The WTO less than half a glass

So how to assess the importance of MC12?  Was the glass half empty or half full?  Frankly, the liquid in the glass is barely noticeable and certainly not at the half-way point.

Let’s examine the evidence.  The 164 members of the WTO managed to agree on a package that included some things on vaccine production, limited some subsidies for fishing, agreed to grant passage for emergency food aid, said they would start to do something important to reform the organization, and promised to keep an important rule in place for e-commerce for up to two more years.

If this list were presented to nearly any person the street today, it is highly unlikely that this set of outcomes would be greeted with a rousing cheer.  It is not that many of these items are unimportant, but rather than each step looks awfully limited and the complete set barely begins to get at some of the pressing and urgent issues of the day.

On vaccine production, for instance, WTO members already granted themselves permission years ago to act in instances of public health emergencies.  The exact scope of the rules is still subject to wrangling, but the agreement reached last week in Geneva which covers the period until 2027 doesn’t seem to go much beyond what already existed.  Perhaps more problematic, the challenge in tackling Covid-19 is less about vaccine production at this point.  

The outcomes on fish are especially depressing.  Members have been trying for 20 years to manage problems related to illegal, unreported and unregulated (IUU) fishing.  After all this time, the MC12 agreement didn’t commit anyone to stopping illegal fishing.  It didn’t even stop subsidies for IUU fishing.  It just got members to agree to spend less on destroying this critical natural resource. 

And, as always, the devil is in the detail.  Trade lawyers will argue over my characterization of the results.  Members have to figure out how to implement the commitments.  Given the decades it has taken to get to this point, it’s probably fair to assume that many members will not enthusiastically race to comply with the letter and spirit of even this fairly limited agreement. 

The idea that the WTO is celebrating an agreement to allow food aid be shipped for humanitarian purposes would probably leave the average person scratching their head again.  Of course, there is the potential for food aid to be misused and for governments to claim “aid” when they are practicing trade distorting or protectionist policies.  However, one might have imagined that food used by the World Food Program at a time of rising inflation and food security concerns would be able to save people from starving without needing an explicit commitment from the WTO.

The extension of the customs moratorium on electronic commerce was a piece of semi-good news.  Of course, it is better, as we previously argued, to have it extended than let it fall.  But a short reprieve just means another fight is ahead in two years.  The extensive wrangling over this commitment also obscured the fact that absolutely nothing else has been done in the WTO agreements on digital trade since the outfit started in 1995. 

Think about that again for a moment—the World Trade Organization, in 2022, continues to have no explicit rules related to the digital economy and no obvious path to getting something in place either.  [The side discussions on electronic commerce did not yield any announcements from participating countries.]

Members did agree to start talking about doing something to reform the organization.  They have “reaffirmed” the foundational principles and agreed to work towards a solution to a specific challenge on dispute settlement in two more years. 

Given this dispiriting list of outcomes, why were trade watchers mostly glowingly optimistic?  Two reasons come to mind.  First, most trade watchers have spent a lifetime building up this institution in one way or another.  It’s very hard to witness the slow extinguishment of a dream, passion project, and vocation.  Second, because the WTO matters and watching it flounder is genuinely a problem.

Given the importance of the global trade body to businesses and consumers, it can feel particularly wrong to kick the organization when it is down.  After all, why continue to draw attention to limited outcomes and why not recast the latest outcomes as a historic achievement that highlights continued relevance?

It is precisely because a functioning WTO matters so much that it is important to be honest about its pathway and prospects for the future.  Sugarcoating a weak package of outcomes doesn’t help focus attention on why the institution has failed to make headway or why members cannot agree on doing important things.

Let’s just review for a moment why a functioning WTO is so critical to all of us.  It provides a common set of rules and principles that have allowed trade to flourish.  It’s like oxygen for the trading system.  Extinguish the air and everyone will start to suffer.

Without the WTO in place, governments would be free to randomly reset their trade rules on a regular basis.  Tariffs could go up or down without notice.  Customs checks at the borders could suddenly focus on allowing goods from some locations to pass easily while blocking everything from other firms.  It would drive up costs dramatically and the burden would fall most heavily, as always, on the smallest firms. 

Many might assume that free trade agreements, including bilateral and regional arrangements, might sort out the majority of these issues.  But all free trade deals are built on WTO foundations.  Even if this problem were sorted out, not every country is a great partner for a bilateral or functioning regional trade agreement. 

Finally, of course, global problems are going to be especially tough to solve with bilateral and regional solutions alone.  The challenges facing us all are going to require the cooperation of most of the planet.  This includes all of the current and future members of the WTO, working together to deliver packages of results that are meaningful.