Trade Knowledge Exchange > Commentary > Uncategorised > Miraculous catch or struggling to stay afloat? Early thoughts on the WTO’s 12th Ministerial Conference.

Miraculous catch or struggling to stay afloat? Early thoughts on the WTO’s 12th Ministerial Conference.

And so,  in the final watch of the night, the WTO’s negotiators cast their nets one final time, and reeled in a collection of declarations and decisions. The “Geneva Package” isn’t  a haul of biblical proportions. But it did include a multilateral agreement, that has been over 20 years in the making, on eliminating the  subsidies most responsible for overfishing. It also included among other things a decision to relax  aspects of intellectual property rights protections relating to Covid-19 vaccines, and to extend a moratorium on customs duties on digital trade. There were also declarations (essentially, political commitments) on food security and WTO reform.

WTO negotiations are fraught because agreements require consensus across 164  members. Consensus on any particular agreement is usually not forthcoming unless there is consensus across a sufficiently wide range of questions to satisfy everyone’s negotiating priorities. Which are often as much political as they are economic.

Given that, and a fraught international context, the outcome in Geneva is a welcome, and to be frank, largely unexpected, success.  Indeed, so low were expectations that some long standing observers had feared an outcome of the lines of the 1999 Seattle Ministerial Conference. That meeting finished in chaos, without a declaration, and has long held a special place in WTO lore as the “event that must not be mentioned”. Perhaps, one observer mused before the conference, the repeated postponements of the 12th ministerial had been a blessing in disguise.

What’s in the package?

The agreement on fisheries is only the second multilateral agreement launched and concluded after the inception of the WTO in 1995. (The other one is on trade facilitation concluded in 2013).  It prohibits subsidies to illegal, unreported or unregulated fishing as well as for fishing activities in the high seas that are not managed by a regional fisheries management organisation. It also restricts subsidies that contribute to overfishing and overcapacity. There is more flexibility for subsidies within a country’s exclusive economic zone, more flexibility for the poorest developing countries, and provisions for technical assistance and financial support. It operates largely as a standard WTO agreement – prohibit the worst, restrict the bad, and develop transparency around the rest, where there remains a fair amount of wriggle room. Where it does depart from the norm is in the recognition that this may provide a useful platform to develop trade, environmental and development wins.

The outcome on waiving certain aspects of the TRIPS agreement relating to compulsory licensing for Covid-19 vaccines is the outcome of close to two years of haggling. In essence, the decision makes it easier for developing countries that do not have existing vaccine production capacity to issue compulsory licences (something already allowed for under WTO rules) to produce the vaccine locally, and to export part of that production to help with the pandemic response.

The initial proponents of the waiver had sought a much broader scope of exemptions, but opposition, principally from European countries with large pharmaceuticals sectors, led to the narrower scope. Both opponents and proponents of waivers from TRIPS obligations in relation to Covid-19 vaccines are likely overstating their cases. Fears that waivers dilute patent protection and the incentive to invest neglect the big role played by government funding in underwriting the risks of Covid-19 vaccine development. Those who set a lot of store in TRIPS waivers – often because of a reflexive aversion to the agreement as a whole – neglect the role a multitude of other supply chains constraints play. These include skills and a inefficient logistics and customs processes, all of which are much more likely to bind than provisions relating to licensing.

The decision on extending the moratorium on duties on digital transmissions hung in the balance until the end, and caused no small degree of angst. A group of countries – notably India and South Africa -asserted (against the evidence) that the moratorium could cost them significant tariff revenues. In reality, the holdout was likely more a negotiating ploy to gain satisfaction on other fronts. It is questionable how far allowing the moratorium to lapse would have led to the imposition of “duties on data”. India, with a thriving data-dependent IT sector would probably be among the chief losers. What it is more likely to do is to keep the threat of duties open and use it to extract concessions, including in FTA negotiations. That being said, the moratorium does provide legal certainty, though only out to the next ministerial conference. So expect the same brinkmanship again.

