The WTO’s Journey Through Decades of Challenges and Achievements
When I was tasked with writing an article titled “WTO at 10” for a commemorative book in 2005, I had no idea of the immense challenges that the World Trade Organization (WTO) would face in the following two decades. The first decade of the WTO’s existence was marked by cautious optimism, as its membership expanded and globalization gained momentum. This period was further propelled by the launch of the Doha Development Agenda and China’s accession to the WTO in December 2001. The impact of this accession on both the Chinese economy and the global trading system was profound, as explored in my co-authored book with Mark Clifford.
During its initial years, the WTO faced several significant tests, including the Asian financial crisis (1997-98), the protests at the Seattle Ministerial Conference in 1999, and high-profile dispute settlement cases. Despite these challenges, the WTO proved resilient. Countries hit by the crisis managed to recover, partly due to the openness of global markets that absorbed their exports. Trade played a crucial role in stabilizing economies, surpassing the effectiveness of IMF support.
The WTO’s dispute settlement system also emerged as a key strength during this time. Renowned international law professor Giorgio Sacerdoti highlighted the system’s efficiency and its central role in ensuring adherence to agreed rules. This mechanism became a cornerstone of the organization.
In 2003, the Cancun Ministerial Conference marked a turning point as developing countries began to assert themselves more actively in negotiations. They pushed for Special and Differential Treatment (SDT), supported Least Developed Country (LDC) accessions, and advocated for technical assistance through the Aid for Trade program. The inclusion of cotton as a specific commodity for negotiation at Cancun underscored the importance of addressing the needs of LDCs in Africa.
Over the next decade, issues like cotton, SDT, and the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement gained traction. The 2015 Ministerial Conference saw progress on prohibiting export subsidies for cotton and reducing domestic support. Meanwhile, discussions on SDT continued, culminating in a ministerial declaration in 2024. On TRIPS, the ability to use compulsory licensing for medicines beyond domestic markets was expanded, enabling countries without manufacturing capabilities to import essential drugs. This provision was further clarified in 2022 to support equitable access to vaccines during the pandemic.
Despite the stalled Doha Agenda, the Trade Facilitation Agreement (TFA) became a major achievement, coming into force in 2017. It streamlined trade processes, leading to a significant increase in trade, particularly among developing economies. According to the WTO World Trade Report 2024, agricultural trade among developing nations rose by 16 to 22%.
As the WTO entered its third decade, it faced new challenges. Geopolitical tensions, trade disputes between the US and China, and rising trade restrictions complicated the global trading system. Environmental concerns also introduced new border regulations, such as carbon taxes and border adjustments.
A critical issue emerged with the Appellate Body, which has been disabled since 2019 due to the US blocking new appointments. This has left the dispute settlement system without an appeal mechanism, undermining the enforceability of WTO rules. Alternative solutions, such as the Multi-Party Interim Appeal Arbitration Arrangement, have been proposed, but they remain limited in scope.
Reforms are now essential for the WTO to survive and thrive. The US’s concerns about the Appellate Body’s interpretation of rules have led to calls for reform, even though the US has historically benefited from the system. Proposals for expedited arbitration under Article 25 of the Dispute Settlement Understanding (DSU) are being revisited.
As the WTO moves into its fourth decade, it must address the growing disruptions in the global trading system. Unpredictable tariff hikes and retaliatory measures have created uncertainty, affecting trade flows. While the US remains a major market, its share of global trade may decline, while South-South trade expands. However, this chaotic environment does not benefit anyone, and the long-term impact on the US trade deficit remains unclear.
The WTO’s role as a guardian of the rules-based trading system is more critical than ever. As former Cuban President Fidel Castro once said, “The world needs the WTO to bring order to this chaotic world.” To ensure its relevance, the WTO must undergo deep and thorough reforms, particularly in the Dispute Settlement Understanding, to entice the US back into the system.
Efforts are already underway to address these challenges. The General Council is engaging in informal consultations to mitigate the impact of tariff escalations and explore joint actions. These efforts aim to pave the way for meaningful reforms at the upcoming 14th Ministerial Conference.
Despite the challenges, there is confidence in the WTO’s ability to preserve and strengthen the rules-based trading system. The future will reveal whether the current disruptions will ultimately serve the intended corrective purposes or prove costly for all economies.
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