By Wang Huiyao, president of the Center for China and Globalization(CCG)
Over the past 20 years, the WTO has played a critical role in the economic development of nations all over the world, and has been the primary impetus for economic globalization. However, for more than a decade now, the development of the WTO has stagnated due to irreconcilable differences between developed and developing countries. This can be seen in the demise of the Doha Round of talks.
With WTO talks deadlocked, the current US administration has adopted an increasingly negative attitude toward the institution, choosing to abandon multilateralism and instead relying on bilateral talks to resolve trade issues. Furthermore, US President Donald Trump has repeatedly threatened to pull the US out of the WTO. These developments constitute an unprecedented challenge to the multilateral trading system that has done so much to reduce trade barriers and promote the spirit of free trade since World War II.
In addition to the stalled WTO agenda, it is apparent that the WTO has not kept up with important new developments and trends in the global economy, such as the explosive growth of the digital economy. By only focusing on conventional trade issues such as trade in goods and tariffs, the WTO has failed to develop frameworks that can accommodate new emerging sectors driven by information and digitization. It is all too apparent that the current WTO is outdated and not in tune with important new aspects of the global economy.
However, while the WTO currently faces a series of significant problems, we do not believe that either developed or developing countries want to completely discard the current system and start all over again. Even Trump’s tough stance of repeated threats to leave the WTO - without actually following through on such threats - should be seen as part of his particular approach to "the art of the deal."
On top of the fact that WTO principles and its framework are still recognized around the world, there is still no institution that would be able to replace it. The process of the WTO’s development has shown that the healthy and sustained development of world trade and the operation of multilateral mechanisms still depend on the functioning of the WTO. In light of this, there are certain recommendations that could be offered for the WTO’s reform, covering both broad principles and practical actions.
First, the WTO should reaffirm its basic principle, which is to promote market openness and fair trade in order to realize the free movement of goods. At present, the most pressing problem is the trend for certain members to turn toward unilateralism, neglecting the WTO’s basic principles.
Second, the current deadlock in appointing judges to the WTO dispute resolution mechanism must be resolved. The dispute settlement body is virtually paralyzed due to the US continually blocking appointments of new judges. The dispute resolution mechanism is also beset by several other problems, including the fact that some rulings transgress the scope of WTO rules. Also, statements and rulings are often too long, and settlement processes tend to be long and drawn out.
Third, the WTO’s consensus principle needs to be reformed. More use could be made of plurilateral agreements as opposed to multilateral agreements in order to enhance the efficiency of negotiations and subsequent implementation. Due to the continued divergence between different members’ requirements, WTO talks have reached a critical phase tied to core and sensitive interests. Given that disputes between developed and developing nations are intensifying about various issues - such as agriculture, trade in services, intellectual property and technology transfer - solely relying on the universal consensus decision-making model will easily lead to deadlock.
Fourth, WTO reforms should fully take into consideration the needs and capacities of developing countries, with utmost efforts made to find points of mutual benefit for all sides. Dealing with technology transfer will be an important component of the WTO reforms.
Moreover, given the difficulty of achieving a consensus among a large number of WTO members, a group of key nations representing the voices of both developed and developing nations could work first to reach an agreement on the most crucial issues.
To support the WTO reform process, a concrete time schedule should be designated, with accompanying tests and standards to ensure progress. During this phase, it is also important that WTO members maintain an open and active approach to reform.