Fast-forward to today: the WTO and its rules are still crucial in helping nations to tap into new opportunities for trade growth, to harness trade to tackle global challenges and de-escalate trade tensions. But amid heightened geopolitical tensions,  some key players’ commitment to economic interdependence has waned, chipping away at some of the fundamental principles of global trade governance and making it harder to achieve sustainable economic convergence, particularly for those still at the periphery of economic development — whether they are people, businesses or entire countries.

Thirty years after the inception of the WTO, it is time to reignite the spirit of economic cooperation that inspired its formation — this time to support so called re-globalization to make trade more inclusive and more equitable. Inaction, complacency, or waiting for a sudden change of heart among those unconvinced by the multilateral trade system will not do the trick. Restoring the practice of collaboration among WTO members requires bold measures: first, the role of trade policy as a catalyst for growth and development must be emphasized; second, national security concerns must be recalibrated; and third, a tangible commitment is needed to rebuild trust among economies and to update the WTO rulebook so that it aligns more closely with today’s realities.

Reclaiming the role of trade policy as a driver of growth

In today’s world, trade policy can all too often be used to achieve domestic goals, including some that may be commendable. However, the effectiveness of using tariffs, subsidies or other trade policy instruments to achieve geopolitical, climate or technological objectives is mixed, at best. One thing is clear: making it more difficult to trade does not make goods less costly, and it is mostly consumers, especially the most vulnerable, who end up paying the highest prices. Evidence also confirms that those on the receiving end of trade restrictions rarely remain idle, and that tit-for-tat measures may rapidly ensue, leading to a risk of trade conflict.

Over the past 30 years, trade has consistently driven income growth, including in many developing countries. Yet heightened uncertainty and tensions have dampened the expansion of commerce in recent years. Global trade growth in 2024 is projected to be well below average rates in the decades preceding the pandemic. Policymakers must reclaim the role of trade policy as a driver of economic growth, starting by fully utilizing the WTO to safeguard openness and certainty in the trading system.

Rebalancing national security and trade

While national security and the increased threats implicit in excessive concentration of production or certain disruptive technologies are a legitimate concern for governments, there is also a risk that increasingly citing national security risks may distort trade and create trade tensions. Professor Daniel Drezner recently argued that as more items are added to the “national security” basket, the harder it becomes for policymakers to focus on what is truly important in foreign policy, adding that a “rightsizing” of national security threats is needed. This, in turn, could ease the way to fostering greater transparency and mutual understanding of the rationale and merits of trade measures driven by security concerns.

Reforming the WTO for today’s world

The WTO needs important reforms to remain effective. One such reform would involve strengthening the disciplines that address trade-distorting policies such as subsidies, including by considering whether special rules might be needed to manage the specificities of different economic systems. Another reform would involve bringing greater flexibility to the way in which the WTO works by facilitating negotiations among group of economies through plurilateral talks that can later be integrated into the global framework. And yet another reform could promote trade initiatives that are growth-enhancing — a topic especially relevant for developing economies — by supporting green, digital and inclusive trade. Finally, for greater certainty and predictability in international trade, the WTO’s dispute settlement system must be restored to full functionality.

From globalization to re-globalization at the WTO

Under Peter Sutherland, the WTO became a platform for opportunity through globalization. Thirty years later, under the leadership of Director-General Ngozi Okonjo-Iweala, the WTO must evolve into a renewed source for opportunity through re-globalization, ensuring that the benefits of trade reach more people, businesses and economies, leaving none behind.

To read the blog as it was published on the World Trade Organization webpage, click here.

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Introduction: A Global Emergency

The post-war trading system, which is at the foundation of our prosperity and orderly international relations, may be ending. Instead, ahead of us may lie an indefinite period of fragmentation of world trade and a more fractious and unstable world order. As trade rules embodied in the World Trade Organization (WTO)—which are imperfect and outdated but still constitute the bedrock on which the world trade edifice stands (Wolff, 2023)—become increasingly eroded, trade will be reconfigured inefficiently along regional and “friendship” lines. The global economy will slow, expectations of higher living standards will remain unmet, the poverty reduction of decades past may be reversed, and climate action will be impeded (Georgieva, 2023).

This book seeks to address the questions—uppermost in the minds of policymakers and analysts around the world—why fragmentation is happening, how it might evolve, and what can be done to prevent, or at least mitigate, the economic and political disruption that it will bring. I do not claim to provide a definitive answer, nor—frankly—would I expect anyone to do so. Indeed, uncertainty about what fragmentation will bring is the essence of the challenge it poses for policymakers and firms. I aim, however, to advance our understanding of fragmentation by considering both the politics and economic thinking that drive it, and the economic and security context within which it is occurring. I try to sketch possible outcomes of the fragmentation process and suggest policies that respond robustly to the uncertainty the erosion of trade rules is generating.

Along with a succession of crises—the Global Financial Crisis (GFC), China–U.S. tensions, the pandemic, the war in Ukraine—the prevailing narrative on globalization and trade changed. In many quarters trade is no longer viewed as a source of efficiency, growth, and peaceful relations but as a source of unfair competition, inequality, and a threat to national security. What did not change, however, is a compelling body of theoretical and empirical evidence dating back 250 years which shows that nations gain from international trade. If anything, the evidence continues to accumulate. Countries could not have fought the pandemic without trade in vaccines and medical equipment, and without foreign supply of everything when whole nations went into lockdown at various times. As the effects of climate change became more visible in prolonged droughts and other disasters, so did the need for trade in food, solar panels, and critical materials for batteries. As the world’s climate continues to deteriorate, nations will have to choose between agricultural trade and mass migration, and to choose between trade in environmental goods and use of fossil fuels.

Why did the narrative on globalization become so negative and why is the resurgence of protectionism threatening? One reason is as old as the annals of commerce yet remains fundamental. Nations gain from trade but, in sectors where they do not have comparative advantage, workers and capital invested lose, creating a coalition to resist trade. A sequence of crises which undermined confidence in globalization and discredited the prevailing policy paradigm bolstered the political resistance to free trade by those who lose from it. The “Washington Consensus” became the Washington dissensus.

