Amid Fragile Environment, Ministers Weigh Trade's Future and its Contribution to Sustainability

30 November 2017

Trade ministers, negotiators, and thousands of business and civil society actors will gather in Buenos Aires, Argentina, for the World Trade Organization’s Eleventh Ministerial Conference (MC11), marking the first time that the global trade body’s highest-level meeting will be held in South America.

This year’s ministerial comes at a moment of change for the global trade system, which in October celebrated the 70th anniversary of the General Agreement on Tariffs and Trade (GATT). The negotiating agenda under discussion at the WTO is, however, relatively limited for the Buenos Aires meet. Areas where ministers could reach agreement – with varying degrees of ambition – include agriculture, electronic commerce, fisheries, and issues related to small and medium-sized enterprises. There is also the prospect of voluntary, plurilateral offshoots in important matters such as fossil fuel subsidies and gender.

All of these policy initiatives will require considerable effort to reach a concrete outcome. Despite heightened activity in Geneva and a flurry of proposals over recent months, the capacity of negotiators to cross the finish line, or otherwise chart a course for the organisation’s future work, remains uncertain due to both technical and political challenges. Not least among these are a number of systemic issues related the functioning of the organisation - such as disagreement over the role of the Appellate Body - that are likely to play an influential role in the talks, even though they are not on the formal negotiating agenda.

In contrast to these muted expectations, there are growing demands for the global trade body to respond to a fast-changing world and for its members to engage effectively towards the evolution of an updated rules-based system that delivers on the objectives of sustainable development, as recognised in the preamble to the Marrakesh Agreement establishing the WTO. The United Nations 2030 Agenda for Sustainable Development and the Paris climate agreement provide a framework on which this effort could be aligned, and various stakeholders have called for seizing this moment of opportunity to use the WTO structure to deliver on several global public goods. They also warn that failing to work towards helping to achieve these universal goals could further test the system’s long-term resilience and miss a valuable opportunity for change.

Meanwhile, the WTO ministerial also comes just as Argentina begins its presidency of the G20, and its move to host both high-level events presents an opportunity to advance leadership on trade issues while generating synergy between the bodies.

A volatile global environment

The political and economic background against which MC11 is taking place can be characterised as uncertain, even volatile. The anxieties of individuals and communities over the domestic impacts of globalisation, coupled with the dislocations and uneven pace of recovery since the 2007-08 financial crisis, have been channelled over recent months towards different brands of political and economic nationalism – most notably in the United States, but also in elections across Europe.

The centre of world economic gravity meanwhile continues its inexorable shift towards emerging regions, especially Asia, with China gradually assuming the mantle of globalisation champion. Both of these dynamics have disrupted leadership patterns within the post-war liberal international economic order, thereby generating some instability and frictions in the system. The debates on what constitutes free, fair, and reciprocal trade, as well as the pull of power-based and zero-sum approaches to trading relations, are some of the most visible manifestations.

There is a sense that the global trade system could experience a profound shake-up. The drive towards deeper integration through regional initiatives continues apace, as efforts to advance at the WTO have been frustrated.

This includes the development of new trade routes though China’s Belt and Road Initiative, negotiation in the Asia-Pacific of the Regional Comprehensive Economic Partnership (RCEP), the Continental Free Trade Area (CFTA) in Africa, a recent deal among signatories of the Trans-Pacific Partnership (TPP) without the US, the planned extension of the Pacific Alliance to new associate members, and the EU-Canada Comprehensive Economic and Trade Agreement (CETA). The engagement of the US has focused on the modernisation of the North American Free Trade Agreement (NAFTA) with Canada and Mexico, and considerable rhetoric on bilateral trade relations with China and other Asian trading partners, along with the initiation of some high profile trade remedy and intellectual property investigations by domestic authorities.

What these developments mean for the WTO framework remains unclear. Some national leaders have lately argued that regional agreements could be a shot in the arm for the rules-based economic system. Analysts say that should WTO negotiations continue to stall, countries may increasingly be looking to other forums to advance trade rule-making. This could lead to these new initiatives serving as useful structures to test new ideas that could eventually be brought back into the WTO system – or drain the energy from global trade talks.

From Nairobi to Buenos Aires

As they begin to arrive in Argentina, ministers will also be faced with the challenge of building on the success of the last meeting in Nairobi in the context of the inconclusive discussions that have unfolded at WTO headquarters in Geneva during the two years since.

