Revitalizing the WTO under a Biden administration
Published 12 January 2021 | 10 minute read
Longstanding bipartisan US concerns about the WTO will persist and the need for reform will be no less important under a Biden administration than a Trump one. While many in Geneva and elsewhere around the world are finally talking about WTO revitalization for the first time, philosophical differences between the US and key allies like the EU remain and have undermined serious progress.
Analysts around the world widely anticipate that President-elect Joe Biden’s Administration will radically change the US approach to multilateral institutions. When it comes to the World Trade Organization (WTO), this consensus opinion is right to a degree. The Biden Administration is likely to lift the hold on the naming of a new WTO Director General, to more actively work with allies through the system to hold China accountable for its unfair trade practices, and to engage in fewer overtly provocative unilateral trade actions.
However, longstanding bipartisan US concerns about the WTO – many of which have historically been held more strongly by Democrats than Republicans – will persist and the need for reform will be no less important under President Biden than President Trump. Indeed, it is worth recalling that it was the Obama Administration, not the Trump Administration, who first blocked the reappointment of Appellate Body Members in 2016.
It is also important to recognize that US concerns go well beyond the Appellate Body and span all three major WTO functions. With respect to negotiations, policymakers in both political parties have bemoaned the system’s inability to update the rules, including to address key Democratic priorities like the environment and labor as well as China’s non-market practices. Republicans and Democrats alike have also expressed concern about the issue of “developing country status”, which permits major emerging economies to escape the same level of commitment as established ones.
With respect to monitoring, there is broad concern about the disrespect many countries have shown for the most basic transparency rules. This plays a key role in undermining business certainty and the ability to effectively enforce the rules.
And finally, with respect to dispute settlement, the longstanding bipartisan US view is that the Appellate Body has strayed beyond acceptable limits and often gotten it wrong when adjudicating cases involving trade remedies. But these concerns go beyond the Appellate Body, and also include the system’s lack of efficiency.
While many in Geneva and capitals are finally talking about WTO reform for the first time, philosophical differences between the US and key allies like the EU remain and have undermined serious progress. In particular, the US and EU simply have not been able to see “eye to eye” about the role of the dispute settlement system and whether it is permissible for the WTO’s “court” to set rules and develop a body of international common law without the consensus of all Members. To put it bluntly, the US rejects this idea while the EU generally embraces it.
I strongly agree with the critiques put forward by the United States and its vision for the institution, including the idea that the WTO must respect every Member’s sovereignty. At the same time, I also believe that the WTO is at a moment of crisis where it may quickly drift into irrelevance if significant reforms are not agreed upon. The importance of reform is underscored by the need to have a comprehensive set of rules on China’s non-market practices that can be enforced multilaterally, which poses a much greater chance of success of actually changing China’s behavior than unilateralism.
But none of the needed reforms are remotely possible if the US and EU can’t get on the same page. The United States and EU share common values, jointly spearheaded the WTO’s creation, and are equally challenged by China’s policies. If they cannot reach consensus on how to fix the WTO, it is inconceivable that the rest of the world could do so. And this going to require flexibility, creativity, and ambition.
That’s why I wrote my paper. Although the United States and European Union have coordinated better than reported on WTO reform proposals regarding the negotiation and monitoring functions over the last four years, they have remained at loggerheads on dispute settlement. Further, it is important to acknowledge that there have been instances where the United States has found the level of creativity or ambition on the part of the EU to be lacking, including on the negotiating front.
My paper attempts to help change this dynamic with three objectives: (1) to illustrate the scope of the problems with the WTO across all three of its major functions; (2) to raise the level of ambition about the types of reforms that should be contemplated; and (3) to promote flexibility and compromise between the United States and EU, particularly on dispute settlement.
I don’t have all the solutions, and some have criticized my paper for being too slanted in favor of the developed world. That’s a fair critique, but I did work for the US government after all! Nonetheless, it’s clear that many of my proposals need further refinement, including to ensure that they get buy-in from countries outside the US and EU with different needs and levels of development. But if the United States and EU aren’t are unable to set aside their longstanding philosophical differences and get on the same page, it is certain that the WTO will drift into irrelevance. And given all that the WTO has accomplished over the years – despite its flaws – that would be a major loss for the world. So, my hope is that this paper will simply be seen as an attempt to facilitate a first, but very necessary step toward the revitalization of the WTO.
"Revitalizing the WTO" paper by Clete R. Willems is available here.