Title: WTO Faces Escalating Crisis as Global Trade Threatened by Mounting Disputes
The World Trade Organisation (WTO) is currently experiencing a deepening crisis as the number of unresolved disputes continues to pile up, jeopardizing global trade. With 29 cases left in limbo since late 2019, after the United States blocked the appointment of new judges to the WTO’s Appellate Body, the dispute settlement system has taken a severe blow.
Among the countries depositing cases are China, Dominican Republic, India, Indonesia, Morocco, Pakistan, South Korea, and the United States. These unresolved disputes and growing list of trade concerns from WTO members exhibit the gravity of the situation.
Former deputy director-general Alan Wolff, emphasizing the urgency of the matter, urged countries to refrain from fresh appeals starting in 2024, when WTO members have committed to addressing the issue. He stated, No more fraud, no more pretending you’re appealing.
Intensifying the already precarious situation, the WTO has warned of a polycrisis involving the pandemic, the war in Ukraine, and inflation, all of which have eroded faith in globalization. As a result, WTO members are becoming increasingly reluctant to abide by global trading rules.
Just last month, the WTO cautioned that without proper checks, a surge of unilateral measures could lead to the fragmentation of the world economy, ultimately resulting in a 5% decrease in global income. Despite a decline in import restrictions since 2018, export curbs have far surpassed their decline, with last year alone witnessing 139 cases—an alarming increase compared to the average of 21 per year between 2016 and 2019.
Consequently, this surge has prompted a substantial rise in the number of concerns raised at the WTO. These concerns range from export restrictions on Indian rice to subsidies associated with clean tech advancements, like the US Inflation Reduction Act favoring production in North America or Chinese electric car subsidies currently under investigation by the EU.
Keith Rockwell, a senior fellow at the Hinrich Foundation, expressed concern regarding the WTO’s waning relevance, stating that it is teetering on the abyss of irrelevance. He emphasized that unlike a decade ago when countries adhered to their obligations to the WTO, today’s policy decisions seem unconstrained by these commitments. Consequently, even for the United States, a key driving force behind the establishment of the rules-based trading system, the WTO no longer holds the same level of priority.
Several countries have been exploiting exceptions to WTO rules, such as the United States imposing limits on metal imports under the Buy American Act and certain Gulf states restricting trade with Qatar under the pretext of national security. Additionally, Beijing has enforced export restrictions on critical minerals, while Washington has actively sought to hinder Chinese access to US technology in the name of national security, effectively sidelining global trading rules.
While the 164 WTO members generally agree on the need for reform, any changes require full consensus. For some, reform revolves around reinstating the Appellate Body, a step the United States refuses to accept. The US believes that reform should address what it views as discriminatory practices of state-owned enterprises, particularly in China, which distort competition.
Furthermore, reforms should address issues neglected during the establishment of the WTO, such as climate change, data flows, and artificial intelligence.
Reform will undoubtedly dominate discussions at the upcoming 13th ministerial conference (MC13) in February. However, concerns persist that the Biden administration does not view further trade liberalisation as beneficial to US interests, a belief that may solidify further in 2024, a presidential election year. This sentiment, paired with Indian obstructionism and US indifference, hurdles that also hampered MC12, presents additional challenges for the WTO.
The WTO argues that the world must recommit to integration, a concept it calls re-globalisation, to collectively address challenges such as climate change and poverty reduction. It highlights that currently, 75% of goods trade relies on WTO tariff terms that members extend to each other. If this system is disrupted, chaos will ensue, and a power-based system would replace the current rules-based structure, warned Director-General Ngozi Okonjo-Iweala.
In conclusion, the WTO confronts an escalating crisis as disputes continue to accumulate, posing a severe threat to global trade. With unresolved cases and mounting trade concerns, the urgency for reform has never been more apparent. The 13th ministerial conference in February will serve as a critical platform to address these challenges. However, the road to revitalizing the WTO and restoring faith in the global trading system remains fraught with obstacles.
