The WTO must adapt and evolve to stay relevant

Image: Flickr, World Trade Organisation
Image: Flickr, World Trade Organisation

More than 60 years after its creation, the multilateral trading system is at a crossroads.

Recent global events, such as the food crisis and, most importantly, the global economic meltdown have all raised significant questions about the role and future of the World Trade Organisation (WTO) in global economic governance.

The WTO’s flagship project, the Doha “development” round of trade talks, did not even rate a mention in the Group of 20 meetings in Canada last month. Assuming Doha ultimately concludes, the WTO’s contours should change if the organisation is to maintain its relevance.

Nothing has made this more prominent than the financial crisis. Inaction may result in a proliferation of disputes at the WTO dispute settlement body, currently one of the flagships of the WTO’s success. Since no new rules have been made at the WTO since the Uruguay round, these disputes could throw the WTO into disarray.

There is no guidance for the WTO judiciary on trade policies to achieve climate change mitigation or to mitigate a financial crisis. As a result, WTO rules and judgments would, at most, be based on deductions from current rules. If the major trading powers consistently refused to comply with such judgments then the system could collapse.

Developing countries have long resisted the inclusion of trade-related issues in the WTO, particularly as it has been an agenda of developed countries, but also because there has not been any significant improvement in market access in areas such as agriculture. However, the global trading system has increasingly become identified with bilateral and regional trading arrangements and, through these arrangements, trade-related issues are creeping in.

A pertinent example is the Southern African Development Community’s economic partnership agreements (EPAs) with the EU. The EPAs have been marked by disagreement over the inclusion of new issues such as services and investment.

Inevitably trade-related issues, if not addressed at WTO level, will be included into regional arrangements with stricter discipline than at the WTO, to the potential detriment of developing countries.

The combination of these pressures also has implications for what countries will be prepared to concede in the context of multilateral negotiations in the future, and therefore for the shape of the multilateral trading system. The world of commerce is constantly developing and subsuming other issues not initially under the WTO’s domain.

The WTO needs to keep up with the developments in economic regulation in its member states. Inevitably, the WTO has to adapt and expand into other areas not traditionally in its domain. Consequently there is a need for stronger co-ordination and harmonisation of functions between the WTO and other institutions with a mandate to deal with the various trade-related issues.

Since the needs and interests of developing and developed countries cannot be merged entirely, there is a need to craft “trade and …” rules with flexibilities linked to the implementation capacities of developing countries. Developing countries have an attendant obligation to engage with the “trade and …” agenda by deciding which elements of it mesh with their own interests.

21 Jul 2010