The resistance to trade found new life in three developments. The first is the intensifying rivalry between China and the United States, the world’s superpowers, and largest economies. The second—and connected—development is a revolution and inward turn in the trade policy of the United States, the architect of the post-war system, which has its roots in its increasingly fractious social and political divisions, and to the rising inequality and macroeconomic instability of recent decades. The third development is the mounting concern that WTO rules are outdated and increasingly getting in the way of sovereign preferences in many areas. While traditional agendas such as differences in labor standards and in industrial policy (e.g., support to infant and declining industries) remain insufficiently addressed, even more pressing and divisive issues, namely climate change and national security took center stage.

Economic efficiency mandates that the right policy response to the mounting tensions is not to close trade but to address the problems at the core—to find a strategic accommodation with China, to mitigate the losses of some workers from trade with adequate social support, and to coordinate decarbonization policies. For all its shortcomings, there is enough flexibility in WTO trade rules to accommodate national preferences and where there is not, the WTO offers a means to achieve better coordination without unduly restricting trade. But however valid these arguments are, trade policy is a balancing act between conflicting interests and views, and the balance is rapidly and decisively shifting toward allowing countries more “policy space.”

It takes time for the world economy to change direction and this book shows that the fragmentation of world trade has barely started: it is not too late to prevent fragmentation. Protectionism and rule-breaking in many quarters have been offset by trade liberalization in others, especially under the growing number and increased depth of regional and mega-regional trade agreements. Global value chains continue to show remarkable resilience. Many companies that once called for protection have either become defunct or are adapting, reorienting toward world markets, importing cheaper inputs, drawing on foreign technology, investing overseas, and calling on equity and debt capital from abroad. Trade continues to grow, technology advances, enormous gaps in wages and productivity across the world persist, and the gains from globalization are far from spent.

Yet, the signs that the trading system is on the cusp—that an avalanche of protectionist measures has begun to roll and is building—are unmistakable. These signs now go well beyond the trade war between China and the United States and the sanctions on Russia and Iran. They include, for example, over thirty WTO trade disputes that remain in limbo after its Appellate Body became disabled, a vast increase in trade concerns expressed in WTO committees, large trade-distorting subsidies in the United States which has newly embarked on import-substituting industrial policy, and a widespread expectation that decarbonization measures will cause a new wave of trade disputes. Donald Trump is the Republican candidate in the 2024 Presidential election and has promised to escalate the trade war with China and impose an additional 10 percent MFN tariff on U.S. imports, which would amount to the United States tearing up the WTO and is bound to prompt retaliation by partners that account for most U.S. exports.

Avoiding fragmentation or, at least mitigating the damage it will cause, is possible. An essential condition is for China and the United States to reach an accommodation on trade. The tension in China–U.S. relations is no longer mainly about trade if it ever was, and nor is reduced trade the most worrying consequence of their rift. The rivalry between a rising China and the incumbent United States has preoccupied eminent American scholars such as Graham Allison (2017), John Ikenberry (2014), Henry Kissinger (2011, 2012), and Joseph Nye (2023). The perspectives they offer are diverse, but they build on the same assumption: the nuclear-armed giants have the means to destroy the other without realistic prospect of defense, and so they will coexist or not exist, and must be constantly wary of the risk of escalation. Others of the self-denominated realist school see a military conflict between the superpowers over supremacy in Asia as highly likely (Mearsheimer, 2006)….”

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This deficiency arises because the government members of the World Trade Organization (WTO), the global trade rule body, have struggled to reach consensus on new trade rules since 1995, coinciding with the public emergence of the World Wide Web.

This digital void poses an escalating challenge. In the absence of global rules to structure consistent regulations and laws for the digital economy, governments are independently addressing issues, resulting in a rising level of fragmentation that proves increasingly difficult for businesses to navigate.

While the WTO governments have acknowledged the issue, their attempt to address it dates back to 1998 when they initiated a work program to discuss what was then termed electronic commerce. The group established one important rule, prohibiting WTO members from imposing customs duties or tariffs on electronic transmissions. Although this rule was initially put in place for a two-year period, it requires renewal every time trade ministers convene. The most recent ministerial conference (MC13) in Abu Dhabi at the end of February saw the moratorium on customs tariffs renewed, potentially for the last time, with an expiration date set for 2026.

Despite the lack of clarity surrounding the term “electronic transmissions,” it is expansive enough to cover many digital trade activities, including cross-border delivery of software subscriptions, entertainment streaming, digital payments, and online education. The intentionally vague language adopted in 1998 aimed to allow internet-enabled transactions to continue across borders without tariff impediments.

In the decades since, digital trade has burgeoned with applications that were inconceivable in the 1990s. Despite the absence of customs forms or potential tariffs for cross-border activities, if the moratorium expires, WTO members could demand customs paperwork and impose tariffs or duties on each transmission.

While some argue that WTO members wishing to impose tariffs on digital trade may face practical challenges, such as the inability of customs departments worldwide to track and trace online transactions, the moratorium’s expiration may still lead to attempts to collect duties, especially from larger firms engaged in significant cross-border activities. Although the difficulty in collecting customs tariffs might not be a sufficient barrier, the costs of collection will likely outweigh tariff amounts, particularly for transactions bundled into larger payments like subscriptions or professional service fees, or for those delivered for free.

It is crucial to note that the moratorium exclusively applies to customs tariffs. Governments can already levy other forms of taxes on digital transactions.

The WTO rule book, crafted primarily before the internet’s pivotal role in cross-border trade, contains few rules directly applicable to the digital economy. Many internet-delivered services are covered by commitments made for postal mail or fax delivery across borders.  A few updated rules for intellectual property apply to digital trade. Governments have adapted commitments originally intended for offline use to fit online trade situations, but this is undeniably a suboptimal approach to managing the digital economy.

Despite agreeing at MC13 to “reinvigorate” the original work program on electronic commerce, 90 WTO members have spent several years negotiating new e-commerce rules under the “Joint Statement Initiative” (JSI). Expectations for significant conclusions at the ministerial level were unmet due to substantial gaps among JSI members on sensitive issues such as cross-border data flows, data localisation, source code protections, overall agreement scope, and permitted exceptions. Consequently, members opted not to advance any JSI activities for consideration at the ministerial meeting. Even if JSI members reach an agreement, it remains unclear how these rules will be incorporated into the global rule book.

