The WTO lives to fight another day, but is it ready to tackle the crises of our times?

With breakthrough agreements including against fisheries subsidies, but watered-down deals such as the vaccine IP waiver, the world trade body at least avoided failure
Now the WTO needs to steel itself for new and acute trade challenges, including ensuring health security in the face of pandemics and setting rules to slow global warming

David Dodwell

Published: 3:30am, 20 Jun, 2022

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Last Friday, almost unnoticed amid the clatter over Ukraine, inflation, recession, summer firestorms and floods, food shortages and starvation, and pandemic recovery, the World Trade Organization made history.

Trade ministers from the 164-member organisation, meeting for the first time in five years, reached agreements on issues that have dogged it for as long as two decades – on e-commerce, sharing vaccine technology, services trade, food security and, perhaps most significantly, against fisheries subsidies that have caused fish stocks in many parts of the world to collapse.

For an organisation that – since its 1995 formation – has failed to agree on virtually anything (except a small Trade Facilitation Agreement in Bali in 2013), this was nothing short of momentous. Yet celebrations have been subdued.

As Alan Beattie at the Financial Times grudgingly put it, the WTO’s biggest achievement was “keeping itself alive”.

Its Nigerian director general Ngozi Okonjo-Iweala, who must take much credit for the meeting’s success, celebrated by quoting Winston Churchill: “Success is not final, failure is not fatal: it is the courage to continue that counts.”

The meeting avoided failure: it secured no final success; but it reaffirmed the courage to continue.

Beattie sees it as “impressive and dispiriting” – impressive in breaking 25 years of dissonance and procrastination; dispiriting because, even after such a gigantic diplomatic effort, the agreements represent the most paperweight of progress.

Take the agreement on a waiver of intellectual property rules to allow developing countries to produce vaccines at speed to ensure protection against future pandemics – an amendment fiercely blocked by Western pharmaceutical groups.

Beattie complained that the agreement had been “watered down to almost homeopathic levels” – it “isn’t really a waiver at all: it’s a clarification of existing flexibilities”.

One clear breakthrough of the meeting was getting India – which has, over the decades, earned a reputation for blocking every deal brought to the table on the often-specious grounds of protecting poor countries’ interests – to fall into line.

Piyush Goyal (centre), India’s minister of commerce and industry and minister of consumer affairs, speaks to the media on the sidelines of the 12th Ministerial Conference in Geneva on June 16. Photo: EPA-EFE

India’s price was a farm trade rule exemption that will let it stockpile grain to sell at subsidised rates to local farmers. Other members felt this was a small price to pay for India – along with Indonesia, Sri Lanka, Pakistan and South Africa – to drop threats to upend a moratorium waiving tariffs on e-commerce products and data that has been in place since 1998.

Perhaps the greatest breakthrough was the agreement to make fisheries subsidies illegal, and to clamp down on “illegal, unreported and unregulated” fishing, much of it in the deep ocean far beyond territorial waters.

The subsidies amount to between US$14 billion and US$54 billion a year – small compared to farm subsidies but significant in enabling the overfishing that has jeopardised stocks in many parts of the world.

01:37

Chinese fishing boats return to disputed South China Sea after summer moratorium ends

According to the UN’s Food and Agriculture Organisation, fish stocks in many parts of the world are at risk of collapse due to overexploitation, with an estimated 34 per cent of stocks overfished. Areas of state subsidies range from vessels and machinery to fuel, ice and bait, from income support for fisherfolk to price support for fish, and to cover operating losses.

With the world’s biggest fishing fleet, and much of it operating in the deep ocean, China has for many years been the main subsidiser and target for the ban, so the effectiveness of this breakthrough agreement will depend on how China responds. Wang Wentao, China’s commerce minister, left the meeting without comment.

With Okonjo-Iweala’s ringing reminder that “success is not final”, attention has at last turned to the next ministerial meeting, perhaps in the United Arab Emirates and perhaps at the end of next year – and the many unfinished items of business.

An ice sculpture of Finley the Fish melts on World Ocean Day in front of the United Nations ahead of the WTO’s 12th Ministerial Conference, on June 8. Photo: Reuters

The highest priority may be reform of the WTO itself, its ability to provide a negotiation forum for trade liberalisation, and its capacity to settle trade disputes after Donald Trump’s trade henchmen took a wrecking ball to the dispute settlement mechanism in 2017.

On all of these, a chronic and inbuilt weakness needs to be tackled – that the WTO’s decision-making power can never be strong unless there is strong commitment from its members, in particular the world’s leading trading powers.

Critical here will be whether the United States decides to return meaningfully to the table, in particular on rebuilding the dispute settlement process. As the FT’s Beattie noted, even after the meeting’s successes, the US “remains heavily under-engaged”.

Other key reforms need to be tackled: a need to modify the consensus rule, which allows just one dissenting country to block reform, by allowing – and recognising the fruits of – agreements among “coalitions of the willing”; the need to set clear rules on when and how a WTO member can be exempted from new rules – what is called “special and differential treatment”.

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CPTPP could become game changer and supplant 'out-of-date' WTO, after mainland China, Taiwan apply

The WTO also needs to brace itself to tackle trade challenges that were unrecognised or beyond agreement back in 1995 when it was founded. These include how state-owned enterprises should be treated, and how the protectionist elements of national industry policies can be reconciled with the core principles of free trade.

But they also include the new and acute challenges of the 21st century: ensuring health security in the face of pandemics; setting trade rules to slow global warming and mitigate harm from climate change.

In Okonjo-Iweala’s words, we need to ensure the WTO can provide solutions to the crises of our time. Last week, the world’s trade ministers reached agreements that broke a dispiriting 25-year era of procrastination. From here, it is their “courage to continue” that counts.

David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view