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WTO reform race -MC12 to MC13: What possible outcomesfrom MC13 for the LDCs African Group – Plus for AfCFTA

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By Musa Sawaneh

The World Trade Organisation (WTO) was established in 1995 to serve as the international body responsible for regulating and liberalising global trade. Its operations are designed to enforce the rules and agreements of the Uruguay Round to ensure that trade flows as smoothly, predictably, and freely as possible.

In recent years, discussions on WTO reforms have gained momentum to address its members’ challenges and evolving needs in the 21st century. Despite much criticism of its functions, the WTO remains an indispensable institution in the multilateral trade system and one of the pillars of economic governance globally. The surge in trade flows (refer to Figure 1) from 1950 to 2022 provides sufficient evidence that since the establishment of the WTO in 1995, global trade has significantly increased in volume, reaching a level 45 times higher than the recorded levels in the early stages of the General Agreement on Tariffs and Trade (GATT).

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Figure 1. Evolution of world trade, 1950-2022

Source: WTO

Despite the increase in global trade flows, the call for WTO reforms is louder than ever. Discussion on these reforms is based on the premise that the world has evolved since the creation of the WTO, necessitating updates to all three of its pillars: negotiations, implementation and monitoring, and dispute settlements, to align with the current realities of our time. The WTO’s failure to defuse the economic competition that led to the ‘giants’ trade conflict underscores the imperative need for reform. It was assumed that the conflict, which was somewhat an issue of subsidies, would have been unravelled through the WTO Agreements on Subsidy and Countervailing Measures; instead, each side’s unilateral actions made the WTO somewhat irrelevant.

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The calls for the revitalisation of the WTO and the blockage of the appointment of the dispute settlement appellate body have led many to believe that the WTO is in deep crisis. There is a concern that a weakened WTO would have far-reaching and numerous consequences, leading to increased negative polarisation of the global economy and limited cooperation. As opined by Osakwe in 2020, unilateralism, economic nationalism, and trade wars would be largely unconstrained. In this regard, with numerous calls for reforms, the fate of the WTO gained renewed attention following the conclusion of the 12th Ministerial Conference in Geneva in 2022. The “Geneva Package,” as it was termed, brought hope and confidence to the WTO, indicating that it continues to be the linchpin of global trade governance.

The Geneva Package marked the culmination of efforts by WTO members to provide concrete trade-related responses to the world’s important challenges. The outcomes reached were issues of WTO reforms, agreements on fisheries subsidies, the WTO response to the pandemic, food insecurity, e-commerce, and others. The package serves as evidence that the multilateral trading system effectively addresses some of the biggest challenges of our time. Within the package, WTO members have committed to undertaking a comprehensive review of the WTO’s functions to ensure the organisation is capable of responding more effectively to the challenges facing the multilateral trading system. Director-General Okonjo-Iweala emphasised that the decision reflects the “widespread recognition that the WTO’s core functions need to be updated and improved.”

Main issues being addressed by members regarding WTO reform at MC12

The adoption of the WTO reforms at the 12th Ministerial Conference marked the initiation of what is anticipated to be the revitalisation of an essential rule-based organisation, elevating it to a standard that is fit for purpose. The concerns of WTO members vary, but they generally revolve around reforms aimed at updating all core functions of the WTO. These reforms address challenges in negotiating and concluding trade agreements, fortifying the activities of the WTO’s regular bodies and committees, as well as enhancing notification and transparency disciplines. Furthermore, there is a focus on addressing issues related to the status of developing countries and the provision of special and differential treatment. Of utmost importance is the scrutiny and improvement of the WTO’s two-tier dispute settlement system.

On the challenges in negotiating and concluding trade agreements: The WTO serves as a negotiation forum rather than a diktat forum. However, this purported negotiation forum has proven less effective than desired, as evidenced by the abandonment of the Doha Round, described by Jagdish Bhagwati as “the broken legs in global trade”. The failure to successfully conclude the Doha Round, aimed at achieving multilateral trade liberalisation, resulted in a loss of potential trade gains for the world. This setback is attributed to the foundational principle of consensus upon which the organization was built, where decisions are not made until unanimous agreement is reached. The consensus-oriented culture in negotiations, coupled with the accompanying bureaucratic processes, has led to the proliferation of reciprocal and non-reciprocal preferential trade agreements. Since 1995, the WTO has experienced only a few notable negotiating successes, including the plurilateral Information Technology Agreement (ITA), the multilateral Trade Facilitation Agreement (TFA), and an amendment to the Agreement on Trade-Related Aspects of Intellectual Property Rights. Since all members have to come to a consensus, multilateral negotiations sometimes become deadlocks due to hostage taking by some members.

On regular bodies and committees and issues of notification and transparency: The Ministerial Conference, convened biennially, along with the General Council and various committees, actively engages in daily operations. The WTO disseminates information about the implementation and monitoring of trade agreements through diverse councils and committees. Numerous committees within the WTO, each represented by delegates from member missions in Geneva, play crucial roles in the works of the WTO. Nevertheless, over time, developing countries, particularly Least Developed Countries (LDCs), facing resource constraints, have expressed difficulties in participating effectively in the WTO’s day-to-day activities. Concerns encompass overlapping meetings, pre-meeting agendas, and delays in post-meeting reports, prompting a call for substantial reforms. To address these issues, members have proposed measures such as the timely circulation of documents for consultation with capitals (members) and the incorporation of technology to enhance efficiency and productivity within the system. Furthermore, there is a growing trend of non-compliance with notification and transparency requirements, notably in the area of agricultural subsidies. This non-compliance culture bears significant trade-distorting implications, impeding members’ ability to anticipate the trade environment. Instead of solely insisting on compliance with notification requirements and proposing enforcement penalties, reforms should encourage increased cross-notification and aid WTO members in collecting data pertinent to their specific needs.

