Author: Ken Heydon
World Trade Organisation (WTO) Director-General Ngozi Okonjo-Iweala says the measures agreed upon at the 12th WTO ministerial conference (MC12) on 12 June ‘will make a difference to the lives of people around the world’. She may be right on some specifics, but turning the MC12 into a game-changer for the trading order will require a level of political resolve from G20 leaders that so far is still lacking.
Director-General of the World Trade Organisation (WTO) Ngozi Okonjo-Iweala and MC12 Chair Mr Timur Suleimenov attend the opening ceremony of the 12th Ministerial Conference (MC12), at the headquarters of the World Trade Organization, in Geneva, Switzerland, 12 June 2022 (Photo: Reuters/Martial Trezzini).
Five outcomes from the WTO ministerial stand out. After 20 years of negotiation, an agreement to end harmful fisheries subsidies was reached. This included the absolute prohibition of subsidies for fishing in the high seas. In its 27-year history, this is only the second multilateral agreement on new trade rules agreed upon by the WTO.
A waiver was also agreed under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). It allows for the manufacture and export of COVID-19 vaccines without the consent of the patent holder.
Despite fears from the business sector that the moratorium on customs duties on e-commerce would end, an agreement was reached to extend the moratorium until the next ministerial conference.
In response to the current food situation, members agreed to exercise restraint on implementing export restrictions and to exempt World Food Program humanitarian purchases from such restrictions.
Members also committed to work towards WTO reform — including the goal of creating a fully functioning dispute settlement mechanism no later than 2024.
One might quibble that even if there is full implementation, fisheries subsidies are only one part of the environmental challenge. The WTO still needs to liberalise trade in environmental goods and services and impose discipline on fossil fuel subsidies.
As for the COVID-19 vaccine initiative, it will not provide developing countries with the technical capacity needed to actually produce vaccines. In e-commerce, critical questions remain about the right balance between data access and data protection. And ‘exercising restraint’ on food export restrictions leaves scope for abuse.
Despite their shortcomings, these measures are all steps in the right direction. And they are accompanied by other ongoing WTO work that offers scope for cooperation.
One of these is the negotiation among participating WTO members on e-commerce and issues such as data protection. This brings together key players, including the United States and China, in a plurilateral agreement that does not require the elusive goal of compliance by all WTO members. It may offer a welcome, if small, area of cooperation between Washington and Beijing.
The positive steps described here cannot disguise the fact that there is a systemic challenge to the liberal order of which the WTO is part, as the trading system becomes increasingly exposed to the twin temptations of autarky and unbridled national sovereignty. Whether the achievements of the MC12 and these other cooperation efforts represent a new beginning for the WTO remains unclear.
Well before the COVID-19 pandemic, global value chains were losing their force as drivers of world growth in the face of mounting protectionism. COVID-19 transformed and accelerated this trend, as factories closed and transport was restricted. Now disruptions resulting from the war in Ukraine and related sanctions are compounding concerns about supply chain vulnerability. These concerns have led tocalls by two world leaders from very different constituencies, French President Emmanuel Macron and Chinese President Xi Jinping, for their countries to become more self-reliant.
This flirting with autarky is matched by a growing tendency towards exercising national sovereignty through so-called trade defence measures. We saw this under the former Trump administration. Angered at a perceived WTO bias in dispute settlement, the United States imposed punitive, unilateral tariffs under US law against China for its breaching of the rules. These measures — and their underlying grievances — have persisted under the Biden administration. Now they will be joined by no less than five unilateral, punitive trade-defence weapons that are on the drawing board of the European Union.
Arguably most important of the MC12 measures is restoring a fully functioning dispute settlement mechanism. Unless faith in the liberal trading order can be rekindled, the chances of restoring the dispute settlement system — and the essential synergies between the WTO’s judicial and legislative functions — remain slim. Balance between accepting the rules of the liberal world order, enshrined in the WTO, and the exercise of national sovereignty by WTO members needs to be restored.
There is a vital role for the G20 in meetings later this year. The G20 must give a coordinated boost to the rules-based order by stressing that autarky and unilateralism are simply a recipe for protectionist capture, retaliation and trade friction.
A liberal re-awakening in Washington and Beijing would be the G20’s most rewarding legacy. Though this seems remote, the groundwork for G20 engagement has been laid by the 12th WTO ministerial conference.
Ken Heydon is Visiting Fellow at the London School of Economics and Political Science. He is a former Australian trade official and senior member of the OECD secretariat.
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