WTO needs serious reflection about its future

By Lu Xiankun

The recent biennial World Trade Organization (WTO) ministerial conference in Buenos Aires, which gathered together 4,000 ministers from its 164 member countries as well as participants from civil society and business, ended with little achievement. Mr. Roberto Azevêdo, WTO Director-General, who once hailed the achievements of ministerial conferences, sadly concluded, “Members did not manage to agree on final, substantive agreements this time.”  

He is right. Almost all of the results on the table after the three days of talks are about so-called “house-keeping” issues, such as e-commerce, a work program on small economies, and intellectual property rights . Most of these issues are raised at ministerial conferences every two years with much the same content.    

China's Vice Minister of Commerce Wang Shouwen, from left to right, European Commissioner for Trade Cecilia Malmstrom, Japan's Vice Minister for International Affairs Tadao Yanase, and Morocco Secretary of State to the Minister of Industry, Investment, Trade and the Digital Economy Rakiya Eddarhem, take part in the business forum of the eleventh Ministerial Conference of the World Trade Organization in Buenos Aires, Argentina, Tuesday, Dec. 12, 2017.[Photo: AP/Natacha Pisarenko]

The only notable outcome of negotiations is regarding fisheries subsidies . However, this hardly looks like a substantial decision. It contains two paragraphs in which ministers commit to “engage constructively” in negotiations to develop otherwise undefined “comprehensive and effective disciplines” that prohibit certain forms of subsidies. The only two specific commitments are to achieve this “by the Ministerial Conference in 2019” and to implement “existing notification obligations” on fisheries subsidies. Given the poor record of the WTO in honoring its established deadlines and of its members in honoring their obligations regarding transparency in areas such as agriculture, such commitments provide little comfort for keen observers of WTO negotiations that members would do better this time.  

Such a poor performance on multilateral negotiations comes as no surprise. For too long the WTO has been performing poorly in delivering results while regional and bilateral trade agreements are gearing up. The Doha Round, launched in 2001, proved a disappointment as missed deadlines and finger pointing beset negotiations. The agreements reached at Bali and Nairobi, such as the Trade Facilitation Agreement, although significant in their own right, were just a few brief flashes of lightening across an otherwise dark sky and won’t help those impatiently waiting for the dawn to come. 

Such a situation poses serious challenges for China, which joined the organization in 2001. China spent over 15 years painstakingly negotiating its WTO accession with the hope that the multilateral trading system would provide a constant external driver for its domestic reform and opening-up and help ensure its steady long-term growth. Its accession and the delivery on the commitments that followed did play a role in putting China on a path for fast-track growth in the decade after 2001. However, the stagnating Doha Round negotiations failed to provide the boost China needed to stay on that fast track, and the global financial crisis in 2008 further exacerbated the situation. The double-digit growth China experienced since 1978 has decreased to the so-called “new normal” of around 6.5%. 

The WTO is about more than just negotiations, and its poor performance does not diminish its importance as the fundamental pillar of the multilateral trading system that supports cross-border trade and investment. But the organization needs to adapt to the new realities and challenges of the 21st century. These include a more diversified membership with different priorities, new trade and investment dynamics within the global value chain, and the transformation towards a digital economy driven by technological advancement and the associated servicification of manufacturing, on top of long-standing traditional problems such as the subsidies that distort the agricultural market. The rise of emerging economies led by China, and the grouping of poorer countries in the negotiation process, has strengthened the voice of developing countries but also rendered the negotiation more complicated and more challenging to manage. 

Members need to seriously reflect upon how they can best react collectively to these new challenges. This does not mean that we need to overhaul the organization or its core principles, such as that of consensus decision-making and the development goals enshrined in the WHO Preamble. What is needed is for members to comprehensively review the various WTO mechanisms to identify the practices that have made things happen. Examples include the Trade Facilitation Agreement, which innovates the ways and means to address special and differential treatment, consultations at some regular councils and committees, such as the Technical Barriers to Trade (TBT) Committee, to resolve specific trade concerns, and open plurilateral negotiations, such as those for the second Information Technology Agreement, to achieve significant incremental progress in specific areas, instead of an overloaded round of negotiations that bog members down. 

In that reflection process, leadership is needed. With the recent complications in the domestic politics of some of the traditional major players, it is impossible to expect that role to be taken up by these countries, at least not in the next few years. Therefore, emerging economies, in particular China, should lead this review process. The multilateral trading system, which has been instrumental in assisting domestic reform and the opening-up of China, has incomparable value for China and ensuring that it remains well-functioning and will be indispensable to securing the country’s continuing economic growth and the realization of the “Two Centenary Goals”  set by President XI Jinping at the recent 19th Congress of the Communist Party of China. Meanwhile, as the world’s second largest economy, the international community expects China to shoulder more responsibility. In Buenos Aires, China took the lead among 70 WTO members to announce plans to pursue structured discussions with the aim of developing a multilateral framework on investment facilitation . That is the sort of role China is expected to play into the future. 

(Professor Lu Xiankun is a former senior trade diplomat of China and now associate professor of University of International Business and Economics and Wuhan University of China.)