Challenges of Tomorrow: What the Future Holds for the WTO

Thanks to – Calie Hill, Diplomatic Courier

(Well, this article was published in 2013, but it still holds. That itself shows the nature of challenges to WTO).

Snapshot

  • WTO played important role in shoving off the threat of protectionism immediately after 2008 economic recession.
  • The economic expansion of large developing countries has created a new set of challenges for the WTO.
  • As more Free Trade Agreements have been created, the primary role of the WTO in liberalizing trade has been increasingly questioned.
  • WTO has played a fairly limited role in helping address other global issues related to trade, such as food security, climate change, and global trade inequalities.
  • At present, concluding Doha Development Round is the most important challenge in front of WTO.
  • Developed countries’ recourse to TTIP and TPP as an alternative to stalemate in Doha Round is fraught with risks for developing countries. Developing countries will have to face intimidating bargaining powers of developed countries and ‘sphagetti bowl’ of cross cutting and inconsistent rules governing different regional and bilateral markets.

 

Twenty years ago, votes in favor of implementing the Uruguay Round trade agreements established the World Trade Organization (WTO). Since its creation, membership has grown from 23 to 155 [159 in 2015] countries and continues to grow. Along with gaining momentum in numbers, diversity and depth of resources are vastly increasing. With more than two-thirds of its members from developing countries, the WTO is far more diverse than ever before. WTO regulations, dispute settlement strategies, and the work of its administration have become crucial to the management and smooth functioning of global trade. During the 2008 global financial crisis when tumbling economies and rising unemployment created pressures to protect domestic industries, the WTO was recognized for stopping the threat of trade protectionism.

.. However, despite the organization’s undeniable success, a changing international economic environment creates a series of significant challenges.
The most evident challenge is the Doha Development Round—the current round of multilateral trade negotiations to further liberalize trade and reform the WTO. After a decade of talks, the discussions remain at a standstill. The Doha Round is focused on reducing critical trade barriers in areas such as agriculture, industrial goods, and services. This would urge businesses around the world to specialize in the production of goods and services, achieve greater economic status, and increase their efficiency and productivity, all of which would permit them to deliver higher quality and cheaper products to international consumers. The Doha Round is specifically determined to provide increased market access to goods and services from developing countries. In the end, the WTO estimates that the passage of the Doha Round could increase global GDP by $150 billion per year. Part of the reason the Doha negotiations are at a stalemate, many observers now recognize, is that it was simply too ambitious, relying on a “single undertaking” approach which sought an all-encompassing agreement on the markets for agriculture, goods, and services.

Developing economies, which had been assured “special and differential treatment” in the talks, also became perturbed as the richer and more developed countries demanded more and more allowances, cautious of giving rising trade powers such as Argentina and China a larger competitive advantage.

The economic expansion of large developing countries has created a new set of challenges for the WTO. How these countries are incorporated into the global trading system, and specifically how China as the world’s second largest economy, involves itself with the WTO is important not only for the Doha Round but for the future of the Organization.

Since Doha has been in a stalemate, the world’s trading powers have been busy bypassing the WTO by signing multiple bilateral and regional trade agreements. As more Free Trade Agreements have been created, the primary role of the WTO in liberalizing trade has been increasingly questioned. The WTO has played a fairly limited role in helping address other global issues related to trade, such as food security, climate change, and global trade inequalities.

While some FTAs can help to cement the relationship between trading partners, two large flaws from the perspective of development promoters have emerged. First, the major nations—the EU and U.S., for example—can use their intimidating bargaining power to press for more concessions from weaker countries than they could get away with in the setting of the WTO, where the governments of smaller economies can form consensus blocks. Second, they create what has been labeled as a “spaghetti bowl” of cross cutting and inconsistent rules governing different markets, which can be very expensive for producers in poor countries to conform to, let alone keep track of.

With the various challenges that lie ahead, new thinking is needed in the WTO. The approaches of twenty years ago are no longer adequate to today’s global obstacles. The WTO Secretariat needs to begin a process that will revitalize the organization and equip it to deal with the changing international economic environment. As well as inheriting a sturdy foundation of triumphs, the new Director General has a daunting task ahead.

Calie Hill is the assistant editor for the Diplomatic Courier. This article was originally published in the special annual G8 Summit 2013 edition and The Official ICC G20 Advisory Group Publication.

Original article Challenges of Tomorrow: What the Future Holds for the WTO

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