As Members Debate WTO Reform, What Lies Ahead for 2019?

Coming Up in Global Trade

The international trade community is returning to action in what promises to be a jam-packed year that could set the stage for an overhaul of the World Trade Organization (WTO) as we know it.

Early hints of what may lie ahead came from the World Economic Forum’s Annual Meeting in Davos last month, where trade ministers debated how to safeguard the WTO’s Appellate Body—now bordering on collapse—and how to help the organization adapt to an increasingly uncertain political and economic landscape.

The past year at the WTO was, by all accounts, an especially challenging one, as the organization’s members sparred over the increasing use of unilateral tariffs by the United States, as well as the growing strain on the organization’s dispute settlement mechanism. As 2019 begins, these subjects will remain contentious, even as the WTO works to advance and reinvigorate its negotiating agenda on multiple fronts.

Normally, this would be a “ministerial year,” with the organization’s members laying the groundwork for their highest-level meeting. In a relatively unusual development, there will be a 2.5-year gap between ministerials, rather than the statutory two years, with the next one set for June 2020 in Astana, Kazakhstan.

The deadlines set at the 2017 WTO ministerial, such as reaching a deal to discipline harmful fisheries subsidies by late 2019, remain intact. Should WTO members meet those deadlines, it leaves the Kazakhstan meeting agenda virtually wide open in a year that coincides with the next U.S. general election, where trade is expected to again play a headlining role.

WTO reform: “Like-minded” countries reconvene

It’s clear, though, 2019 will be anything but quiet.

For example, the WTO’s Appellate Body now has only three members—the bare minimum to sign off on any ruling. Several WTO members have submitted proposals, either individually or jointly, on Appellate Body reform—but whether any of these will serve to quell the United States' stated concerns about “persistent overreaching” remains to be seen.

There is growing momentum among many WTO members to “modernize” the organization, including the Appellate Body—though the details and feasibility of reform are unclear at this stage. In Davos, Canada led a meeting of “like-minded” countries to gauge what contribution this group could make on dispute settlement, the WTO’s negotiating function, monitoring and transparency, and development.

Their communiqué said they hoped to achieve “significant progress” by the upcoming G20 leaders’ summit in Japan this June—a short window for achieving a political commitment on what these reforms could look like, much less for the technical negotiations and consensus building that need to occur among the WTO’s much wider membership.

Also notable was the announcement that the group would convene “open-ended consultations with all interested Members,” aiming to craft proposals that would “improve the WTO’s deliberative and monitoring functions and ability to solve trade concerns without litigation.” The approach would entail strengthening existing WTO bodies to head off disputes before they escalate to formal cases, thus alleviating some of the pressures on the legal system.

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These proposals would be designed as “cross-cutting and committee-by-committee basis,” covering initially the relevant WTO bodies that work on rules of origin, sanitary and phytosanitary measures, technical barriers to trade, and services. Moving important issues to committees will require transparency to ensure important regulatory outcomes are not hatched behind closed doors. Also, the participation of developing countries (including those that do not have missions in Geneva) would be essential in order not to erode their say in the multilateral trading system.

The concluding remarks of Swiss Federal Councillor Guy Parmelin after the separate Davos “mini-ministerial” on trade indicated that while there is wider interest in WTO reform beyond the Canada-led group, there are also questions on the work’s “content and modalities.” Other WTO reform discussions are also underway in parallel groupings, such as the US-EU-Japan trilateral format.

E-commerce: questions remain about approach, objectives

Also on the horizon is the start of formal negotiations on electronic commerce rules among a group of WTO members. The countries endorsed a joint statement on the subject at Davos, with the notable addition of China to the list of participants, with its rapidly growing e-commerce market.

The group confirmed its “intention to commence WTO negotiations on trade-related aspects of electronic commerce,” pledging they would pursue “a high standard outcome that builds on existing WTO agreements and frameworks with the participation of as many WTO Members as possible.” The statement also referred to the situation of small and medium-sized enterprises and developing and least developed countries.

The statement is scant on substantive details or timeframes, and otherwise reads similarly to the joint statement most of these WTO members already endorsed over a year ago in Buenos Aires. The start of these new negotiations will likely fuel renewed questions over what such rules should entail and whether an international regime on e-commerce is even plausible—points Simon Lester has raised in his International Economic Law and Policy blog.

Trade watchers will also be considering whether the WTO is the right forum for such an effort and what new ideas may emerge from these discussions. Looking ahead, WTO members will still have to address long-standing disagreements over whether to start new negotiations on topics such as e-commerce or investment facilitation while old processes are still outstanding.