On advanced emerging economies and issues of Special and Differential Treatment (S&DT): While Article I, a fundamental principle of the GATT/WTO, the Most Favored Nation (MFN) treatment, prohibits discrimination among members, the Enabling Clause and Article XXXVII of GATT acknowledge the treatment of developed countries towards the economic status of developing and least developing countries. As indicated in the document (WT/COMTD/W/271), except for the Fisheries Agreement, which is yet to enter force, there are one hundred and fifty (150) S&DT provisions contained in the WTO Agreement. This implies that, under the Enabling Clause and other legal provisions, in negotiation, a developing country may offer less than full reciprocity. This practice is permissible under the Marrakesh Agreement establishing the WTO and its annexes. However, special and differential treatment is not acceptable in most developed countries. This is because, in the WTO, the status of a country is self-determined.  Some developed countries are questioning countries with high GDP per capita who are still calling themselves ‘developing’ just to benefit from S&DT. Countries, mostly developed, have called for a formula to determine which is a developed or developing country as well as a formula to graduate from developing country status. This reform process will ensure that S&DT is not underused, abused, or misused.

On the dispute settlement /Appellate Body: According to the Dispute Settlement Understanding (DSU), the Dispute Settlement Body (DSB) of the WTO has two tiers: the establishment of a panel and the appointment of the Appellate Body (AB). Members have called for broad reforms on dispute settlement, particularly on the AB. The blockage of the appointment of AB by some members was one of the reasons that brought a global roar to the need for comprehensive reform. The issue of the 90-day deadline for AB reports, excess AB powers, and jurisprudential issues are all reasons for the reform. Just seven members of the AB, most often at a time, do not meet the 90-day deadline for submitting the report due to the workload. Also, some members argued that the AB has overstepped its powers and sometimes tends to interpret the domestic laws of those in dispute. Recommendations have been proposed (WT/GC/W/753) for an increase in the AB size from seven (7) to nine (9) members, along with the adoption of a single, longer term for their appointments. Recognising the urgency for reform in the Dispute Settlement (DS), some members suggest treating it as a distinct and separate process from the general reform initiative.

The possible outcome of MC13 on reforms for LDCs African Group

The WTO’s 13th Ministerial Conference (MC13), scheduled to take place in Abu Dhabi in February 2024, presents an opportunity for members to make a few efforts towards enhancing the WTO. As indicated in the document (WT/GC/M/203), considerable progress has been achieved through the General Council and subsidiary bodies. In informal meetings, members have acknowledged the concerns raised regarding Special and Differential Treatment (S&DT), and ongoing efforts aim to enhance the effectiveness of S&DT provisions. Moreover, discussions have taken place on reforms concerning horizontal procedural guidelines and streamlined meeting arrangements, with a consideration of the use of electronic means. Advanced informal discussions on the dispute settlement systems are also in progress, with the expectation of reaching a resolution before the MC13.  Several informal meetings are ongoing to establish a process, with clear steps and mechanisms, to advance dialogue as requested during the MC12 to be submitted at MC13. Thus, with the rigorous work ongoing to meet the Minister’s request, the possible outcome of MC13 on reforms that would be preferable to the LDCs Africa Group would be:

?          The restoration of the WTO’s two-tier adjudicative system, as articulated in paragraph 4 of the MC12 outcome document;

?          A customized S&DT that meets the needs and priorities of developing and LDC members.

?          Adoption of simplified notification formats, simplified updating reporting requirements, and using new digital tools that can help Members improve compliance with notification obligations;

?          Proposal and/or adoption of an alternative method (through different negotiating formats) of concluding negotiations when consensus is not reached.

Benefits of the outcome of the reforms at MC13 to the LDCs African Group

The above-expected outcomes of MC13 would benefit the LDCs in various forms. The functioning of the AB of the DSB will promote a fair and competitive multilateral trading system. The implementation of effective Special and Differential Treatment (S&DT) will safeguard the interests of The Gambia and other LDCs and developing countries by providing them with flexibility and policy space. A simplified notification format and the utilization of new technological tools can assist the African LDCs Group and other members in enhancing compliance with notification obligations and participating efficiently in WTO meetings at the secretariat. Avoidance of the ‘consensus problem’ would make a positive contribution to enhancing many sectors, especially global food security, by promoting a fair and competitive agricultural trading system, thereby protecting the livelihoods of farmers in LDCs and developing countries who have struggled to compete in international markets due to heavily subsidized products.

Conclusion

The bottom line is that the global economy is changing day by day, and the WTO must evolve to assist its members in meeting these challenges.  Recently, the communication from the African Group (WT/GC/W/895) called for adherence to the principles that underpin institutional reform, effective functioning of the WTO regular bodies, and other trade-related matters.

All things considered, the outcomes of MC13 could foster a more favorable climate for international trade that would support the goals of the AfCFTA. MC13 decisions can help Africa’s integration efforts and contribute to the economic growth and development of the continent by boosting rules-based commerce, further reducing barriers, improving trade facilitation, and promoting capacity building.

I firmly believe that, just as one can’t simply wave a magic wand and produce a few million more jobs instantly, reforms are similarly not an instantaneous solution. It is a process that has begun and must be encouraged, as the WTO remains the lifeblood of the multilateral trading system.

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