The WTO can do more for global trade by trying to do less

Ministers met for four days, then granted a two-day extension. There were some significant achievements, such as an agreement to facilitate foreign direct investment in developing countries. But ministers largely agreed to keep talking ahead of future meetings. Unfortunately, there was no discussion of AI or how to use data, two of today’s hottest topics.

The outcome of the 13th Ministerial Conference (MC-13) was far from the comprehensive package of reforms that WTO observers like myself believe the trade body desperately needs to continue to function and respond to the pressing needs of today’s global market. And it is a disappointing result after two years of hard work since the previous ministerial conference in June 2022 and months of intense negotiations leading up to Abu Dhabi.

Trade officials could shrug and start planning for the next ministerial conference in Cameroon in two years. But that would be wrong. The failure of MC-13 shows that the WTO is gradually becoming detached from the real world of trade.

Negotiations to adopt new rules for the digital economy have reached an impasse. Guidelines on cross-border data transfers and server locations are still unclear. Assessing the impact of generative AI hasn’t even begun.

Consider global supply chain restructuring as countries pursue “friendshoring” and “onshoring” agendas. It has become an important agenda item for many governments, pursuing both legitimate and dubious political objectives.

And yet the WTO has remained silent on this fundamental issue of global trade, despite the fact that it strikes at the heart of the organization: the long-cherished principle of non-discrimination. Governments are confident enough to admit publicly that they want to change the rules of global trade.

However, the WTO remains unresponsive.

The 1994 Uruguay Round designated the WTO as the global governing body with binding legal rules and a strong dispute settlement mechanism. However, his early successes were gradually overshadowed by his inability to resolve complex and sensitive disputes. It is fighting a losing battle against sovereign states unwilling to surrender their regulatory authority, leading to endless discussions and negotiations as AI, bitcoin and other digital technologies threaten to transform the world economy.

Unfortunately, the WTO in its current form cannot meet the demands of the new global community. Giving it up is not an option; more chaos and confusion will ensue.

The value of the WTO is to provide an arena for countries to come together and talk about trade. So how do we reconfigure OMCs modus operandi to protect this?

Some trade issues—customs procedures, sanitary regulations, anti-dumping enforcement, and so on—can still be handled under the current model of the WTO as an enforcer of international rules with a strong dispute settlement process.

However, these are matters long settled and long understood. The WTO will need something else modus operandi for new digital economy issues such as AI regulation, subsidy policy, supply chain reformulation and national security scope.

In this case, the WTO should take a step back, playing the role of a facilitator rather than an organization that actively drives change.

This is unlikely to lead to comprehensive global agreements, but instead to plurilateral agreements where states form their own blocs with similar countries. The WTO can monitor and oversee these different agreements, facilitate the negotiation of future agreements, and offer its dispute settlement mechanism to states participating in these blocs.

It is no mere coincidence that two of the three agreements adopted by the WTO since its inception have “facilitation” in their titles: the 2013 Trade Facilitation Agreement and the 2024 Investment Facilitation Agreement for Development. Perhaps “facilitation ”, rather than “action”, is the only thing an increasingly polarized global trading community can agree on.

ADRs could provide new ways to resolve complex, politically charged trade disputes, such as the US-China semiconductor dispute or the EU-China electric vehicle dispute. Mediation can prove useful, helping countries break away from strict binding legal norms towards something more flexible and creative. These dispute resolution solutions are proving useful in resolving complex state-to-state disputes where legal norms have become outdated, vague or simply absent, such as when the Gulf Cooperation Council facilitated reconciliation between Qatar and Saudi Arabia in 2021.

Becoming a consultative body would not mean giving up the WTO’s ambition to lead global politics. Consider the OECD’s recent success in adopting global digital tax rules. The international body managed to reach an agreement on digital taxes in October 2021 and 137 countries got involved. Critically, the US and China agreed to the framework, which is notable given their clashes in the global economy.

Why has the OECD succeeded, when the WTO has not yet started the discussion? Perhaps, as a consultative body, the OECD has created a space where states can discuss sensitive and complex issues in a more open, honest and creative way.

A less ambitious and more consultative WTO can show significant leadership in addressing emerging global issues. Sometimes less is more.

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