Criticism or claptrap

The World Trade Organization (WTO) is frequently criticized as outdated, ineffective, and incapable of responding to modern challenges. Yet the outcomes of the 12th Ministerial Conference (MC12) in June 2022 demonstrated that the organization remains a vital part of the global trading system.

Members reached agreements on fisheries subsidies, vaccine access, food security, and digital trade. These deals will help curb illegal fishing, improve access to vaccines, support food trade during a growing food crisis, and preserve duty-free digital trade for at least two more years. While none of the agreements satisfied every participant, they showed that compromise remains possible among 164 members with vastly different interests.

The WTO’s importance extends beyond negotiating agreements. It provides a forum where governments can discuss problems, exchange information, and reduce trade tensions before they escalate. At a time of rising geopolitical rivalry, the organization remains one of the few global institutions capable of bringing competing powers together.

Critics often overlook the WTO’s broader achievements. Around 75% of global trade still takes place under WTO rules despite the existence of more than 350 regional trade agreements. Major regional accords, including the Regional Comprehensive Economic Partnership, the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, and the African Continental Free Trade Area, all use WTO disciplines as their foundation.

Friction over intellectual property rights

The debate over intellectual property rights and Covid-19 vaccines became one of the WTO’s most contentious issues. India and South Africa proposed a broad waiver of the Agreement on Trade-Related Aspects of Intellectual Property Rights, arguing that patent protections limited vaccine production and access in developing countries.

Supporters claimed existing rules were too restrictive during a global health emergency. Opponents argued that weakening patent protections would reduce incentives for pharmaceutical innovation and future vaccine development.

By mid-2022, however, the situation had changed dramatically. Global vaccine production reached 24 billion doses, enough to fully vaccinate the world’s population. The larger challenge was distribution rather than manufacturing.

By 31 March 2022, 5.7 billion vaccine doses had been exported worldwide. The European Union accounted for 39.7% of exports, China 32.6%, and the US 15%. Export restrictions, supply chain bottlenecks, transportation problems, and regulatory barriers often proved more significant obstacles than patents.

The debate also helped spur investment in vaccine manufacturing across Africa. New facilities and partnerships emerged in South Africa, Rwanda, Nigeria, Senegal, and Tunisia, strengthening long-term health security on the continent.

The WTO also played an important role in highlighting the trade consequences of the war in Ukraine. WTO analysis showed how disruptions in agriculture, energy, and industrial goods could worsen food insecurity and strain global supply chains. These concerns helped place food security at the center of MC12 discussions, leading members to support the World Food Programme’s ability to source food without export restrictions.

Two decades of talks on fisheries subsidies

The fisheries subsidies agreement illustrates both the WTO’s strengths and weaknesses. After more than 20 years of negotiations, members finally agreed to prohibit subsidies supporting illegal, unreported, and unregulated fishing.

The agreement is significant, but it leaves unfinished work. Members still need to address government support that contributes to overcapacity and overfishing, and they have given themselves four years to complete those negotiations.

A major obstacle has been disagreement over Special and Differential Treatment (SDT), which provides developing countries with additional flexibility under WTO rules. Many developing countries argue that such flexibility is essential for growth and development. Developed countries often counter that broad exemptions weaken trade disciplines.

The controversy is amplified by the WTO’s practice of allowing members to determine for themselves whether they qualify as developing countries. This becomes politically sensitive when major economies such as China and India seek benefits intended for poorer nations.

Because consensus on SDT reform is unlikely, pragmatic solutions may be the most realistic path forward. Countries such as Brazil and South Korea have already stepped back from some developing-country privileges, while China agreed not to use certain vaccine-related flexibilities.

Dispute over dispute settlement

Perhaps the WTO’s most serious institutional challenge is the paralysis of its dispute settlement system.

The crisis emerged when the US blocked appointments to the Appellate Body, arguing that it had exceeded its mandate by creating obligations never agreed by members. By December 2019, too few judges remained for the body to function.

Washington also criticized procedural shortcomings. WTO rules specify that appeals should normally be completed within 60 days and never exceed 90 days. Yet between 2011 and 2019 the average appeal lasted 133 days, while appeals from 2014 to 2017 averaged 149 days.

Most WTO members continue to support a binding dispute settlement system, but there is widespread agreement that reforms are necessary. The system has successfully resolved major disputes involving aircraft, bananas, and beef, yet lengthy legal battles can discourage negotiation and slow decision-making.

Members are now exploring reforms that would expand arbitration, encourage mediation, and create more efficient procedures. At MC12, ministers committed to restoring a fully functioning dispute settlement system by 2024.

Consensus or plurilateralism?

The WTO’s consensus principle protects national sovereignty by ensuring that no member can be forced to accept rules it opposes. However, requiring that none of 164 members object makes negotiations extremely difficult.

One alternative is plurilateral negotiations involving smaller groups of willing members. Some of the WTO’s greatest successes, including agreements on information technology, telecommunications, and financial services, were negotiated in this way.

This approach is becoming increasingly important. WTO members are pursuing initiatives on e-commerce, investment facilitation, women’s economic empowerment, climate change, and plastics pollution through smaller negotiating groups.

A major success came in 2021 when 67 members concluded an agreement on domestic regulation in services. According to estimates by the Organisation for Economic Co-operation and Development, the deal could reduce annual trade costs by US$150 billion. It streamlines licensing procedures, improves transparency, and includes provisions preventing discrimination against women.

Many members now view plurilateral agreements as the most practical way to modernize trade rules in emerging areas.

Other areas of reform

The WTO also faces challenges in transparency and monitoring. Members fail to submit required notifications of trade policy changes more than half the time, weakening oversight and complicating negotiations.

The broader reform agenda remains extensive, but the costs of inaction are significant. WTO economists estimate that a split in the global trading system into competing blocs could reduce global output by US$4.4 trillion over a 10-to20-year period, equivalent to 5% of world gross domestic product.

The WTO is far from perfect, but it remains an essential pillar of the global economy. Its future depends on greater flexibility, pragmatic reforms, and renewed political commitment. The danger is not that the WTO changes too much, but that countries fail to strengthen an institution whose value may only become fully apparent if it disappears.

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