2019 – part2 – 7 – 12

154/ DDG Wolff: The multilateral trading system will endure and will adapt

14 October 2019

Speaking at a conference on global trade held at Chatham House, London, on 14 October, Deputy Director-General Alan Wolff said that at a time of slowing global economic growth and political uncertainty the WTO is even more essential, with its rules providing fairness and preventing discrimination. He stressed the importance of discussions aimed at strengthening the WTO and added: “Defending and improving the global trading system is needed now more than ever.” This is what he said:

Serious questions have been raised.

• What are the major structural risks to the international trade system, and can the current structures withstand this period of increased protectionism and political uncertainty?
• Can the US be persuaded to end its veto of new WTO appellate body members and resolve the current impasse? What would be the implications for global trade if the appellate body cannot function after 10 December?
• Is there a constructive agenda for greater reform of the WTO and the multilateral trading order?
• In the absence of consensus at the WTO, do plurilateral agreements represent a way forward for global trade?

These are trying times

• increases in protection to the point of economic warfare,
• a degree of uncertainty introduced regarding adherence to either current rules and even a major country questioning continuing its WTO membership,
• the upcoming likely loss of the dispute settlement system as it is currently structured,
• an argument over which WTO Members are due special treatment when they claim developing country status,
• conduct on the part of no small number of governments that indicates an apparent preference for preferential bilateral trade deals, and
•  the lack of a single document setting forth a reform agenda despite calls for WTO reform by the G7 and G20.

Is the current multilateral structure up to the challenges presented?

The answer to me is clear.  The multilateral trading system will endure and will adapt.

This does not mean that all is well.  It is not.  But the system is in a lot better shape than most commentators believe.

Until the traumas began in the recent past, outside of the few specialists in government or academia, few knew or cared whether the WTO existed or not.

The WTO was largely invisible until it began to be tested, and then the dominant narrative has been one of criticism and failure.

This is far from an accurate picture.  What is the evidence?

• Most of world trade continues under WTO rules.  The  prosperity of the world depends upon it.
• The fact that there is one large trade war, and some incipient ones, indicates what we should all have known from history.  No international agreement prevents war.  But no war lasts forever, and there are very good examples of the ensuing peace contributing to a stronger international trading system.  That possibility should not be discounted in the present.
• In a time of rising populist sentiment and slowing global economic growth, the WTO is even more essential.  The definition of populism is a belief that whatever systems exist are not delivering on their promise.  The WTO does deliver.  Its rules provide fairness.  At the level of the individual
• Fairness means that the products of a factory worker will have access to world markets and not be blocked by protectionist product standards.
• Fairness means that farmers can sell anywhere and not face protectionist requirements limiting imports of food or feed.
• Fairness means that the coming generations will from their laptop computers create products, services and ideas, that through the web have the world as a market, and with this digital access they can earn a living anywhere where there is internet access and the free flow of data.
• Fairness means that needed supplies for productive activities can be sourced anywhere.
• Fairness means not only the prevention of discrimination — against goods and against services, it means the availability of information to locate sources of supplies and to find markets.
• Fairness means flexibilities to enable all to engage in international trade, providing benefits that today do not exist sufficiently for women and micro, medium and small enterprises.
• Bilateral and regional agreements are not a replacement for the multilateral trading system, they build upon it; they require it as a necessary foundation.

Within the multilateral trading system, there are no insuperable structural challenges.  Importantly, Members are deeply engaged in seeking solutions to both longstanding and emerging issues.

A specific question has been raised as to whether the blocking of Appointments to the WTO’s Appellate Body will soon end.  There are no signs that it will, although progress is being made toward a consensus to deal with a number of the issues raised.  The fundamental difference between the EU and the U.S. goes to the nature of WTO dispute settlement.  Are the panels and appeals like a court, with Members having no influence over the evolution of law, determined by an independent judicial process, or is the panel and appellate system designed to foster the settlement of disputes without becoming a substitute for negotiating new rules?  These are strong differences that go beyond the philosophical.  A political resolution will be required.

What will happen in the interim?  The distinguishing feature of the WTO, that trade rules are enforceable, will continue.  Cases continue to be filed and disputes will continue to be settled whether or not the Appellate Body as now constituted is still functioning.

Pragmatic solutions  will be preferred to chaos and unilateralism.

As for WTO reform,  there is no single neat reform agenda, set out in one place, no official list.   There is no document labeled “Constructing WTO 2.0”.  And if there were one,  it would be unlikely to be complete.    In its place, there is intensive activity on the part of Members representing most of world trade and economic activity

• to extend the rules to electronic commerce,
• to facilitate investment,
• to allow services to be provided across borders more freely,
• to facilitate cross border investment,
• to resolve differences over the dispute settlement system,
• to improve standards, and to provide development assistance to the peoples of the poorest countries.
• Serious work is to be found in the WTO’s committees, the joint initiatives (taking the form at present of negotiation of open plurilateral agreements), and various other negotiating frameworks.

The current outlook, often described in bleak terms, needs to be leavened by the reality of what is being done to maintain and improve the system.  Pronouncements of doom for the multilateral trading system are not well-founded.  Yet, there are substantial risks, so attention must be paid.

This is not a time for a return to complacency.  It is a call to action.  There should be a WTO 2.0.  The level of ambition needs to be raised.  Crises create opportunities.  Muddling through will not take the system to a better place.  Chatham House, with its work and convening capabilities and other institutions like it can make a difference.  Defending and improving the global trading system is needed now more than ever.  More can and should be done.

The future is not written yet.  It is what we make it.

Source: wto.org