Yeah or meh?

That the WTO cleared a very low bar only highlights how much remains to be done if success is to be measured less against perenially low expectatons, and more by yardsticks relevant to the current reality of trade.  That reality lies in recognising that we are at a time of heightened fragmentation in terms of policy, even while economies are more interdependent than ever before, and that the nature of trade itself is changing through the influence of technology.

For all the relief surrounding the moratorium on digital duties, this represents one tiny part of the tip of the iceberg regarding digital trade. The moratorium is part of a broader work-programme on e-commerce: the same work programme the WTO set up in 1998. The agreement on fisheries may represent the WTO’s first agreement with an explicit sustainability angle. The fact that it took over 20 years does not bode well for the far more complex questions surrounding the interaction between climate change and trade. There is also the small matter of the WTO not having a functioning dispute settlement mechanism – and hence a  diminished capacity to enforce the rules –  with its Appellate Body still non-operational.  At a time when there is a need for a new multilateralism, the WTO still visibly struggles with the older version.

Inevitably, such observations lead to calls for “WTO reform”. The Geneva package duly contains a brief declaration setting up a process to improve the three pillars of the WTO: negotiations, dispute settlement, and monitoring. Calls for WTO reform are not new. The reason nothing seems to come of them is simple: all countries see reform as something others should do. The impetus for liberalisation and rule-making that led to the creation of the WTO did not come from some procedural magic that has now run out. Rather it was based on a recognition that liberalisation and rule-making were things you did for your own benefit, primarily. Negotiations helped to overcome internal political resistance. That internal ownership of reform has largely gone. There is now a solid bipartisan consensus in the US against trade. The EU, minus the liberalising influence of the UK, has clearly staked out a more inward looking stance. Nobody else appears willing to take up the mantle.

How should the show go on?

It thus pays to keep expectations for “Min -13”, to be held on 2023, pretty low. The outcome in Geneva could conceivably clear some ground for progress on various plurilateral negotiations, including on e-commerce and related digital matters. But that is far from certain. And indeed, there may be some mileage to the thought of deliberately playing down this sort of summitry. As it happens, much of the most useful functions of the WTO are performed largely out of the limelight through its committee work. The unglamorously named Committee on Technical Barriers to Trade, for example, is where countries discuss flashpoints, and often diffuse disputes, at the increasingly fractious interface between trade and regulation. It is here that discussions on leading edge issues like the regulation of Artificial Intelligence and circular economy questions will take place.  Unglamourous committee work are like the duck’s legs paddling furiously beneath the water.

Beyond these  WTO staff and subgroups of members are engaged in series of structured dialogues on trade and sustainability, which could help countries push their own domestic reform agenda which could then serve as a basis for international cooperation. That cooperation is likely to take a regional form or between coalitions of like-minded countries.

As a concluding observation, what is also noticeable is the difference between the (understandable) excitement at the Ministerial outcome on the part of trade insiders within the Geneva bubble, on one hand, and generally muted, if not downbeat, reaction of  those (businesses, policymakers and practitioners) working more at the coalface of trade.  That in itself says a lot. It means that with formal diplomatic processes gummed up, rule-development might lie with a more disparate group of actors. It may be more innovative but less structured. That lack of coordination will impose costs over time, not to mention issues of accountability, which are precisely the reasons multilateralism is a practical necessity. The question is whether countries can grasp that quickly, or whether some hard and costly lessons need to be learned first.


About the Author

Amar Breckenridge

Amar
Breckenridge

Amar Breckenridge is a manager in Frontier Economics' public policy practice, and leads its work on international trade policy.

Amar’s work on trade spans trade policy analysis and modelling, support to dispute settlement and litigation, and trade negotiations. Amar spent five years as a staff economist at the World Trade Organisation prior to joining Frontier.

He is also a member of the Experts Network at ICTSD.


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