The global business community has fervently called for an extension of the moratorium, emphasising the need for consistent efforts to prompt WTO members to agree on global digital rules that better suit the 21st century.

Dr. Deborah Elms is Head of Trade Policy at the Hinrich Foundation in Singapore. Prior to joining the Foundation, she was the Executive Director and Founder of the Asian Trade Centre (ATC). She was also President of the Asia Business Trade Association (ABTA) and the Board Director of the Asian Trade Centre Foundation (ATCF).

To read the full Expert Opinion as it appears on the Tech for Good Institute’s website, click here.

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Looming elections in India, the United States, and Mexico, plus a newly installed administration in Indonesia, severely restricted the room for maneuver and crushed any inclination to compromise.

Where the negotiating efforts fell short of agreement – in agriculture, fisheries subsidies, and reform of the organization’s crippled dispute settlement system – the outcome was almost preordained. India was not going to risk blowback from its farmers or fishers and the US was not going to yield on a newly minted Appellate Body.

In her concluding press conference, WTO Director-General Ngozi Okonjo-Iweala referenced the many strong headwinds confronting MC13 including the wars in Ukraine and the Middle East, slumping demand in many economies, and pending elections in more than 60 countries in 2024. She tried to put a brave face on the results from the five-day meeting by suggesting what trade ministers achieved was “pretty amazing” and that the glass was “three-quarters full.”

To be sure, there were some positive results, including the accessions of Comoros and Timor Leste and the entry into force of the 2021 agreement on Domestic Regulation in Services.

But on the major issues, WTO members came up empty.

No deal on agriculture

Agriculture talks ran asunder on India’s demand to make permanent a “peace clause” agreed in 2013 which shields New Delhi from any legal ramifications for breaching its limits on allowable farm subsidies used in its public stockholding program. The building of food stocks is permissible under WTO rules, but India purchases rice from farmers at inflated levels through its Market Price Support system which leads to greater production. Many of India’s trading partners believe the rice reserves, meant to build up domestic stocks, are later exported.

During one small group meeting, Thailand’s ambassador to the WTO, Pimchanok Vonkorpon Pitfield, alleged that 40% of rice held in the subsidized Indian public stocks was being exported. Infuriated Indian officials, including trade minister Piyush Goyal, told Okonjo-Iweala and the conference chair that India would not attend further meetings if Pitfield was present.

No deal on fisheries

Negotiations to expand on the 2022 agreement curtailing fisheries subsidies likewise ran aground. The agreement struck at MC12 banned subsidies for illegal, unreported, and unregulated fishing. This was an important achievement but the subsidies most responsible for depleting fish stocks globally are those that lead to overfishing and overcapacity. The goal at MC13 was to ban subsidies for fishery-related shipbuilding, labor, and fuel, among other things. Once again, India was front-and-center arguing that its fishers should be able to receive unlimited subsidies if fishing in sovereign waters. Developed countries, India proposed, would meanwhile ban all deepwater subsidies while developing countries could continue such support for 25 years.

Pacific island nations argued that subsidies for deepwater fishing must be banned, something the Chinese could not accept. About one-third of the world’s fishing vessels are Chinese-owned and many of them fish waters throughout Asia but also off the coast of Africa and Latin America. China also objected to US demands that any vessels that use forced labor must register themselves as such.

No deal on dispute settlement

Earlier efforts to reform the dispute settlement system had borne fruit in the form of a document produced by former Guatemalan delegate Marco Molina. Molina’s text, widely praised by delegates, proposed increased emphasis on arbitration and mediation and stricter limits on the length of submissions.

Molina avoided in his text the fractious issue of the WTO’s Appellate Body, which remains scuttled by a US embargo on bench appointments. But none of this mattered when Molina was mysteriously fired by his own government shortly before MC13 began.

Without Molina, it seems a tall order to bridge the vast differences separating members on appellate reform.

Pyrrhic victory on e-commerce

Even the surprising decision to extend a moratorium on the application of import duties on e-commerce transmissions rang hollow. India, South Africa, and Indonesia sought an end to the moratorium, which was first agreed at that 1998 Ministerial Conference in Geneva. These countries maintain that the application of such duties will boost their revenues, though many studies indicate otherwise. The Organisation for Economic Co-operation and Development said in a report that such a tax would generate only 0.1% of India’s total government revenue while raising costs and hampering competitiveness of poorer economies and smaller companies.

The hardline taken by India, South Africa, and Indonesia led many to suspect that compromise was not on the cards. But India has a close relationship with the MC13 host United Arab Emirates.

So when the Emirati trade minister Thani bin Ahmed Al Zeyoudi asked Goyal to extend the moratorium as a personal favor, Goyal agreed. The South Africans and Indonesians then went along with the growing consensus.

The pledge to keep digital trade duty-free will come to an end at the next ministerial meeting or 31 March 2026, whichever comes first. Individual WTO members may choose to roll the moratorium over or make it permanent, but as an organization the duty-free commitment will be dropped. For the first time, the WTO will open the door for tariff hikes and create the conditions for the unprecedented application of duties on trade in services. Call it MC13’s Pyrrhic victory.

Plurilaterals make small gains

Hopes ran high before MC13 that ministers would greenlight two plurilateral agreements so that they could be incorporated into the WTO’s legal architecture. Plurilateral agreements are a way for smaller groups of WTO members to build consensus as it gets increasingly harder for the full membership to move as one.

eliHowever, India and South Africa have long opposed plurilateral negotiations.

These two members have couched their protests on plurilateral negotiations in arcane legal arguments, but the reality is far simpler – New Delhi and Pretoria abhor these negotiations because they cannot block them.

This hostility was made plain in Abu Dhabi when the two members blocked proponents’ efforts to incorporate plurilaterally agreed text on Investment Facilitation for Development into the WTO rulebook.

The plurilateral agreement on Domestic Regulation in Services met a better fate. The legal structure of this agreement, which includes 71 participating members and covers 92% of world trade in services, is based on individual members’ commitments to the others and is thus much more difficult to undermine. Aware of the shaky legal foundation of their objections, India and South Africa partially lifted their blockade on the agreement, allowing it to come into force.

