Revitalizing the WTO under a Biden administration

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.