It’s time to rebuild the WTO and make international trade a lever for sustainable development

The World Trade Organization (WTO) is holding its 12th ministerial conference from 12 to 15 June in Geneva, Switzerland, against a background of conflictual international relations. Mired in its own existential crisis, the WTO has become incapable of fulfilling the role entrusted to it when it was created in 1995 – negotiating world trade rules and resolving trade disputes. This crisis is an opportunity to rebuild a WTO that supports ecological transition, decent work and the fight against pandemics.

Since its creation, the WTO has experienced difficulties in carrying out its mission as a forum for negotiating world trade rules. As early as 1999, the Seattle Ministerial Conference, marked by major North-South divisions, proved incapable of reaching an agreement. The adoption of a development agenda two years later in Doha, Qatar, gave hope of breaking the deadlock, but the unwillingness of industrialised countries to meet their commitments led to further disagreements in Cancun, Mexico, in 2003. Since then, North-South divisions have remained stubbornly in place and ministerial conferences have been and gone without the Doha Development Agenda being implemented. For developing countries, it is still a priority, but for the United States and the European Union it is outdated.

A total impasse was reached after the Trump administration came to power in the US, declaring “trade war” on China and threatening to leave the WTO. While the pressure has since eased with the Biden administration, tensions with China remain high and the war in Ukraine is adding to international tensions, trade sanctions, soaring commodity prices and supply disruptions.

As a result of the WTO’s paralysis, trade negotiations are taking place outside its framework through dozens of bilateral and regional free trade agreements, which have continued to steadily rise in number.

The new WTO director-general, Ngozi Okonjo-Iweala, aims to restore the WTO’s status.

She has managed to bring member states back to the multilateral table thanks to several measures, including limiting the subsidies that contribute to unsustainable fishing and suspending patents on vaccines and treatments for Covid-19.

Their adoption, however, is conditional on the agreement of the 164 WTO member states, and differences of opinion persist.

The WTO Appellate Body has been unable to function since December 2019, as the US has refused to appoint its members since 2016. The WTO has a dispute settlement body that ensures that global trade rules are binding. When a member state believes that a trade measure by another member state does not comply with WTO rules, it can take it to this dispute settlement body, which brings together three experts to judge the dispute. If either party is dissatisfied with the ruling, it can appeal to the WTO Appellate Body, which in turn convenes three of its seven members to hear the case. It was originally intended that the appellate body would be rarely used and that anti-dumping measures would remain widely available to member states to protect themselves against unfair competition.

However, things did not go as planned. On the one hand, the appellate body has been called upon to challenge more than two-thirds of the dispute settlement body’s rulings since its creation. On the other hand, it has frequently taken a stand against anti-dumping measures, particularly those applied by the US to counter China’s policy of subsidising state-owned enterprises – a concern shared by many WTO member states. It appears that the appellate body has overstepped its role, interpreting the rules to reduce the scope for action to protect against dumping. The role of the officials who assist the members of the appellate body, who only sit on a part-time basis, has been singled out by the US, which is calling for major reform.

Reshaping world trade

The WTO’s existential crisis is an opportunity to reshape it to make world trade more consistent with sustainable development objectives.

Firstly, negotiations will not break the deadlock unless they take into account the interests of developing countries. While the latter want to strengthen the “special and differential treatment” they enjoy, the developed countries want to reduce its scope. The WTO grants not only specific treatment to the 46 least developed countries, but also preferential treatment to all developing countries, which can generally be given more time than developed countries to implement liberalisation agreements. However, the EU and the US are contesting the legitimacy of a system of preferences benefiting two-thirds of WTO member states, including China, which is the world’s largest industrial exporter. While the list of countries benefiting from “special and differential treatment” at the WTO should be adapted to exclude industrialised countries and trading powers such as China, it should also be strengthened in order to give developing countries more room for manoeuvre in terms of industrial policies and food sovereignty.

Secondly, a solution must be found to resolve the trade disputes between Western countries and China. Western criticism is directed in particular at the policy of subsidies that artificially reduce the price of goods exported by China. While it is legitimate for a country whose jobs are threatened by unfair competition to protect itself with anti-dumping measures, subsidies also have a role to play in supporting the development of sustainable sectors. Therefore, the WTO should adopt an agreement that favours subsidies aimed at sustainable development objectives, but prohibits those that distort competition.

Thirdly, the paralysis of the WTO Appellate Body is an opportunity to reform it and to strengthen the possibility of using anti-dumping measures. On the one hand, limiting the administrative term of office of the appellate body’s officials to eight years would ensure a rotation equivalent to that of the seven members, thus reducing the power of influence of the secretariat on the members. On the other hand, a simple measure would be to exclude anti-dumping and safeguard measures from the scope of the appellate body. In the case of the US, these measures have accounted for only 2 to 5 per cent of the country’s imports, depending on the year. Why threaten the stability of the world trading system for such a marginal share? Anti-dumping measures should not be suppressed, but rather extended to social and environmental dumping.

The issue of the impact of international trade on decent work, climate and biodiversity should no longer be considered taboo.

Extending safeguarding measures to social and environmental issues would give states sufficient scope for action to curb dumping and make international trade a lever for sustainable development.

Finally, the majority of trade now takes place under preferential agreements, as a result of the proliferation of bilateral and regional free trade agreements. These are allowed under Article XXIV of the General Agreement on Tariffs and Trade, but they lead to a fragmentation of the international trading system. The fundamental problem with these bilateral free trade agreements is that they guarantee binding rights for transnational corporations and investors, but not their obligations with regard to social and environmental standards.

While these have been detailed for several years in the sustainable development chapters of agreements negotiated by the EU, they are not enforceable due to the lack of a complaints and sanctions mechanism, whereas trade liberalisation and investment protection are guaranteed through dispute settlement mechanisms. Just as rebuilding the WTO requires the reform of existing multilateral rules, rebuilding world trade more generally will require the revision of the rules of the many bilateral and regional free trade agreements that are more binding than those of the WTO.

In an era of global inequality, climate change and pandemics, free trade must be conditional on respect for environmental, social and health rules. It is time for sustainable trade.

This article has been translated from French by Sara Hammerton