WTO Déjà Vu as Katherine Tai Tries Rallying Peers on Reforms

It could be 2005. It could be 2015. The call for reforms at the World Trade Organization remains an issue, with little noticeable progress. In fact, the biggest “win” for the WTO might have been the recent Airbus vs Boeing settlement, which took more than a decade to resolve. The fact that these are mammoth corporations matters here. Had they been smaller businesses, and not near-monopolies in their home countries, would they have survived the process?

“Is a system that requires 16 years to find a solution ‘fully functioning?’,” US Trade Representative Katherine Tai told members of the WTO in Geneva today.  “This process is so complicated and expensive that it is out of reach for many – perhaps the majority – of members,” she said in her prepared remarks.

Tai began her speech by saying that the Biden-Harris Administration believes that “trade – and the WTO – can be a force for good that encourages a race to the top and addresses global challenges as they arise.”

The Marrakesh Declaration and Agreement, on which the WTO was founded, begins with the recognition that trade should raise living standards, ensure full employment, pursue sustainable development, and protect and preserve the environment.

However, none of that has happened since. China is a member and producers more energy from coal and built more coal-fired power plants than almost the entire Western world, despite its constant talk about working with Washington and Brussels to roll back global CO2 levels.

Living standards in most developed countries have stagnated, including here in the U.S., just keeping up with inflation.

Moreover, the recent study on bilateral trade deals and their impacts at home, by the International Trade Commission, showed that the biggest winners were big multinationals. The biggest losers: blue-collar and non-college-educated American men and women. Minorities and women were particularly hard hit, the report showed.

Read CPA’s take on the ITC report here.

WTO tariff cutting and its limited focus on increasing global trade volumes did help develop many poorer countries, like those in Asia, but that was due in large part to production shifting out of the U.S., Italy, and elsewhere and going to countries where labor was cheap, currencies were weak and environmental regulations were non-existent.

Tai’s speech was about ways members can work together on health issues. But she mainly spent her time at the podium to cheer people up – to bring about a more unified approach to fixing what is broken at the WTO.  We have heard this now for at least a decade. There was a call to reform even before the Trump administration refused to appoint new members to the Appellate Body, the main dispute settlement “judges” of the WTO.

Robert Lighthizer, then the US Trade Representative, released a study in February 2020 on the Appellate Body which outlined Washington’s issues.

“The reality of the institution today does not match the ambition of its goals,” Tai said.  “Every trade minister I’ve heard from has expressed the view that the WTO needs reform. We need to look beyond simple dichotomies like liberalization versus protectionism or developed versus. developing.  Let’s create shared solutions that increase economic security.”

Tai suggested that one place to start would be to reform the monitoring function of individual WTO committees.  In committees, WTO members discuss trade issues and monitor compliance with the WTO rules.  She said that WTO “members are not responding meaningfully to concerns with their trade measures.  The root of this problem is a lack of political will.  But committee procedures can be updated to improve monitoring work.”

She also said it was “essential to bring vitality back to the WTO’s negotiating function.”  That would be trade rounds like the Doha Round and others from the early 2000s, the WTOs heyday. “We have not concluded a fully multilateral trade agreement since 2013,” Tai noted.

Tai’s speech, and a subsequent Q&A session, will not give much hope to those looking for a quick resolution. If countries have been creating new rules through WTO litigation, as both Tai and Lighthizer have now said, then it is not enough to tweak the Appellate Body. The WTO must change its approach to negotiating as well to “motivate” members to work out new rules rather than turning to the dispute settlement system, Tai said.

“A functioning dispute settlement system, however structured, would provide confidence that the system is fair. Members would be more motivated to negotiate new rules,” she added.



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