Last week’s marathon ministerial meeting of the World Trade Organization breathed a little life back into the multilateral trading system. It was able to trumpet a package of deals, including a partial waiver on Covid vaccine patents and cuts to fishing subsidies; these lacked much real substance, though their impact depends on their implementation. Yet the WTO remains, in many ways, on life support. Keeping it alive is important; if it did not exist, the world would need to reinvent it — which would be very hard today. Indeed, with multilateralism under such strain, and problems of managing global public goods multiplying, it is arguably needed even more today than when it was created in 1995.
Globalisation, of which the WTO has been a driver and enabler, has stalled. The global financial crisis was followed by a populist backlash against open borders. Donald Trump’s election led to a US trade war with China. The Covid-19 pandemic closed borders, gummed up global trade and prompted companies to reconsider the wisdom of extended supply chains.
That makes the likelihood of further big rounds of trade liberalisation in the foreseeable future almost non-existent. Indeed, preferences on how to regulate some of today’s main growth areas, such as digital services, differ so much across the world it is hard to see a basis for agreeing on global rules.
Yet open trade remains so important to global prosperity and there are so many issues countries must deal with that a forum such as the WTO can still play a key role. One example, despite the paucity of last week’s deal, is limiting subsidies for fishing that are destroying global fish stocks. Another is climate policy. The carbon border adjustment mechanism being implemented by the EU — putting tariffs on imports where the producer is not paying a cost for emissions — is bound to lead to arguments over which are legitimate and which are protectionist. Without at least a way to resolve disputes, trade wars could result.
Ngozi Okonjo-Iweala, the WTO’s energetic director-general, deserves great credit for keeping the body’s heart beating. Its future health and vitality, however, will depend on national governments — and above all on whether the US, a driving force in its creation, and China, one of its main beneficiaries, see value in its existence.
Though it claims to have “recommitted” to the WTO, the Biden administration has done little to reverse the assaults on the trade body of the Trump years. The White House has little appetite for new trade initiatives that it knows would be politically onerous; its approach to trade is a form of “America First Lite”. A key test will be whether it is prepared to engage productively in discussions agreed last week on having a functioning dispute resolution mechanism by 2024 — it has rendered the existing panel useless by refusing since the Trump era to allow new members to be appointed.
China, whose 2001 accession was meant to be proof of the WTO’s worth, has under Xi Jinping expanded policies that run counter to free trade principles. India, meanwhile, seems more intent on special-pleading and posturing as leader of the developing world than on real engagement.
This opens an opportunity for the EU to be a standard-bearer on free trade. There are limits to what it can achieve, however, without the support and commitment of other big trading powers. The best that can be hoped for is that the WTO can meanwhile be preserved as a discussion forum and — with luck — an arbiter of disputes. The next generation of political leaders might one day rediscover its importance.