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How Effective Are Our Global Organizations?

Part 2: The World Trade Organization

Foreign Policy Brief # 125 | By: Ailín Goode | August 3, 2021

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Policy Summary

This is the 2nd in a USRENEW NEWS series that examines the effectiveness  of our global governance organizations.

The United States has been an active member of the World Trade Organization (WTO) since its creation in January 1995. As of 2019, the U.S. had been a party in 179 cases managed using WTO dispute settlement procedures. It remains  active in the creation and maintenance of the  agreements set for by WTO to organize and govern world trade.

The US is also one of the loudest voices calling for reform within WTO. In July, the US brought the latest revision of the transparency proposal before the General Council. The proposal, first introduced under the Trump Administration, “seeks to enhance transparency and improve Members’ ability to comply with notifications.” Notifications are – “ a transparency obligation requiring member governments to report trade measures to the relevant WTO body.” The most recent revision of the transparency proposal is supported by one-third of WTO members including the EU, Japan, and Singapore. 

In addition, the US is continuing  to block any new appointments to the Appellate Body of the organization. A decision which has essentially nullified one of the key functions of WTO, its trade dispute settlement process. The United States itself has brought 124 cases before the Appellate Body, the seven person body that hears appeals of panel decisions in trade disputes. However, the AB has been rendered ineffective in recent years by the US choice to block new judges from appointment following concerns of perceived threats to US sovereignty and claims of bias within WTO judges. As the terms of members have continued to expire, the Body no longer has the numbers necessary to hear cases.

As the world’s nations and economies continue to struggle with the effects of COVID-19 and the growing demands of globalization, collaborative organizations such as WTO have come under increasing scrutiny. In the case of WTO, its effectiveness is being called into question for good reason.

Policy Analysis

The World Trade Organization was founded in 1995 as a follow-up to the General Agreement on Tariffs and Trade, which was established after WWII as part of the post-war effort of nation states to foster international cooperation. GATT addressed tariffs, anti-dumping agreements, and other trade barriers. As GATT became outdated by the growing needs of the global economy, its members agreed via the Uruguay Round to establish WTO.

The 164 member nations of WTO account for roughly 96% of global trade. It exists “to ensure that trade flows as smoothly, predictably and freely as possible.”It has  six major functions designed to protect both consumers and producers and to liberalize global trade by reducing trade barriers between developed and developing countries.

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They are: Administering WTO trade agreements; serving as a  forum for trade negotiations; handling trade disputes; monitoring national trade policies; providing technical  assistance and training for developing countries; and engaging in cooperation with other international organizations.

WTO enforces roughly 60 global trade agreements between its 164 member nations. These agreements regulate global trade, but also act as a framework for other bilateral and multilateral trade negotiations , many of which have been successful, such as The Bali Package.

However, the processes by which these global agreements are negotiated has come under strong criticism for their lack of transparency, exclusive nature, and systemic bias towards more powerful nations. Such was the case of the multiple breakdowns of The Doha Round negotiations.

Also referred to as the Doha Development Agenda, The Doha Round was initiated in 2001. It is the most recent and the last round of trade agreement negotiations to involve all members of WTO. Its focus claimed to be the needs and interests of developing countries and its aim was to lower global trade barriers and address issues in agriculture.  However, multiple negotiation attempts failed.

Photo taken from: South Asia Subregional Economic Cooperation

The breakdown of the 2008 talks regarding The Doha Round was due to disagreements between developed and developing nations on subjects like tariffs and food sovereignty. Multiple countries expressed frustration that many of the talks involved only seven major trading powers, while the representatives from other developing nations remaining uninvited. India’s trade minister at the time “accused the US of putting the livelihoods of a billion of the world’s poorest people against “commercial interests.”” 

It is thought by many commentators that, after multiple deadlines for concluding The Doha Round talks were missed, the Nairobi Package of 2015 signaled a shift in WTO negotiations to smaller, more focused trade agreements. Both the Bali Package of 2013 and the Nairobi Package addressed parts of The Doha Round talks. The Bali Package was approved by the 9th Ministerial Conference, the Nairobi Package by the 10th.

The Bali Package addressed food security, development and Least-Developed Countries (LDC) issues, cotton subsidies, and The Trade Facilitation Agreement. The Nairobi Package had six decisions on issues including agricultural subsidies, market access, and enhancing provisions for LDCs. Both packages are considered a success, particularly in benefiting developing countries. 

WTO’S struggles are  evident in the last 20 years of negotiations involving the global fishing industry. Government ministers and other world leaders have struggled since 2001 to agree on a solution for addressing unsustainable fishing practices and fishing subsidies. As of July, an agreement had not been reached, however the Trade Negotiations Committee expressed confidence that, though there were still issues that needed to be addressed, the revised text for negotiation should be a functional basis for agreement by December.

Photo taken from: The Hindu

Another current impasse within WTO  is over the proposition to waive intellectual property rights for vaccines in order to address the shortages being faced by developing countries during the continuing pandemic. The Biden Administration released a statement in May backing the proposal introduced by South Africa and India to equalize global access to the COVID-19 vaccines. However, the most recent talks held in July, failed to reach a consensus among member states regarding the implementation of the waiver. Talks are scheduled to continue in September, almost a year after the proposal was first introduced.

Despite one of its goals being to aid developing nations, WTO has fallen under heavy scrutiny for exacerbating economic inequality. In particular, its actions regarding agriculture and intellectual property have drawn criticism from economists and activists alike. In her book Blame it on the WTO?: A Human Rights Critique, Sarah Joseph (Director for the Castan Centre for Human Rights Law) criticizes The Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) , writing that, “TRIPS presently mandates the regressive transfer of wealth from the South to the North because most patents are owned by people, particularly companies, from the North.64 Populations in the South, where patent rights were not generally respected prior to TRIPS, must now pay more for patented goods. The biggest losers are the poor in developing countries, who cannot afford the price increases.”

She cites the 2005 Human Development Report, that also challenges the idea that trade liberalization automatically leads to economic development and greater financial equality. “Participation in trade can exacerbate inequality as poor people absorb the adjustment costs of increased competition from imports, while people with assets and market power take advantage of opportunities provided by exports.”

One of the most utilized functions of WTO is their dispute settlement procedures. Through their dispute settlement system , WTO outlines the process countries must take to challenge perceived violations of  trade agreements. The steps include various means to settle disputes through consultations, panel procedures, and the establishment of an Appellate Body. These procedures were designed to avoid potential military and political conflicts by giving nation’s a separate, clearly structured, mechanism to handle economic disagreements.  However, of the 605 disputes brought before WTO since 1995 only around 350 have been ruled on. 

With the upcoming Ministerial Conference set for December of this year, many countries are offering their suggestions and requests for organizational reform. As WTO continues to struggle on its most prominent fronts, its future remains uncertain. It is clear that its continued effectiveness as an organization will require much work and the willingness of its member states to compromise.

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