The WTO’s tenth ministerial conference was held in December 2015 in Nairobi, Kenya, and was similarly billed as a turning point in the organisation’s history. It also held the distinction of being the first WTO ministerial in sub-Saharan Africa. The stakes at the time seemed high, coming off the success of the 2013 Bali ministerial, where ministers adopted a Trade Facilitation Agreement – the first global trade deal since the WTO took the place of the GATT system in 1995.

In Nairobi, ministers approved a package of outcomes which included a deal to eliminate agricultural export subsidies, along with adopting a set of development-oriented deliverables. A subset of WTO members also signed off on an update to the Information Technology Agreement (ITA-II), expanding the tariff-cutting accord on information and communications technology goods to include a series of new products.

Despite these achievements, a long-simmering disagreement over how to address the Doha Round of trade talks in their final declaration spilled out onto the surface in Nairobi. Members spent the high-level meeting openly at odds over whether to repeat their endorsements of the Doha agenda, as in ministerials past, or cast that framework aside in the hopes of overcoming old negotiating blockages. Unable to agree on a clear path forward, they ultimately codified their differences in writing: that some members still wished to proceed under the Doha structure, while others preferred “new approaches” to multilateral trade talks. They did, however, note their common ground when “acknowledg[ing] the strong legal structure of this organisation.”

Two years hence, that same “strong legal structure,” many fear, could soon buckle under the weight of too many complex legal cases, with too few lawyers to handle them. Moreover, the WTO’s dispute settlement arm is currently facing a newer hurdle with systemic implications – that of eventually not having enough appeals judges on deck to rule on cases at all.

Earlier this year, the US moved unilaterally to block the start of new selection processes for two Appellate Body vacancies, citing frustration with purported overreach by the global trade court. Washington also questioned the legal basis behind the long-standing practice of having appellate judges whose terms have expired finish their work on ongoing cases. The move has left the WTO’s highest court with only five of its seven judges in office – a number that will fall to four judges in December, and down to the minimum number of three by next September if not resolved.

Trade insiders note that some of the US concerns with the WTO’s appellate system have existed for years, and are not necessarily a hallmark of the new administration’s wider approach to international trade. Even so, the lack of clarity on what Washington needs to allay its concerns of alleged Appellate Body overreach; the overall tone of the new US president’s trade rhetoric; and the repeated statements of American “scepticism” over reaching negotiated outcomes in Buenos Aires have stoked fears in some quarters that the WTO may be entering one of its most challenging chapters to date.

Why this matters for sustainable development: trade’s contribution

Meanwhile, the world keeps turning, and pressing public policy challenges remain – with real implications for the lives and livelihoods of people around the globe. Just over two years ago, UN member states endorsed a new sustainable development agenda, with 17 Sustainable Development Goals (SDGs) and 169 associated targets designed to spur political momentum – as well as concrete action – towards ridding the world of poverty, hunger, and inequality by the year 2030 while ensuring environmental sustainability.

Many of these goals have potential overlaps with trade, including as a means of fulfilling these public policy objectives. Indeed, the 2030 Agenda and the Addis Ababa Action Agenda on financing for development explicitly recognise the role of trade in advancing the SDGs. Yet while trade negotiators cite SDG 14.6 as a powerful motivator in reinvigorating the fisheries subsidy negotiations at the multilateral level, where do the other SDGs fit in? The same question can be asked of the nationally determined contributions (NDCs) committed to under the Paris Agreement to mitigate the rise in the average global temperature to below two-degrees Celsius above pre industrial levels, given that trade components feature in nearly half of current NDCs.

Some of that SDG momentum can be seen driving specific initiatives that WTO subgroups are set to announce in Buenos Aires: different groups of members are expected to release declarations on trade and women’s economic empowerment, as well as trade’s role in fossil fuel subsidy reform. Both of these initiatives could serve to advance progress on specific goals, such as SDG 5 on gender equality, SDG 7 on affordable and clean energy, and SDG 13 on climate action. How to move from political statements to concrete implementation with tangible benefits will, as always, be key.

What sort of ministerial and legacy

Whatever the result of Buenos Aires, WTO members will have to consider whether the current system can handle the speed with which the world is changing, the evolving manner in which business is conducted, and the aspirations of citizens regarding future prosperity and sustainability. Questions remain over WTO members’ record on implementing the results of recent ministerials, along with their spotty performance in notifying that progress to the global trade club in order to facilitate future reforms. Furthermore, it remains unclear whether the global public, given the heated international debate on globalisation, technology, and the merits of international trade deals, will be receptive to the outcome.

In turn, WTO members will urgently need to reflect on how and whether they can adapt to these challenges, and thus continue to serve their domestic constituencies and the collective public good over the years to come.

The Bridges reporting team

This article is published under
30 November 2017
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