WTO is losing credibility now

On the twentieth anniversary of the World Trade Organization (WTO) in 2015, the outlook was sanguine as negotiators, trade practitioners and academics around the world reflected on the success of the Uruguay Round and the WTO’s achievements and contemplated its future at celebratory international conferences. Discussion tentatively turned to a possible future reform agenda but with little sense of urgency. Reform was seen more as potential embellishment rather than necessity. With the adoption of the United Nations Sustainable Development Goals in 2015 and the Paris Agreement on climate change that same year, the world seemed to bask in a warm and inspiring glow of global solidarity. It seemed that the international community was recognizing that assuring our future prosperity depended not only on liberalizing trade but also on achieving environmental sustainability, social and economic equality, political stability and access to justice. But this cooperative spirit proved short-lived and long-simmering dissatisfactions with trade resurfaced, followed by convulsive reversals and a surprising return to protectionism. In 2016, the United Kingdom voted to leave the European Union, and Donald Trump won the presidency of the United States on a campaign of “America first” in an election in which neither Republican nor Democratic party leaders supported free trade. Despite the evident and widely distributed gains from global trade,1 populism was fuelling political upheaval and bringing to the fore growing discontent about impacts of trade that had been festering for many years: the hollowing out and decay of once great industrial cities and the individual loss of well-paid and steady factory work. The US administration channelled the popular discontent into nationalist foreign policy, distrust of the rules-based international order, disregard of international ties and commitments, and resort to security exceptions, tariffs and trade wars. The global trading system has been battered by this approach, with growth slowing in 2019 to three percent, according to the International Monetary Fund. And while nations cooperated to resolve the 2008 financial crisis, that urge to work together to solve global issues has been subdued.2 Today, the WTO is experiencing a crisis of legitimacy — its Appellate Body (AB) effectively shut down by the United States blocking consensus on new appointments — and hegemonic trade wars seem to have replaced the steady pace of diplomacy and reasoned argumentation. The WTO finds itself struggling to respond effectively to the challenges of rapid economic, political, social, technological and environmental change, seemingly lacking the infrastructural resilience needed to weather today’s geopolitical storms. The global trading system, which only a few years ago was being lauded as the model of effective multilateralism, now seems locked in an out-of-date governance paradigm, in need of a new program of work with which to start to break impasses and address the urgent and encompassing challenges of the twenty-first century. Part of the WTO’s challenge is figuring out just how to start such a reform initiative when there are such strongly opposing factions to be drawn into consensus. This essay series grows from earlier work done by CIGI on the WTO: a consultation on the Canadian government’s Ottawa Group initiative on WTO reform3 and two essay series on reshaping trade through women’s economic empowerment4 and mainstreaming gender in trade agreements.5 Launched as the AB was about to become non-functioning in December 2019, this series casts its net more broadly than the dispute settlement issues while acknowledging that the WTO’s challenges are all deeply interconnected. The essays explore the potential for more comprehensive WTO reform to imagine a new program of work and a way to embark upon that work, and thereby to help invigorate discussions for the next Ministerial Council meeting. The growing trade tension has sparked important conversations at the WTO and in nations’ capitals about potential WTO reform. Both the European Union6 and Canada with the Ottawa Group7 (comprised of Australia, Brazil, Canada, Chile, the European Union, Japan, Kenya, South Korea, Mexico, New Zealand, Norway, Singapore and Switzerland, and notably not including China, India and the United States) have put forward ideas for WTO reform, as have others. Canada’s discussion paper focused on improving the monitoring of existing rules, safeguarding and strengthening the dispute settlement function, and modernizing trade rules for the twenty-first century. This series looks at the issue of reform and modernization from a variety of angles. While some contributors focus on how to keep the lights on in dark times, others offer ideas on how to restart productive negotiations, how to reform and restore the rules-based dispute settlement system (DSS), how to make trade more inclusive, whether to narrow the WTO’s focus to trade basics to leave more flexibility to nations for their own development, and how to update and reshape the WTO to deal with today’s interconnected global challenges.