So, six key takeaways in the aftermath of MC13:

1. The WTO is not going anywhere. Prognosticators enjoy using phrases like death knell when examining the WTO’s shortcomings but the collapse of the organization and the system it oversees is not going to happen. A foundation based on 75 years of rulemaking is too ingrained in the trading practices of nations and businesses. If every country applied different and variable tariffs on its trading partners, chaos would swiftly ensue. The question about the WTO is not whether it will continue to exist, but how relevant it will be.
2. MC13 underscored that if members want to accomplish anything, plurilateral negotiations are the only viable option. Some important lessons were learned in Abu Dhabi about how results from these negotiations might be implemented. This will have meaningful ramifications particularly with respect to the 90-member negotiations on electronic commerce. The plurilateral process is increasingly the WTO’s only e-commerce game in town.
3. When the new dispute settlement is reformed, it will have a very different look. Many smaller, poorer members seek ways to access the complex and costly process of dispute resolution. One way to do that would be through incentives to use mediation and arbitration. It’s unclear how a new Appellate Body would look but it’s inconceivable that there will be a return to a powerful WTO “court.” A pared-down and less heavy-handed mechanism is inevitable.
4. Economies still want to join the WTO. With the accessions of Comoros and Timor-Leste, the WTO will have 166 members. There are 22 candidate countries still in the accession queue. None of the current members have ever expressed a desire to leave. Whatever criticisms there may be on the WTO, governments still believe there is value in membership.
5. Several major systemic issues were not really addressed at MC13, including the use of national security exemptions. The dispute settlement cases on the national security exception have strained the system to its breaking point. Given the tense state of the world today, such cases are unlikely to disappear. There are also unresolved questions over China’s formal status in the WTO as a developing economy that is also the world’s largest trading nation.
6. Okonjo-Iweala’s future is uncertain. Her term expires at the end of August 2025. The process of reappointing her or choosing her successor will start in December. The US may not back her for a second term, especially if Donald Trump wins. In Abu Dhabi, Okonjo-Iweala worked around the clock and to the very end to broker deals. But her tactics angered two powerful members, India and Brazil, and some delegates in Geneva say they are weary of her work style.

Keith M. Rockwell is a Senior Research Fellow at the Hinrich Foundation. Prior to his retirement in June 2022, Keith served as a Director at the World Trade Organization (WTO) and spokesperson for the organization for more than 25 years. He also is a Global Fellow at the Wilson Center.

To read the full article published by the Hinrich Foundation, click here.

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The following communication, dated 29 February 2024, is being circulated at the request of the delegation of South Africa on behalf of the 65 Co-Sponsors of the IP/C/W/669/Rev.1 proposal and Brazil; Colombia; Paraguay and Sri Lanka.

_______________

1.1. The most solemn obligation of every government is to protect the life and health of its people.

1.2. The Director General of the World Health Organization (WHO) declared the COVID-19 situation a Public Health Emergency of International Concern (PHEIC) on 30 January 2020. The need for scaled-up access to diagnostics, treatments, vaccines and personal protective equipment (PPE) (“health products”) was manifest.

1.3. The co-sponsors approached Members of the World Trade Organization (WTO) with a proposal to temporarily waive certain provisions of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to support the global COVID-19 pandemic response. This was in recognition that the intellectual property system is meant to provide a balance between providing incentives for bringing about innovation and rewarding creativity and promoting the broader public interest. In the area of public health, intellectual property objectives must also be balanced against realising the right to health, of which access to medicines and other health products is a central part. It was also in recognition that allowing legal monopolies may delay access to the requisite health products becoming available, as evidenced by disputes on infringement of intellectual property rights even at the height of the pandemic and that health products would be in global short supply drawing from the experience of previous pandemics and health emergencies. The co-sponsors believed that pooling financial and scientific resources is the only option for accelerating progress towards new vaccines, treatments and diagnostics.

1.4. Developing countries including the LDCs were gravely concerned. Much of the latest technology used to develop and manufacture necessary health products was owned and controlled by companies, governments and other institutions based in developed countries. Without access to this technology, the prospects for manufacturing and distributing health products would be restricted. Access to health products would be at the discretion of pharmaceutical companies from a handful of high-income countries.

1.5. The COVID-19 pandemic offered WTO Members an opportunity to act in solidarity by adopting a multilateral solution to help bolster the capability of developing countries to respond to a health crisis. Co-sponsors advocated for a multilateral solution so as to restore faith in multilateralism and avoid Members adopting self-help measures, thereby fragmenting the intellectual property system. An undesirable outcome that a time-bound and limited waiver could have helped prevent.

1.6. The WTO failed to deliver a comprehensive multilateral solution on the pandemic and even when it delivered on COVID-19 vaccines, this was too little too late. Rather than heed the call of the co-sponsors, non-proponents advocated for voluntary arrangements and donations as the only solution to equitable distribution. In reality, however, an inconsequentially small number of voluntary licenses were availed with strict conditionalities that did not assist to respond to the global crisis. And there were no voluntary licenses or any licensing arrangements when it came to the most-used vaccines in developed countries.

1.7. The COVID-19 virus is still with us, and the world needs therapeutics and diagnostics to ensure better management of its impact. If WTO Members were serious about providing an effective solution in the context of global solidarity, they needed to extend the TRIPS decision to diagnostics and therapeutics within six months as promised. However, over a year after the deadline, the non-proponents have stalled any possible outcome, ensuring that the world remains vulnerable not only to this pandemic but future pandemics. Resilience for future pandemics can be achieved through resolving challenges of equitable and affordable access to health products by addressing concentration of production, and building adequate manufacturing capacity, especially in regions with limited production.

1.8. Failure to deliver on a multilateral outcome to effectively address concerns on equitable and affordable access to health products including therapeutics and diagnostics, casts a dim light on the ability of the WTO to act in solidarity during an international emergency as recognized by the WHO. The IP barriers that challenge equitable and affordable access have prolonged this pandemic and remain unaddressed, threatening us in the next pandemic. The co-sponsors remain committed to addressing these concerns of developing countries including the LDCs in the context of health emergencies such as pandemics by advancing policy space for Members, along with full utilization of existing flexibilities in the TRIPS Agreement including Article 73.

__________

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The following communication, dated 28 February 2024, is being circulated at the request of the delegations of Bangladesh, Columbia, Egypt and India.

