One Step Forward

June 21, 2022

Readers of this column know that I am fond of quoting (or rather, misquoting) Lenin’s statement about “two steps forward, one step back.” I was preparing to use it again regarding last week’s WTO ministerial conference, but the members eventually produced a number of significant, albeit modest, accomplishments. Given the dire predictions of failure early in the conference, the outcome was a pleasant surprise and reminiscent of Winston Churchill’s comment about the Americans—that they usually do the right thing after trying everything else. One could say that about the trade ministers as well.

Less than good news was explained in a statement by Jake Colvin, president of the National Foreign Trade Council, who was on the scene in Geneva:

Rather than digging into conversations about forward-looking solutions to pressing global challenges, ministers spent an alarming amount of time trying to prevent backpedaling on existing WTO rules at the behest of a small handful of countries.

He makes an important point. Much of the ministers’ time was taken up arguing with countries, primarily India, that wanted to weaken the rules rather than strengthen them. The result was some weaker rules (the vaccine waiver), some new rules that were significantly less hoped for (fisheries), and some areas that were vague when they could have been specific (food and WTO reform). As a result, the ministers passed up opportunities to move the ball forward, particularly on fisheries, where they settled for a limited agreement instead of the more comprehensive one that had been on the table.

In brief, the ministers did three big things, along with a bunch of smaller things. First, they agreed to a vaccine waiver that is a pale imitation of the initial proposal. It is limited in scope (vaccines only) and in duration (five years). This was a hard-fought issue, with activists arguing that a waiver was necessary to save poor countries from Covid-19, and the pharmaceutical industry arguing access to vaccine intellectual property was not the issue. In the end, the waiver is probably unnecessary and certainly too late. The world now has plenty of vaccines; the issues are distribution channels and public demand, so the waiver will probably not make much difference—this time. Whether it will lead to further weakening of WTO intellectual property disciplines remains to be seen.

Second, ministers agreed to a slimmed-down fisheries agreement. The good news is that they prohibited subsidies on illegal, unreported, and unregulated (IUU) fishing. The bad news is that they failed to ban subsidies that contribute to IUU fishing. Those are things like fuel or ship construction subsidies that indirectly enable overfishing. The agreement is also limited to five years, during which time WTO members are supposed to produce an agreement on the additional subsidies that were left out this time. The agreement, in baseball parlance, is a single or double, not a home run.

Third, ministers extended the moratorium on taxing e-commerce transactions until the next ministerial conference. This moratorium has been regularly extended since its inception in 1998 but was under unusual pressure—again from India—this time, partly because the United States last year mistakenly allowed a different moratorium that India favored to be extended without insisting the e-commerce provision be extended as well, thus undercutting U.S. leverage. If the United States wants to preserve this moratorium in the future, it will have to develop a more aggressive strategy.

Ministers also circled around a number of agriculture proposals, ultimately agreeing to two of them—food security and exempting contributions to the World Food Program from export restrictions—in watered down texts. A commitment to begin an open-ended process on WTO reform was also adopted, again with less specificity than some had hoped for.

Early commentary on the outcome has fluctuated between the glass is half full and the glass is half empty. On the one hand, the fact they agreed to anything is a welcome surprise to WTO skeptics accustomed to a long series of failures, and the results will, at least temporarily, put questions about the organization’s relevance to the twenty-first century trading system on the back burner.

On the other hand, the conference made clear that there are deep divisions over fundamental issues, largely related to the distribution of trade benefits among developed countries, developing countries and least-developed countries (LDCs). Those differences were papered over by simply removing the most controversial elements from the various texts and settling for least common denominator outcomes. The result was that the WTO continued to argue about the past and spent insufficient time confronting the future.

Unfortunately, the future is on the train coming rapidly down the track toward us, and the respite that the ministerial conference has provided the WTO will be a short one. The possibility of failure has been postponed, but it has not gone away. Colvin summarized the next challenge quite well:

Looking ahead, it's vital for the vast majority of WTO members who want to see the organization address shared priorities like e-commerce, supply chains, inclusive growth, climate and health pursue flexible pathways that foster commercially-meaningful outcomes and prevent any one member from obstructing progress.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.  

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