An Open Letter to Trade Minister O’Connor

We write this open letter to express the strong support of the New Zealand business community for ambitious outcomes at the Twelfth World Trade Organization (WTO) Ministerial Conference (“MC12”).

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Five Minutes to MC12

by | Nov 17, 2021 | Trade Working Blog | 0 comments

In a fortnight’s time, Ministers from the 164 members of the World Trade Organisation will gather for the Twelfth Ministerial Conference (“MC12”) in Geneva. The pandemic, fish subsidies and agriculture will headline the agenda, but meaningful outcomes are far from a sure thing.

MC12, which starts on 30 November, gives Trade Ministers their first chance since 2017 to take some long overdue decisions on trade reform. Media stories about “the failure of the WTO” make a regular appearance, and indeed since the Doha Round got underway in 2001, only handful of additions to the global rulebook have been agreed, including the WTO Trade Facilitation Agreement – practical measures to reduce red tape – and the elimination of agriculture export subsidies, the bane of developing countries and efficient farmers everywhere, including in New Zealand.

The prospects for MC12 scarcely look any brighter, despite positive language from APEC Economic Leaders last week, and recent G20 and US statements. (An important point of detail: there is no such thing as “the WTO” when it comes to writing the rules: that power rests entirely in the hands of the WTO members themselves.)

Achieving substantive outcomes is crucial to ensure that global rules remain fit for purpose. Just as important as the substance, however, is the need for the WTO to remain credible by showing it can respond to a major challenge like the pandemic. Otherwise this threatens to undermine the myriad benefits that the WTO offers, which include predictability and a more level playing field, enforceable rules, the foundation for even deep modern FTAs, and the only potential avenue to address cross-cutting issues such as subsidies or sustainability.

While serious problems abound, if nothing else, the enthusiasm for bringing new issues to the table suggest that reports of the WTO’s demise have been greatly exaggerated.

Priorities, priorities

The Director-General of the WTO, Dr Ngozi Okonjo-Iweala, is encouraging members to focus on three priorities: the pandemic response, fish subsidies and agriculture.

On the pandemic, WTO members have been discussing practical steps including keeping supply chains flowing, freeing up trade in essential medical supplies, and achieving better transparency.  MC12 outcomes seem likely on at least some of these.   A related issue is intellectual property protections for vaccines – the so-called “TRIPS waiver”.   Proponents have argued that certain protections should be put on hold in order to enable developing members to start producing vaccines themselves, which are otherwise in short supply in poorer countries.  While this has broad support, including from New Zealand, some members are concerned about precedent.  (There are also valid questions about what the waiver alone could achieve, given the complexities of vaccine production.)  In any case, there are large gaps to be bridged even at this late stage.

 

Protecting the global commons: fish subsidies

While COVID may be a new issue, the other priorities – distorting subsidies to fishing fleets and farmers – have been on the agenda for over twenty years.  On fish subsidies, countries have already recognised the need for action to mitigate the destruction of global fish stocks, but without nailing down detailed commitments.  An agreement may at long last be in sight – although talks are likely to go down to the wire.

Agriculture: subsidies and food security

As for agriculture, the focus is on distorting subsidies, which not only disrupt markets, but are also linked to environmental harm and food insecurity.    This has long been a developed-country problem (with the US, the EU and Japan at the top of the league table), but spending is also increasing in big developing economies such as China and India.  New Zealand, Australia and the Cairns Group have pointed out that subsidy entitlements could reach USD$2 trillion by 2030 if left unchecked, and are calling for meaningful cuts, but others remain opposed.   The compromise may end up being a work programme, but for credibility this must be ambitious.   A raft of other contentious issues are also under discussion, including government purchases of food stocks.

 

Dispute settlement, and modernizing the WTO

New Zealand and indeed most other WTO members remain deeply worried about the restoration of the full operation of WTO dispute settlement.  The WTO’s appeals body remains paralysed thanks to the US, and despite strenuous efforts by members to address US concerns.  The stalemate is unlikely to be resolved at MC12, but there may be some nascent signs of US flexibility.

Members are also likely to affirm their intention to keep working on new issues, from services (where a new deal is likely), digital trade (where good progress is being made), and investment facilitation, to enhanced participation in trade by women, small economies and small businesses.   A raft of environmental topics is also in the mix, including environmental goods and services, plastic pollution, fossil fuel subsidies, and the “Trade and Environmental Sustainability Structured Discussions”, which may address climate change measures.   The US and a few others are also pressing for highly contentious new rules to address Chinese industrial policies, as well as reforms to eligibility for developing-country flexibilities.


Deal or no deal?

The prospects for MC12 remain far from certain, but there are some modest positive signs.  Let us hope that members translate this rhetoric into tangible progress: it is in everybody’s interest to secure credible outcomes, even if the system is far from perfect.   And while serious problems abound, if nothing else, the enthusiasm for bringing new issues to the table suggest that reports of the WTO’s demise have been greatly exaggerated.

 

Stephanie Honey is Associate Director of NZIBF and was formerly New Zealand’s chief agriculture negotiator for part of the WTO Doha Round.

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