With WTO ministerial postponed, 2022 will be a critical year for the global trading system

Twenty-five years after its establishment, the WTO’s multilateral trading system has proven to be a valuable global public good in many ways, providing countries with a clear rules-based framework for exchanging goods and services and, until recently, the means to ensure it is effectively adhered to. On the negotiating track however, progress has remained elusive over the past two decades and members have been riven by dissent on updating the 25-year-old trade rulebook across many subjects. Besides long-standing disagreements on agriculture and other “traditional issues” negotiated since launching the Doha round in 2001, the gap among members has also been widened in recent years over taking up newer issues like electronic commerce as well as reforming the WTO and its appellate body.

As the highest decision-making body of the WTO, the 12th ministerial conference originally scheduled for summer 2020 has been postponed twice due to Covid-19 pandemic – actually the second postponement happened at the very last time in late November 2021. It is envisaged to be held in 2022. The conference is expected to make advances or decisions on a number of important questions, such as dealing with the consequences of the global pandemic; disciplining fisheries subsidies; agriculture; restoring a functioning appellate body and updating the 25-year-old trade rulebook (including through joint statement initiatives), to name a few. Delivering concrete results will be critical to restore the WTO’s credibility as a major pillar of global economic governance, after years of stalemate on many fronts.

Negotiating fronts have continued to multiply

WTO Multilateral Track Remains on Top of Developing Countries’ Agenda Development

Many developing countries have been calling for development and special and differential treatment to be prominently addressed at MC12. Ahead of its postponement, members had agreed to adopt an MC12 Ministerial Decision on the Work programme on small economies (WT/MIN(21)/W/3) which aimed to address the specific trade challenges faced by small economies without creating a separate category of WTO members. Also, ministers were expected to consider the demand of Landlocked Developing Countries (LLDCs) to establish a dedicated WTO Work Programme for LLDCs (WT/GC/237). In addition, a key demand of the LDC Group for MC12 was to adopt a ministerial decision calling on preference-granting members to extend a “grace period” to countries having recently graduated from the LDC status, during which they would continue to benefit from the same flexibilities they used to enjoy as LDCs (WT/GC/W/829). This was emphasised in LDCs’ recent Ministerial Declaration (WT/MIN(21)/2), in which they also called for effectively implementing prior decisions taken in favour of LDCs.

Disciplining Fisheries Subsidies

For twenty years, members have been trying to agree on prohibiting certain forms of fisheries subsidies which have contributed to the ongoing depletion of global fish stocks. Talks intensified after this was prioritised by the UN as target 14.6 of the SDGs, leading WTO members to aim at an agreement by MC12. Since then, efforts focused on prohibiting subsidies which contribute to overcapacity and overfishing, as well as eliminating those contributing to Illegal, Unreported, and Unregulated (IUU) fishing. While the latest text shows that much progress has been made, diverging positions still remain on certain aspects such as delineating carveouts for certain developing countries with small fisheries sectors.

Agriculture

Updating the trade rulebook on agriculture remains one of the top priorities for the WTO membership, particularly developing countries. Talks have proved difficult for many years across negotiated issues, such as reforming trade-distorting domestic subsidies. This has long been of high priority to developing countries, which consider current rules disadvantage their producers. Another key mandate of their interest has been to find a permanent solution on easing rules for their food stockholding programmes maintained for food security, as many poor countries cannot currently benefit from the existing interim solution (a “peace clause”). While some gaps on some agriculture issues have been narrowed, profound divergences remain. Of particular interest to some countries, particularly in francophone Africa, ministers at MC12 were also expected to agree that negotiations on the reduction of trade-distorting domestic support for cotton should continue post-MC12.

Besides the above issues under the WTO’s multilateral track, members have launched an increasing number of initiatives aimed at exploring or even negotiating new rules among themselves (and any interested members) on issues where multilateral consensus does not exist.

Buenos Aires Joint Statements have remained very active

Four Joint Statement Initiatives (JSI) launched at Buenos Aires have become an increasingly active part of members’ work towards MC12. These initiatives on e-commerce, investment facilitation, gender and Micro, Small and Medium-sized Enterprises (MSMEs) have been signed by many members, including several developing and LDCs. Each at a different stage of progress, most issued statements late last year to take stock of their work and providing guidance on the way forward despite the postponement of MC12. Given their standard-setting potential, even non-participating developing countries will need to closely monitor these discussions/negotiations, in particular the JSIs on e-commerce and investment facilitation participants aim to achieve outcomes by end of 2022. Small developing countries and LDCs will need assistance to keep pace with progress under these Joint Statements.

