In Brussels on Tuesday 18 September, the European Commissioner for Trade, Cecilia Malmström, presented areas for reflection on ways of reforming the World Trade Organisation (WTO).
“The mechanism has seized up”, the Commissioner said about an obsolete WTO that has been left behind by the growing complexity of trade and undermined by its own weaknesses. She referred to great swathes of global trade that are covered by WTO rules little or not at all: rapid technological progress, the digital economy and online trade, but also the role of State-owned enterprises and forced technology transfers – referring directly to China.
All of these subjects of friction are already casting doubt on the ability of its 164 members to reach a consensus on its reform.
Dispute settlement in danger
Another WTO activity, the mechanism to settle disputes related to trade - particularly its Appellate Body (AB) - is also facing unprecedented challenges due to the increasing number of appeals, their growing complexity and limited resources.
One year ago, however, the Trump administration vetoed appointing any new judges. Amongst other things, the American diplomats allege that the Appellate Body (AB) has flouted the rules established by the WTO members. At the end of September, the AB will be reduced to almost nothing, when the number of judges falls from seven to three. This means that the American veto jeopardises the entire dispute settlement system.
Reforms at all levels
On the basis of the mandate granted by the European Council in June of this year (see EUROPE 12052), the Commission is therefore putting its ideas forward to revise the way the WTO works at all levels.
Starting with its regulatory function. Launched 17 years ago, the cycle of negotiations underway, the so-called ‘Doha programme’ has been at deadlock since 2008 due to differences in the interests, but also its functioning by consensus. The Commission is focusing on the architecture of the negotiations, suggesting that plurilateral negotiations be used more systematically to facilitate discussions, particularly in new sectors.
The European institution also hopes to tackle discrimination in all sectors of the economy and to open up the agenda negotiations to include questions concerning reciprocity of market access. It is calling for more transparency in the notification of state subsidies, suggesting sanctions against states that deliberately fail to notify these subsidies and stricter disciplines to pin down the role of state-owned enterprises. The agreement on subsidies and compensatory measures should also be revised, to cover subsidies that most disrupt trade, the Commission reflection document reads.
Another proposal, which is broadly supported by Washington, is to create new rules to deal with trade and digital barriers, including forced technology transfers - moreover, Europe brought proceedings in June of this year against such practices in China.
In another highly controversial subject, the EU is proposing to revise the lines to distinguish between developing countries, which benefit from various facilities in the framework of the WTO. The inclusion of sustainability objectives is another area of work to reform the organisation.
Finally, the Commission proposes to reform the functioning of the Appellate Body, by bringing in more flexibility on the lead times for judgements and longer, non-renewable terms for its members.
The Commission will table concrete proposals in the coming months.
Maintaining the impetus
The Europeans have already begun dialogue on WTO reform with their major trade partners. A tripartite group with the United States and Japan will discuss Europe’s ideas this Thursday 20 September in Geneva, where Canada will put forward its own proposals.
The Commission has also launched a similar reflection with China; a working group will hold its inaugural meeting in the near future.
Although the American President, Donald Trump, the WTO’s most virulent detractor, has not taken his country out of the organisation, he has put it under pressure, meaning that this reform becomes even more urgently required.
The Commission’s reflection document can be consulted at: https://bit.ly/2NqyVb2. (Original version in French by Hermine Donceel)