The switch for the 12th ministerial conference (MC12) of the World Trade Organization (WTO) has – for reasons beyond its control – been flicking on and off. Ministers are supposed to meet at least once every two years but, due primarily to Covid-19, their last formal get-together was in December 2017. Now, the switch has been flipped on again, with the announcement that MC12 will take place at last in Geneva from June 12-15, 2022.
Will this be a light-bulb moment for the WTO?
The WTO is seen as dysfunctional; many have written it off. Its dispute settlement system was seriously weakened when the Appellate Body became inoperative in December 2019. Trade negotiations have sputtered. It has been difficult to make progress in rule-making in important areas such as digital trade and the environment and, as a result, there has been an increasing tendency to move negotiations to the margins of the WTO. The institutional machinery has a patchy record in monitoring and implementing existing agreements.
It is no surprise, therefore, that there have been increasing calls for radical reform. The G20, with its membership of both developed and major developing economies, could be regarded as a bellwether of opinion among governments. Ritual protestations in leaders’ communiqués in the early 2010s about an enduring commitment to the multilateral trading system in 2017 turned to the need to improve the WTO’s functioning and, later, to a call for “necessary reform”. In 2020, the Saudi Arabian presidency launched the “Riyadh Initiative on the Future of the World Trade Organization”. But tellingly, G20 members were not able to agree on a collective vision on how reform should be advanced.
The G20 has tended to use the WTO as a lightning rod for its own disagreements, increasing the sense of crisis. Major players have vastly differing trade policies, with relations degenerating in some cases into trade wars. They profess attachment in varying degrees to the WTO but have not been prepared to show the flexibility that would be required to enable the organization to make progress, particularly in negotiations. Failure in Geneva reflects the differences between the members, but it is easier to pin the blame on deficiencies in the institution. Yet, the WTO is only a forum.
Despite this caveat, there is no pretending that the WTO as an institution does not have flaws. One of the main narratives in this respect rests on the concept of its “constitutional imbalance”.
Negotiations to produce new trade rules (the so-called “legislative” function) can only succeed if there is a positive consensus among all 164 members, which often seems an impossibly high hurdle. The move from the more club-like atmosphere of the General Agreement on Tariffs and Trade (GATT) to the near-universal WTO membership has been an additional complication. Some success has been achieved – for example the Trade Facilitation Agreement (TFA) which entered into force in 2017 – but there is no doubt that results have been too few and far between.
The “executive function”, meanwhile, presents a mixed picture. It primarily consists of governments’ collective oversight of existing agreements through the network of WTO standing councils and committees. Some bodies are highly active and valued, but others sometimes seem to be going through the motions. In addition, there is a view that the executive function could be strengthened by providing the WTO secretariat, currently severely constrained by a longstanding “member-driven” culture, with more room for initiative. WTO Director-General Ngozi Okonjo-Iweala has been calling for a “transformation”.
As for the so-called “judicial function”, it initially had raced ahead. Members seized with alacrity their newfound ability to litigate festering trade disputes. The Appellate Body did not disappoint them, issuing judgements on a range of controversial issues, notably including the issues of “zeroing” in anti-dumping and the definition of a “public body” in subsidies. Critics, especially the US, accused the panels of misinterpretation and overreach.
It seemed to the US that other parties were seeking to gain through litigation what they had been unable to win through negotiation. As a result, it called time on any appointments to the Appellate Body, which now exists only on paper. When asked about reform of the WTO, Robert Lighthizer, the US trade representative (USTR) in the administration of Donald Trump, indicated that he had “already reformed it”.
Another aspect of imbalance is that, while successful negotiations require positive consensus, Appellate Body reports are adopted unless there is a consensus against (so-called “negative consensus”). This of course could never happen because the “winning” party would always insist on adoption, which then became automatic.