__________

1. We, keeping in mind the upcoming 30th anniversary of the TRIPS Agreement, instruct the Council for TRIPS to undertake and finalize its first review under Article 71 on the implementation of the TRIPS Agreement.

2. Pursuant to paragraph 19 of the Doha Ministerial Declaration, we instruct the Council for TRIPS to expedite ongoing work to examine the relationship between the TRIPS Agreement and the Convention on Biological Diversity, and the protection of traditional knowledge and folklore.

3. We also call upon the TRIPS Council to examine how the TRIPS Agreement could facilitate transfer and dissemination of technologies to developing countries including LDCs.

4. We further instruct the Council to examine the TRIPS Agreement, the Doha Declaration on the TRIPS Agreement and Public Health of 2001 and the Ministerial Decision on the TRIPS Agreement of 2022, to review and build on the lessons learned during COVID-19, with the aim to address the concerns of developing countries including LDCs in the context of health emergencies including pandemic.

5. In undertaking this work, the TRIPS Council shall be guided by the objectives and principles set out in Articles 7 and 8 of the TRIPS Agreement and shall take fully into account the development dimension and shall provide a report on the progress made, including any recommendations, to the Ministers at the 14th Ministerial Conference.

__________

Click here to read the full document as it was circulated.

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The international trading system is gearing up for another test of its resilience. In late February, trade ministers will meet in Abu Dhabi for the thirteenth ministerial conference (MC13) of the World Trade Organization (WTO) in hopes of concluding several ongoing trade negotiations and laying the groundwork for institutional reform. The list of agenda items is vast—WTO reform, a waiver for COVID-19 therapeutics and diagnostics, e-commerce, fisheries subsidies, agriculture, and investment for development—and consensus among WTO members remains far off.

That some WTO members have vehemently opposed the increasingly popular concept of plurilateralism is of particular concern. Plurilateral negotiations are open to all parties, but in practice are carried out by only those members who are particularly interested in the issue at hand. These negotiations have become the most pragmatic method of reaching agreement on new rules in an organization such as the WTO, which has grown far beyond its initial capacity. But some countries, such as India, have strongly objected to any discussions that do not involve the entire 164-country WTO membership. Their objections are directly undermining efforts by the United States to make the WTO “more relevant to today’s challenges,” and potentially scuttling efforts to update international trade rules to address modern concerns. If the United States is as committed to the WTO as it claims to be, then it needs to convince those recalcitrant members to drop their obstructionist approach. India particularly is a heavyweight player in the WTO, and it should also, on its own, take the opportunity to chart a new course and productively engage in trade discussions where it has otherwise been absent.

The Plurilateral Drama and Investment Facilitation

Before the WTO went on holiday break in December 2023, India made a statement during a meeting of the General Council (which includes all members) to highlight what it thought were “sensitivities” surrounding new negotiations. In particular, India called out talks on investment facilitation for development (IFD), which substantially wrapped up last summer, saying that discussion of the topic “does not belong” at the WTO because there “has not been any Ministerial mandate for starting negotiations.” India’s objections stemmed not only from the fact that something related to investment was being discussed at the WTO, but also that a group of members decided to advance discussions on a shared issue of interest without agreement from all 164 member countries.

Over the last few years, India has been joined by South Africa and Namibia in arguing that plurilateral discussions are fundamentally at odds “with the multilateral underpinnings of the WTO.” Furthermore, India has even advanced the notion that plurilaterals undercut the WTO’s uniqueness in “[providing] rights to every individual member to have a say in deciding the negotiating agenda.”

What these countries seem to miss is that plurilateralism offers important benefits. First, the WTO has struggled to negotiate significant multilateral rules since its inception, and the growth in its membership has made such negotiations even more unwieldy. Plurilateral groupings bring together the countries most interested in a particular question, increasing the likelihood, as research has shown, of long-term compliance. An insistence on universal consensus, on the other hand, threatens to bring the WTO to a standstill.

Second, since plurilateral deals have already been accepted into the WTO framework in the past, their existence is not antithetical to the WTO’s purpose, nor do they undermine how the organization functions.

Third, the complaint that objecting members such as India have put forward—that plurilaterals are a tool of developed countries to advance rules in spaces where developing countries have not yet built the capacity to participate fairly—is problematic. To begin with, plurilateral negotiations can be inclusive, as the IFD talks show. All WTO members were welcome to join the talks but not all did. Instead, 110 members participated, making up 67 percent of the organization’s membership. Furthermore, the talks were largely driven by developing states to serve their own interests—improving sustainable, high-quality investment in their countries. The talks did not even include the biggest player, the United States, which chose not to join, though it supported the important effort. As WTO Director-General Ngozi Ikonjo-Iweala stated, by “enhancing transparency, accountability and good governance in investment procedures, the Agreement fosters a business climate more conducive to sustainable development.”

India’s Contradictory Positions on IFD

While South Africa and Namibia have joined India in opposing plurilateral talks, India’s objections have been uniquely baffling and significant.

India claims to champion the Global South. Yet by opposing the developing country-led IFD talks, it is revealing the limits of its leadership. Moreover, India has publicly stated its desire for increasing foreign investment, so it is puzzling that it chooses to oppose these discussions, with some estimates suggesting that the deal could generate global welfare gains between $250 billion and $1,120 billion, primarily benefitting poorer countries.

Such apparent contradictions suggest that India is pushing a legacy strategy at the WTO and is yet to carve out a new approach to today’s challenges or Global South interests. At the last ministerial conference (MC12) in June 2022, for example, India held up discussions on fisheries subsidies—also of immense interest to most developing countries—until the eleventh hour. What finally emerged out of MC12 were watered-down provisions to rein in harmful fisheries subsidies, largely due to India’s insistence that developing countries be exempted from stringent rules. However, most developing countries were keenly interested in including those rules, not least because they could help contain Chinese encroachment into areas they rely on for fishing (notably, China was largely cooperative during negotiations and has already ratified the first agreement).

Ironically, at the end of the marathon negotiations, India’s minister for commerce and industry, Piyush Goyal, stated, “far from being initially projected as a ‘Deal Breaker’ by certain countries, India finally emerged as a ‘Deal Maker’ at the WTO talks.” Commentators were quick to point out that in fact the entire meeting was an exercise in the WTO simply “staying alive.” Haunted by the theatrics of the last ministerial, members have spent countless months preparing fastidiously to secure some deliverables this year.

