At a time of exceptional trade turbulence and uncertainty, the World Trade Organization itself is at a critical juncture. The key pillar of the rules-based multilateral trading system risks losing its standing unless it adapts quickly to a changing world.
Advances in digital technologies are changing how goods and services are produced and traded but existing rules don’t properly cover digital trade.
A temporary moratorium on customs duties on electronic transmissions is due to end in December 2019. Extending it until the next WTO ministerial conference – the organisation’s top body – in June 2020 will provide some certainty, but there is a risk that objecting members such as India do not extend the moratorium further. And 76 countries now want to launch e-commerce negotiations involving only some members.
Taxing digital services provided by tech giants has split countries too. France and the UK are among countries imposing or considering such taxes in the absence of a global solution being developed at the Organisation for Economic Cooperation & Development, but the US says country-specific approaches unfairly target its tech companies.
Meanwhile, the US is among members dissatisfied with aspects of the WTO’s overburdened dispute settlement mechanism. Its recent trade actions have increased the number of disputes and most cases are now appealed, causing long delays.
Appeals require at least a three-person panel to function, but the US is blocking new appointments and the terms of two of the remaining trio on the roster end this December. Resolving that deadlock is essential. Failure of the appeals process would dominate talks next June and risk stalling progress in other negotiations.
The WTO wants to tackle important issues such as climate change, the environment and gender, but the Doha Round of trade talks launched in 2001 stalled years ago, and members are divided on many issues.
One of the few substantive areas of agreement at the last WTO ministerial conference, in 2017, concerned tackling harmful fishing subsidies. Now these are the only multilateral negotiations still progressing. However, with India blocking the appointment of a new chair, December’s deadline for concluding talks will likely be missed. It is essential that members agree a solution by next June.
Companies conduct trade, but the WTO is an inter-governmental organisation and businesses have no formal standing. Some members are reluctant to establish a more formal channel for direct business input.
Next June’s ministerial conference in Kazakhstan could be pivotal for the WTO, particularly given the minimal progress made in 2017. The multilateral trading system is in dire need of reform and the WTO risks losing its effectiveness unless concrete outcomes are agreed.
However, US trade policy has changed the global trading environment. This could complicate efforts to progress negotiations – but it might encourage agreement on liberalising outcomes to combat rising protectionism.
If talks do not progress substantially by June, stopgap measures may be agreed. That provides some certainty, but interim measures could become permanent and the negotiating deadlocks may persist. Any further delay to reform risks compromising the effectiveness of the WTO – an organisation whose rules are more pertinent today than ever.
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