To go or woe with the WTO?

We’ve been here before with the World Trade Organisation (WTO).   The global trade body’s 13^th Ministerial meeting (“MC13”) opens in Abu Dhabi on Monday 26 February, with Trade Minister McClay serving as Vice-Chair.  In recent weeks diplomats, trade officials, and commentators have worked themselves into a frenzy of speculation about whether the meeting can deliver anything meaningful at all.  WTO Director General Ngozi Okonjo Iweala is clear it can be done, but others are not certain.  It’s in the nature of trade negotiations to teeter on the brink.  At MC12 a rabbit was pulled out of a hat – a medium-sized rabbit and a useful one.  Can the same be done this time?

Abu Dhabi do (or don’t)

Each of the issues on the agenda in Abu Dhabi is significant.  This was highlighted in the statement by the APEC Business Advisory Council (ABAC).  The most pressing of these is whether or not to extend a long-standing moratorium on duties applied to electronic transmissions.  Think Netflix and otherstreaming services, e-books and any service delivered digitally.  Most WTO members are happy to make the moratorium permanent. 173 business associations including NZIBF/TradeWorks have signed a statement in support. India, Indonesia and a handful of others want to impose duties primarily to increase revenue.  The US, once heavily invested, appears agnostic. There is plenty of analysis to suggest to suggest the costs would exceed any benefits.  For now there is no consensus.

Subsidies are also on the agenda. On domestic subsidies for agriculture, long a bug bear for New Zealand, there is no likelihood of an outcome beyond agreeing to continue to talk. India is seeking a complete free hand to continue to use such subsidies to purchase public food stocks.  Meanwhile the OECD has estimated that current direct and indirect support to agriculture averaged US$851 billion annually between 2020 and 2022. As for fisheries subsidies, at MC12 WTO members agreed a landmark deal to eliminate some of the harmful subsidies to fishing fleets that contribute to the destruction of global fish stocks.  That agreement has now been ratified by over 70 members, including New Zealand, but issues left over from MC12 are still proving contentious.

Overarching all this is the reform of the dispute settlement system, regarded as the jewel in the crown of the WTO and one which New Zealand has used often to its advantage.  The key issue is the reinstatement of the WTO Appellate Body. At the most recent discussion in Geneva, over 130 WTO members once again proposed to restart the selection process for the judges to serve on the Appellate Body and for the 73^rd consecutive time, the United States blocked that proposal.  Short of another rabbit-bearing hat, it seems unlikely that this can be resolved substantively for MC13.

Given the difficulty in achieving consensus in the WTO a large number of economies are participating in so-called “Joint Statement Initiatives (JSI)”.  This is when a number of WTO Members come together to make progress and then offer the results to the whole membership, including those who did not participate at all.   There is a good likelihood that some solid progress on the plurilateral talks on e-commerce, including rules for paperless trade, e-signatures and cybersecurity, will be agreed in principle in Abu Dhabi (though with the most contentious data governance issues still to be resolved). The development-friendly investment facilitation JSI could also be endorsed.  But JSIs face opposition from other Members including India and South Africa who object to this approach when not all have agreed to participate. In the margins of MC13, participants in various environmental initiatives are likely to engage, including on fossil fuel subsidy reform, where New Zealand leads. 

Measuring success – cheque is in the mail

Set against the magnitude of the problems affecting the global economy in general, and the international trading system in particular, the package on offer in Abu Dhabi may seem a little underwhelming. But the WTO is the creature of its 164 members (plus Timor Leste and Comoros about to be admitted).  The times are just not propitious for something more radical, however much it is needed.  Leadership, especially from the United States, is in short supply. India’s views on a number of issues are fortified by the proximity of their elections. In that light, for the WTO to meet at Ministerial level and do as much as can be done, is not without merit, but it may not be enough to convince stakeholders, especially those in business, that the WTO has overcome its reputation for fiddling while Rome burns. Agreement to extend the moratorium is a no-brainer.  Some results on JSIs would be a real bonus. Agreeing to continue talking (and talking and talking) is probably about as much as can be expected for the rest.

This post was prepared by Stephen Jacobi and Stephanie Honey. Steph presented on WTO to the recent ABAC meeting in Kuala Lumpur.  Her presentation may be seen here.