The problem, however, is that India, a substantive player in the WTO, has not only the ability to prevent WTO deals from becoming law—any addition or amendment to the existing WTO rules requires all members to sign on—but also the clout and visibility. Consequently, its obstruction can lengthen this process, as well as attract more opposition.

What the United States Can Do

At an event in Washington, DC, U.S. Ambassador to the WTO María Pagán spoke about how the WTO could avoid gridlock through responsible consensus, which she described as “the ability to say yes to something that maybe I don’t care that much about, but it doesn’t hurt me. And I’m not gonna hold it back as a chip…until I get…what I want.” Important U.S. allies, such as the United Kingdom, similarly support “the spirit of collaboration and responsible consensus so as to ensure that MC 13 builds on the success of MC 12.”

The United States should embrace this principle if it wants plurilateral initiatives such as the IFD to succeed. This is why some experts have argued for provisional application of the IFD, which would make the agreement legally binding among the parties while they await the formal process for the treaty to enter into force. The idea behind this is that the benefits of the deal are too important to wait for implementation pending consensus from the entire WTO membership.

Likewise, for initiatives that hope to “green” the WTO to make headway, such as tackling plastics pollution, fossil fuel subsidies, and promoting trade in environmental goods and services, the plurilateral approach may be the only avenue to move discussions forward at a speed that meets the urgency of the challenge posed by climate change. The United States should actively push India to change its stance on plurilaterals so that these important issues can be addressed. Furthermore, it is in the interest of the United States to advance negotiations at the WTO to ensure that the organization is fit for purpose and reflects U.S. priorities.

Last week U.S. Trade Representative Katherine Tai went to New Delhi to discuss the U.S.-India trade agenda. In a readout of a meeting between Tai and Indian Minister of External Affairs Subrahmanyam Jaishankar, both “discussed their shared desire to work constructively together to ensure a successful 13th World Trade Organization Ministerial Conference.” A shared desire, however, may not be enough. Getting India to back down from its opposition to progress at the WTO should be at the top of the agenda—apart from anything else, it could persuade South Africa and Namibia to similarly reconsider.

To read the full blog post as it appears on The Council on Foreign Relations (CFR) website, click here.

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After a much-hailed ministerial meeting in 2022, the world trade body is gearing up for crucial negotiations in Abu Dhabi. Its chief economist talks to Geneva Solutions about the need for reform and dispels alarmist calls to scrap the whole organisation altogether.

As the countdown begins for the 13th Ministerial Conference in Abu Dhabi next month, the halls of the World Trade Organization (WTO) in Geneva are abuzz with activity.

The WTO’s 164 member states are making a final, frenetic push to reach consensus on key issues at their highest decision-making meeting, convened every two years. These include the reforms of the dispute settlement system, the landmark fisheries subsidies agreement and reforms regarding agricultural subsidies, a divisive topic among member nations.

The extension of the intellectual property rights waiver for Covid-19 vaccines to include diagnostics and treatments adds to the mix as well as the lifting of a longstanding moratorium on customs duties on data transfer.

Addressing the WTO’s Trade Negotiations Committee in December, director general Ngozi Okonjo-Iweala underscored the dire state of the global economy and urged members to finalise as much of the ongoing negotiations in Geneva as possible before the critical February conference.

At this stage, the outcome of these talks, which are set to shape the future of global trade policies, is shrouded in uncertainty.

At the upcoming conference, Ralph Ossa will make his debut after serving for a year as the organisation’s chief economist and head of the statistical division. In his role, Ossa is responsible for guiding the research agenda and supporting negotiations with reports and insights produced by his team of 60 people.

He received Geneva Solutions at his office nestled on the second floor of the WTO’s headquarters overlooking the lake. Without venturing into rash predictions, he said he didn’t want MC12 to be a “one-time miracle that happened at Lake Geneva, where 164 countries demonstrated that multilateralism is effective”.

The “miracle” Ossa refers to is the so-called Geneva package, hashed out at the WTO’s 12th Ministerial Conference (MC12) in 2022 after five and a half days of marathon talks. It included the historic deal on fisheries subsidies – only the second multilateral agreement to be reached by the WTO since its establishment in 1995.

Ossa said that MC13 should “send a clear signal indicating a serious commitment of member states to the WTO”.

From insight to impact

The German-born economist has been critical of the WTO in the past. In 2015, he wrote in a blog post that the WTO had failed to deliver any significant multilateral trade liberalisation while showing only minimal progress towards its Doha Development Agenda to reduce trade barriers and aid developing countries. He also recognised that the “WTO’s success at preventing trade wars far outweighs its failure to promote trade talks”.

Asked about how the WTO has changed since he wrote that post, Ossa said the trade body has made important progress since then, both on the multilateral and plurilateral fronts.

“Seventy-five per cent of trade is conducted under most-favoured-nation terms (a policy requiring WTO member states to offer the same trade concessions to all other members), and the WTO is playing a crucial role not just about managing tariffs, but also providing market participants confidence that tariffs and trade costs will remain low,” he said.

He acknowledged that the trade environment has become more challenging since he wrote his PhD dissertation that won him the inaugural WTO Essay Award for Young Economists fourteen years ago. At that time, his simulations of the costs of a trade war were dismissed by some as an academic exercise far from a realistic scenario. A few years later, the US-China trade war of a volley of tariffs and retaliatory measures turned Ossa’s simulation into almost a prediction.

Ossa chaired the department of economics at the University of Zurich, where he will continue to teach part-time while he works at the WTO.

Even though he admits he would have never imagined ending up as WTO chief economist, he finds his new role exciting and multifaceted.

“Academia is all about insights, but here, we are all about impact,” he says.

Principled change

In Ossa’s tidy office, images of bustling ports contrast with serene forest landscapes facing his desk, echoing memories of family hikes in the mountains. A book, A World Trading System for the Twenty-First Century by Robert Staiger, is proudly displayed on his desk. For Ossa, it is both an academic resource and a guiding light for understanding and teaching the complexities of modern trade and the WTO.

Staiger’s work, which advocates for measured reform of the WTO, aligns with Ossa’s belief in principled rather than radical change. This perspective was evident at the recent WTO open forum, where Ossa stressed the text’s role in shaping current trade discussions.

