Overhauling the WTO

Sherif Erfan
Tuesday 27 Feb 2024

Egypt is advocating reforms to the World Trade Organisation to give developing countries a greater role in the decision-making and dispute-settlement system, writes Sherif Erfan

 

With the World Trade Organisation’s (WTO) 13 Ministerial Conference (MC13) taking place from 26 to 29 February in Abu Dhabi, the rganisation’s reform is topping the conference agenda.

The world is witnessing significant geopolitical and economic tensions, unilateralism and protectionism are widespread, the multilateral trading system is being undermined, and anti-globalisation sentiments are high.

With all these challenges, the WTO currently seems to be providing little hope that it will be able to uphold an equitable and effective rules-based multilateral system while safeguarding the special and differential treatment of the developing countries and the Least Developed Countries (LDCs).

From a broader perspective, the WTO’s performance has failed to satisfy any of the parties involved. Some critics believe that the rules of the WTO work against the developed nations and give an unfair advantage to the developing countries. Former US president Donald Trump has expressed this view on several occasions.

Similarly, in much of the developing world, the WTO is believed to be manipulated by the Western powers to promote their trade interests. In this view, the WTO rules and decision-making processes are serving mainly the developed countries’ interests.

Although many proposals have been presented to reform the WTO in a manner that benefits all member countries, some argue that the organisation cannot be reformed. German businessman and journalist Mathias Dopfner, author of The Trade Trap: How to Stop Doing Business with Dictators, has criticised the WTO for being dysfunctional and bureaucratic and has urged the adoption of a more efficient and streamlined approach that resembles the earlier General Agreement on Trade and Tariffs (GATT).

Under this approach, member countries could trade without tariffs, and countries that do not participate would be subject to high tariffs. This would create a trade policy based on incentives instead of outright prohibitions, Dopfner says.

In June 2022, a statement on WTO reform acknowledged that it is facing institutional challenges that have negatively impacted its members, particularly the developing countries and including the LDCs. These challenges have resulted in imbalanced rules that limit the ability of the developing countries to shape rules and influence decision-making in the WTO. The statement emphasised the need to address these challenges systematically, transparently, and inclusively among all members.

To achieve this goal, a revision process has been underway in the General Council of the organisation. Members have submitted written proposals to identify the institutional challenges facing the multilateral trading system. The review is expected to propose measures that facilitate the developing countries’ effective, full, and inclusive participation, including the LDCs, in the multilateral trading system and its decision-making processes.

On the same note, since the 11th Ministerial Conference of the WTO in 2017, Joint Statement Initiatives (JSIs) have become increasingly relied upon due to the absence of an effective multilateral approach. Although these have played an important role in achieving significant progress in areas such as investment facilitation for development and domestic regulation, the plurilateral nature of these negotiations has created substantial challenges for the developing countries and LDCs to participate while protecting their core interests.

In this context, the developing countries place great importance on revitalising the WTO’s crucial role as the umbrella for multisector trade rounds. To achieve this goal, Egypt and other developing nations aim to improve the transparency and inclusivity of the WTO by establishing an organised and inclusive process that involves all members, prioritising procedural reforms and agreeing on agenda items in advance to allow for early deliberations and consensus-building.

The WTO’s dispute-settlement system reform is another reform-related issue that is being discussed at the MC13 as a key pillar to maintaining the functionality and effectiveness of the WTO.

A properly functioning system maintains a fine balance of the interests and concerns of the members of the WTO that protects the interests and concerns of all trading system members. It is crucial to preserving an equitable and effective rules-based multilateral system while safeguarding the special and differential treatment for the developing countries and LDCs.

In this sense, restoring the functioning of the WTO’s Appellate Body lies at the heart of the reform process as an integral part of the two-tiered multilateral dispute-settlement system.

Egypt supports the developing countries and the African Group’s position on reforming the WTO, including the reform of the dispute-settlement body that must proceed on a fast track that considers the concerns of the developing countries and LDCs, whole respecting the mandate and deadline set at the earlier MC12 to have a fully and well-functioning dispute-settlement system accessible to all members by 2024.

A reformed settlement system such as the one that Egypt and the developing countries envisage should be designed as a comprehensive and balanced package. The objective of reforming the system should be to simplify the process and ensure that it benefits all members, especially the developing countries and LDCs. The system should include inclusive mechanisms that encourage the effective participation of the developing countries in dispute-resolution proceedings.

In a joint communication with India and South Africa on 24 November last year, Egypt affirmed the significance of WTO dispute-settlement reform in bringing about a stable, fairer, and more predictable trading environment.

The communication emphasised the developing countries’ need for reform to address structural defects that hinder their ability to protect their rights under WTO rules. Egypt called for a reformed system that should incorporate mechanisms that help the developing countries and LDCs effectively to participate in dispute-settlement proceedings and overcome their constraints.

The world is currently facing an array of challenges, including food insecurity, slow economic growth, rising geopolitical tensions, and environmental crises. In the process of WTO reform, Egypt and other developing countries have strongly emphasised the need to strengthen the development dimension of the WTO.

Egypt believes that the WTO must play a pivotal role in facilitating multilateral discussions, devising inclusive solutions, and creating frameworks that enable the developing nations to overcome the complex challenges that hinder their ability to achieve sound development goals.

Therefore, it is imperative to formulate development-friendly agreements that promote economic growth through increased trade and investment while contributing to the UN Sustainable Development Goals (SDGs) with the emphasis on reducing poverty and inequality, ending hunger, promoting good governance, and building resilient infrastructure.

The erosion of effectiveness in achieving the WTO goals could be attributed to the decline in the organisation’s role as a significant contributor to development. The unresolved implementation-related matters since the Uruguay trade round, the ineffectiveness of most of the special and differential treatment (SDT) provisions and flexibilities in various agreements, and the existence of imbalances in the rights and obligations in current agreements are among the crucial reasons why the WTO has witnessed a retreat from playing its influential role and why the intended reform should address these structural imbalances.

The reform proposed by Egypt and the Global South is one that can address these challenges in a systematic, transparent, and inclusive manner among all members. A key aspect of this reform is to enhance governance by introducing key procedural and structural changes with paramount significance to restoring the functioning of the WTO’s Appellate Body, which lies at the heart of the reform process.

Tangible outcomes at MC13 on these issues are very much hoped for by Egypt and the developing countries.

In the same context, Egypt is advocating for the integration of development into the WTO reform as an ongoing process. This process is expected to address both crosscutting and agreement-specific issues and contribute to achieving the SDGs through tangible outcomes.

Effective decisions must be made at the MC13 to deal with the crises the world is facing and reduce their future consequences on the developmental and economic levels.

 

The writer is a commercial counsellor with the Egyptian Commercial Service


* A version of this article appears in print in the 29 February, 2024 edition of Al-Ahram Weekly

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