
Finally, the WTO will address several environmental issues during MC13. Beyond the Agreement on Fisheries Subsidies, which impacts overfishing and overall health of our oceans, the WTO will also look at other areas where trade and environmental goals are mutually reinforcing, as well as areas of friction including in industrial policies. Director General Ngozi Okonjo-Iweala has repeatedly pointed to the significant role trade must play in addressing climate issues for all countries.
At a time when global fora are dwindling, the WTO remains an imperfect but important forum for countries to engage in constructive conversations about economic and trade issues. World merchandise exports grew from around $5.4 trillion in 1995 to over $19 trillion in 2019, with a similar increase expected over the next 25 years. Ministers must use this week’s meeting to outline a robust, future-looking agenda, built on strong foundational reforms and reflecting the need to balance the needs of advanced economies and less developed economies. A strong political message from the ministers this week that integrates the interests of all stakeholders and fosters consensus-building will be essential for revitalizing the multilateral trading system and ensuring its long-term sustainability.
Penny Naas is a nonresident senior fellow with the Atlantic Council’s Europe Center and was most recently UPS president for international public affairs and global sustainability.
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