As the world faces a “polycrisis” of pandemics, geopolitical conflicts and economic instability, the WTO is under increasing pressure to reform. Since its inception in 1995, the WTO has often faced criticism for issues like favouring wealthier nations and lacking transparency, with some critics and political figures going as far as to suggest shutting it down over its deep-rooted systemic problems.

The Appellate Body, essential for resolving trade disputes, has been inactive since late 2019 due to the US blocking new judge appointments, resulting in a backlog of 29 cases. This move effectively crippled the organisation’s ability to adjudicate international trade disagreements, further fueling debates about its effectiveness and relevance in the modern global economy.

Addressing these criticisms, Ossa defended the WTO’s crucial role in fostering a rules-based, multilateral trading system. He cautioned against the detrimental effects of a power-based alternative, which he believes would disproportionately affect weaker members, particularly developing countries.

Ossa praised the WTO’s consensus-based decision-making process, noting its distinctiveness in allowing every member, regardless of their economic stature, to have an equal voice and the power to veto decisions.

He also argued international trade is a powerful tool for development, as shown by the findings from the WTO’s latest flagship World Trade Report: between 1981 and 2019, lower and middle-income economies increased their share of global exports from 19 per cent to 29 per cent and reduced the share of people subsisting on less than $2.15 per day from 55 per cent to 10 per cent.

However, he acknowledged that some of the weakest countries and individuals have not benefited as much as they could from international trade.

“We don’t want to be the PR team that says trade is good and we need more of it,” he said, “but also to look at some of the problems that either come with trade or that perhaps trade is not addressing as effectively as it could, and really try to find solutions.”

Addressing disappointments, he expressed frustration over budgetary constraints. However, he views the recent consensus among member nations to approve a 3.6 per cent increase in the operational budget — a rise from CHF 197.2 million to CHF 204.9 million for 2024-2025 — for the 620-staff organisation as a “commitment to multilateralism”.

On the MC13 agenda

One of the most controversial and polarising discussions leading to the conference in Abu Dhabi is around the renewal of a 1998 moratorium of customs duties on electronic transmissions.

In the ever-evolving global trade landscape, digitally delivered or ordered services, such as video streaming platforms like Netflix or mobility apps like Uber, are becoming a driving force. According to a recent WTO report, since 2005, their value has been increasing by 8.1 per cent on average per year, outpacing goods (5.6 per cent) and other services exports (4.2 per cent). This has opened new doors for market players, notably micro, small and medium-sized enterprises (MSMEs).

Developed economies are the leading exporters in this sector, with the US being a dominant player in software, semiconductors and internet technologies and Chinese companies becoming larger tech exporters.

Still, developing nations are struggling to carve out their space in the digital sector. For example, Africa’s contribution to globally exported digitally delivered services is less than one per cent. Least-developed countries (LDCs) are lagging even more in this digital leap with a contribution of 0.2 per cent.

Developing countries such as South Africa want to end the contentious moratorium, arguing it favours major tech firms at their expense. They believe lifting it could bolster local digital industries and increase tax revenue. Conversely, the European Union, Canada and other advanced economies advocate for its continuation, citing its role in promoting duty-free digital trade.

A joint report by the WTO and other financial and economic institutions found that the end of the moratorium would impact government revenue at less than 0.33 per cent. It suggests that imposing customs duties on electronic transmissions might reduce digital trade, thus lowering its benefits, especially for MSMEs and women-owned firms.

So how can LDCs finance their digital industrialisation without significant tax revenue?

“Customs duties are not the most efficient way to raise revenue from an economic standpoint, and a more effective approach could be implementing other taxes, like a value-added tax (VAT), which can also be applied to digital goods,” said Ossa.

“In contrast, customs duties make imports more expensive than domestic goods, distorting consumption and production choices, leading to less efficient outcomes.”

Contention also surrounds the expansion of the Covid-19 vaccine waiver to diagnostics and treatments. The initiative is backed by civil society groups, while the pharma industry argues it could hinder medical innovation.

For Ossa, the waiver “didn’t introduce many new flexibilities but rather re-emphasised existing ones”.

“This reaffirmation, though seemingly lacking novelty, is vital, especially for developing countries facing political pressure,” he said.

Another hoped outcome is the entry into force of 2022’s agreement to reduce harmful fishing subsidies, which is crucial to combat global fish stock decline. As of last month, 55 WTO members had ratified the agreement, but two thirds of all member states are needed for the agreement to come into effect.

To read the full analysis, click here.

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Rising from the ashes of three disastrous decades of deglobalization, extremism, and world war, our two institutions were built on the idea that thriving international trade goes hand in hand with global prosperity and stability. On balance, the post–World War II record has been impressive. Today fewer than 1 in 10 of the world’s people are poor, a fourfold reduction since 1990, as low- and middle-income countries have doubled their share of global trade. Pivotal to this leap in global income is a twentyfold increase in international trade since 1960.

Yet the tide is turning against economic interdependence and international trade. Trade restrictions and subsidies increased after the global financial crisis, and tensions escalated further as governments responded to the pandemic and Russia’s war in Ukraine by scrambling to secure strategic supply chains and rushing into trade-distorting policies. Taken too far, these measures may open the door to alliance-oriented policies that reduce economic efficiency and fragment the global trading system. They could backfire if short supply chains end up more vulnerable to localized shocks. Foreign direct investment is already increasingly concentrated among geopolitically aligned countries.

Should we abandon the idea of trade as a transformative force for good? Our answer is a resounding “No!” Despite all the talk, trade has continued to deliver even during recent crises. It has great potential to keep contributing to higher living standards and greater economic opportunities for decades to come.

There are at least three reasons international trade is crucial for global prosperity. First, it increases productivity by expanding the international division of labor. Second, it enables export-led economic growth by providing access to foreign markets. And third, it bolsters economic security by giving firms and households valuable outside options when negative shocks hit.

During the pandemic, trade and supply chains became vital to ramping up production and distribution of medical supplies, including vaccines. The power of international trade as a source of resilience has become evident again during the war in Ukraine. Deep and diversified international markets for grain enabled economies traditionally reliant on imports from Ukraine and Russia to make up shortfalls. Ethiopia, for example, lost all its wheat imports from Ukraine but now sources 20 percent of its wheat shipments from Argentina—a country from which it had not imported any wheat before.

