09 Conclusion
Reforming the WTO will require a multifaceted approach and take time. But it remains in the interests of the US and its European partners to sustain the rules-based trading system which they helped to create.
WTO reform has become a buzzword. But modernization does not come in one package. In fact, many different issues, processes and actors will have to be involved. And WTO reform will require time. The need to deal with the COVID-19 pandemic and find a new WTO director-general has stalled wider reform efforts for now, while the upcoming US election in November also means that the WTO’s problems will prove intractable in the near future.
Once the dust has settled, the process of rebuilding the global economy in light of the imperatives amplified by the pandemic, combined with the presence of new leadership at the WTO, could provide much-needed impetus for bold reform. But expectations need to be managed.
The WTO Appellate Body will not return to normal immediately even if there is a change of administration in the US, and in any event its operations would need to restart under an updated format. Many of the US’s concerns regarding the WTO Appellate Body are long-standing, and shared across the political aisle. But in contrast to the position taken by the Trump administration, the US approach would likely shift towards engagement with international allies if Joe Biden wins the election. To reform the WTO Appellate Body, the US stands a better chance of success if it puts forward an explicit proposal for solutions or at least spells out what changes to the Appellate Body it considers acceptable.
As essential as it is to tackle the impasse over the Appellate Body, wider WTO reform will be impossible without also improving transparency and addressing issues related to special and differential treatment for developing countries. The WTO’s functions of administering and monitoring the application of trade rules and settling trade disputes depend largely on whether rules exist and are fit for purpose. Reform will therefore require updating the rulebook to address the needs of global trade in the 21st century. In this regard, the successful negotiation of rules in the areas of e-commerce and digital trade – as well as key initiatives that create greater coherence between trade and sustainability, such as the modernization of fisheries subsidies – could help to reassert the position of the WTO at the heart of the global trading system. WTO members will also have to deal more effectively with the impact of state-owned enterprises on trade and competition – especially given China’s rise and its harmful trade policies and practices – and with industrial subsidies, an area that is becoming more important due to COVID-19.
The transatlantic relationship can be leveraged for reform.138 The US and Europe share many of the same concerns about the WTO system – particularly as it relates to China. The ongoing trilateral discussion format involving the US, the EU and Japan also constitutes an important contribution to reform, although it could be enhanced by bringing on board other like-minded countries, such as the UK. There are also numerous historic examples of US–EU cooperation having been very strong on multilateral trade issues – especially during the early 2000s under EU Trade Commissioner Pascal Lamy and US Trade Representative Robert Zoellick. In this current moment of crisis for the WTO, the US and the EU have been discussing fundamental issues relating to the organization more closely than ever. In contrast, even during the TTIP talks between 2013 and 2016, the WTO was not a topic for debate despite concerns that the Obama administration had raised.
As mentioned, the crisis of the Appellate Body presents an opportunity to reform the WTO, while the appointment of the next director-general and the convening of the next WTO Ministerial Conference both offer chances to consider issues critical for the future of the organization and the global trading system.
This paper has focused on the need to build a positive agenda for a transatlantic partnership on WTO reform. If the US and the EU cannot work together bilaterally, progress is unlikely. To drive reform, transatlantic cooperation is necessary, but this alone is not sufficient. Two other conditions must be met. First, China – as the world’s largest trading nation – needs to be at the table. Second, underlying trade frictions between the major trading partners in the WTO need to be addressed.
The EU will stand the best chance of advancing WTO reform if it engages constructively with the US. This can be done by demonstrating to the latter why it is still in the US’s interest to maintain and reform a rules-based international trading system with the WTO at its centre. Such an effort should involve engaging with domestic US constituencies committed to the WTO and its reform, including the US business community and key players in the US Congress. By emphasizing the need to modernize WTO rules to reflect technological shifts and the challenges presented by China’s state capitalism, the EU has a strong case for why the US should work with its allies to reform the WTO.
138 For a similar recommendation, see Garcia Bercero, I. (2020), What Do We Need a World Trade Organization For? The Crisis of the Rule-Based Trading System and WTO Reform, Gütersloh: Bertelsmann Stiftung, 2 June 2020, https://www.bertelsmann-stiftung.de/fileadmin/files/user_upload/MT_WTO_Reform_2020_ENG.pdf (accessed 14 Jul. 2020).