New Fronts opened after Buenos Aires

Trade responses to the Covid-19 pandemic, including TRIPS Waiver

As the Covid-19 pandemic continues, members are conscious of the key role trade and the WTO should play in responding to the crisis by, inter alia, facilitating universal access to vaccines and ensuring smooth flows along medical supply chains globally. In this area, members have stated several tracks of discussions since the start of the pandemic. For instance, a number of countries led by India and South Africa have been proposing to suspend intellectual property protections to address prevention, containment, and treatment of COVID-19 (i.e. a “TRIPS Waiver”, IP/C/W/669/Rev.1) to enable their mass production and distribution in poor countries. EU (with active involvement of Sweden) has proposed a “trade and health” initiative to holistically address the all-important issue. On the track known as the “Walker Process”, members have been discussing a possible framework which would guide the WTO's work towards a more crisis-resilient trading system. This could cover many areas, such as trade facilitation, export restrictions, regulatory coherence, production and distribution of essential goods, services etc.

WTO Institutional Reform

On the multilateral track, the push for WTO reform has gained momentum in recent years, with ongoing reflection on how to address the challenges faced by the global trade body in: (i) initiating and delivering on trade negotiations for agreements on both traditional and new issues; (ii) strengthening the WTO's regular work and transparency mechanisms; (iii) Approach to special and differential treatment for more advanced emerging economies; and (iv) restoring a functioning appellate body, that has been sitting empty since 2019 thereby severely undermining WTO’s capacity to resolve trade disputes. Options for ministers’ consideration at MC12 are expected to include establishing a Working Group or review process tasked with making recommendations on WTO reform by the next ministerial.

Trade and Environment

On 17 November 2020, fifty WTO members expressed their intention to intensify work on trade and environmental sustainability to complement the work of the Committee on Trade and Environment and other WTO bodies. They announced organising the "Trade and Environmental Sustainability Structured Discussions" (TESSD) and held the first meeting in March 2021, inviting interested Members to join. As of early 2022, 57 Members co-sponsor TESSD. The initiative discusses several themes, such as trade-related climate measures, environmental goods and services, circular economy, fossil fuel subsidy reform, plastics pollution, etc. The challenges related to developing countries and LDCs have been considered in the discussions as cross-cutting issues. Ahead of the original MC12, TESSD participating Members had developed a draft ministerial statement seeking to attract broader support in the WTO through a balanced work programme for furthering the discussions in 2022. Another group of members have also launched a new initiative on Plastic Pollution and Environmentally Sustainable Plastics Trade.

Developing countries are particularly vulnerable to environmental shocks, and a single storm can wipe out a significant proportion of an island economy, setting back years of growth. While they have little responsibility in today’s environmental degradation, they face its devastating consequences. The international community is increasingly aware that trade should be an important part of climate action, as show the above recent initiatives.

But the road is long to environmental sustainability, and trade can be both part of the problem and the solution. This will depend on governments’ ability to devise coherent policy solutions, through coordinated approaches to trade and environmental policy both at the international and national levels. In particular, effective and coherent participation in climate talks at the United Nations Framework Convention on Climate Change (UNFCCC) will be a must, including by considering their interplay with trade.

Small developing countries struggle to keep pace on so many fronts

Not all WTO members are able to equally and effectively participate on the multiple fronts of international trade discussions. Even the developing world is heterogeneous, with varying priorities and capacities. Besides the rising stars of emerging economies, many smaller developing countries still grapple with the implications of new trade debates and their interests therein. This is an even greater challenge for Least Developed Countries (LDCs), whose immediate negotiating priorities may lie in more traditional areas, and whose limited capacities do not allow them to effectively keep pace with changes in the trading system.

Nevertheless, most developing country delegates realise the importance of keeping pace with developments both in multilateral negotiations and plurilateral discussions on new issues, which will have significant trade implications even for non-parties. Smaller developing and least-developed countries cannot afford to remain as spectators and must participate actively in setting the WTO and global trade agenda. In fact, several of them have already signed Joint Statements and other recent initiatives, while others may not have signed but should still follow the developments and take advantage of the opportunity to participate without formally joining.