Fragmentation’s costs

In this context, fragmentation could be costly for the global economy. A scenario in which the world divides into two separate trading blocs could lead to a 5 percent drop in global GDP, World Trade Organization (WTO) research shows. The IMF, meanwhile, reckons global losses from trade fragmentation could range from 0.2 to 7 percent of GDP. The costs may be higher when accounting for technological decoupling. Emerging market economies and low-income countries would be most at risk due to the loss of knowledge transfer.

Reinforcing the trading system to safeguard the benefits and prevent losses is important. But there is also an exciting forward-looking trade policy agenda that responds to the future of international trade, which we envision to be inclusive, green, and increasingly digitally and services driven.

Trade has done a lot to reduce poverty and inequality between countries. Yet we must acknowledge that it has left too many people behind—people in rich countries have been hurt by import competition, and people in poor countries have been unable to tap into global value chains and are often on the front line of environmental degradation and conflict over resources. As we told Group of Twenty officials in a joint paper our institutions wrote with the World Bank, it need not be this way. With the right domestic policies, countries can benefit from free trade’s great opportunities and lift those that have been left behind.

Addressing these underlying causes of discontent would solve people’s problems more effectively than the trade interventions we see today. Well-designed social safety nets, greater investment in training, and policies in areas like credit, housing, and infrastructure that help, not hinder, workers to move across industries, occupations, and companies could all play a part.

The current push toward more diversified supply chains presents great opportunities for countries and communities that have struggled to integrate into global value chains: bringing more of them into production networks—what we call “re-globalization”—would be good for supply resilience, growth, and development.

Many of today’s most pressing global problems will not be solved without international trade. We cannot overcome the climate crisis and get to net zero greenhouse gas emissions without trade. We need trade to get low-carbon technology and services to everywhere they are needed. Open and predictable trade lowers the cost of decarbonization by expanding market size, enabling scale economies, and learning by doing.

To provide one example, the price of solar power has fallen by almost 90 percent since 2010. Forty percent of this decline has come from scale economies made possible partly by trade and cross-border value chains, the WTO has estimated.

Cooperation’s possibilities

By updating global trade rules, governments can help trade thrive in new areas that would expand opportunities, for emerging market economies especially. Even as goods trade stalls, trade in services continues to expand rapidly. Global exports of digital services such as consulting delivered by video calls reached $3.8 trillion in 2022, or 54 percent of total services exports. 

Some efforts are already underway. A group of nearly 90 WTO members, including China, the EU, and the US, are currently negotiating basic rules on digital trade. Shared rules would make trade more predictable, reduce duplication, and cut the compliance costs that typically weigh heaviest on the smallest businesses.

Similarly, multilateral cooperation and common standards could speed the green transition while preventing market fragmentation and minimizing negative policy spillovers to other countries. Bringing more small and women-owned businesses into global production networks—digital and otherwise—would spread the gains from trade more broadly across societies.

Despite geopolitical tensions, meaningful cooperation on trade remains possible. We saw this last June when all WTO members came together to deliver agreements on curbing harmful fisheries subsidies, removing barriers to food aid, and enhancing access to the intellectual property behind COVID vaccines. Governments can build on those successes at the WTO’s next ministerial meeting in February 2024. And recent work by our institutions points to a way to defuse tensions in sensitive areas such as subsidies through data, analysis, and common perspectives on policy design.

Navigating trade policies through the current turbulent period is challenging. But keeping trade open and looking for new opportunities for closer cooperation will be essential to build on existing gains and to help deliver solutions to climate change and other global challenges.

The IMF, WTO, and other leading international institutions have a critical role in charting a way forward that is in the collective interest. We must cooperate tirelessly to strengthen the multilateral trading system and demonstrate that our own institutions can adapt to a fast-changing world. The IMF has a mandate to support the balanced growth of international trade. The WTO remains the only forum that brings all economies together to advance trade reform. We cannot afford to stand still. 

KRISTALINA GEORGIEVA is the Managing Director of the International Monetary Fund (IMF).

NGOZI OKONJO-IWEALA is director-general of the World Trade Organization.

To read the full blog, please click here.

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Chiedu on WTO Reform Through Accessions

The world at large thinks of the WTO as a place for the negotiation of trade agreements and where Member countries come to settle trade disputes. The public may be aware that there is a professional Secretariat issuing reports on current developments in world trade. They may know there are a host of committees of WTO Members administering the multilateral trading system that covers 98% of world trade. They have probably read about some of the world’s largest economies joining the WTO during the last quarter-century, events that garnered headlines, such as when China and Russia came into the Organization. They will know that world leaders for several years running have called for reform of the WTO.

What the general public is less likely to know is that much of the reform of the WTO over its 27-year life has taken place in the process of countries joining the Organization after it was founded in 1995. There are 128 original Members of the WTO, formerly GATT Contracting Parties, who signed up to the Uruguay Round Agreements and came in as a group on January 1, 1995. Since then, 36 countries have joined. They now account for about one-sixth of world trade. Twenty-four candidates are in the accessions process at present.

It was this critical area of accessions to the WTO that occupied much of Chiedu’s considerable energy during the last half of his time with the WTO, from 2009 to 2016. It was a key area in which the trading system made continuous progress during the entire span of the WTO’s existence. It has been a mainspring of WTO reform, never dramatic, rarely noted in the headlines, but it was an important agent of change.

Reform through accessions often involves commitments that are only undertaken by the acceding Member and that are not applicable to all Members. The original Members coming over from the GATT did not have to negotiate their entry to the WTO. Entry on day one of the WTO for these countries was relatively easy. All would recognize that once the WTO was established, acceding was and is not an easy process. Each accession is a negotiation and reflects the current trade issues of the day and the need for the country to bring its economy up to the standard that the other Members require of it – a standard that increases over time. From the acceding country’s point of view, the most palpable aspect consists of the requirements insisted upon for its domestic reforms. For the WTO as an institution, what is even more important are the reforms that each accession points to as an updated standard for international conduct, nothing short of a leveling up of the system.

By Alan Wm. Wolff – Distinguished Visiting Fellow at the Peterson Institute for International Economics (PIIE)

To read the full piece, please click here.

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