The multilateral trading system, as embodied by the World Trade Organization is under threat. Even before Trump and trade wars, the WTO lost the central role it had as a place discussion, rule-making and conflict resolution. A new paper that the Bertelsmann Stiftung commissioned from Dr Robert Basedow discusses the options that have been forwarded to strengthen the WTO and the multilateral trading system.

The Importance of the WTO for the Multilateral Trading System  

If international trade is not governed by rules, mere might dictates what is right. The World Trade Organization (WTO) serves as a place where trade policy issues are addressed, disputes arbitrated, legal frameworks derived and enforced. Through these functions, the WTO ensures that the rules of trade policy are inspired by fairness and reciprocity rather than national interest. It is more important than ever to vitalize the global public good that it represents against various threats that have been undermining it.

A High-Level Board of Experts with Feasible Policy Recommendations

For the above mentioned reason, the Global Economic Dynamics project of the Bertelsmann Stiftung has called into life a High-Level Board of Experts on the Future of Global Trade Governance, which is composed of eminent experts and seasoned trade diplomats. It elaborated a series of feasible policy recommendations that will increase the effectiveness and salience of the WTO. To inform the discussions of the Expert Board, the Bertelsmann Stiftung has commissioned additional research to inform the discussions of the Board. This is the first piece of this research, which summarizes the proposed suggestions to improve the functioning of the multilateral trading system.

The Challenges in the WTO’s Institutional Setup and Related Reform Proposals

The main purpose of the study is to review E15 work to identify weaknesses in the WTO’s institutional setup and related reform proposals. As institutional aspects received comparatively little attention, the study draws also on other academic and policy publications to complement E15 work. The underlying rationale is that the current crisis has various – including institutional – causes. An institutional reform may thus contribute to overcoming the WTO’s current problems. The political climate does not allow for wholesale amendments to the WTO Agreement. The study therefore focuses on incremental reform proposals rather than grand and ideal-type solutions. The study focuses on three main challenges and reform areas. The following paragraphs provide a first overview.

1. Enhancing the Multilateral Trading System’s Legitimacy and Accountability

The WTO arguably suffers from a democratic deficit. In the eyes of its critics, the WTO lacks legitimacy, accountability and transparency. These perceptions undermine the WTO’s standing as a policy-making forum. The following proposals may help to address the democratic deficit:

  1. Creation of standing advisory councils for business, trade unions and NGOs;
  2. Public consultations for negotiations and Committee measures;
  3. Greater involvement of national parliaments in WTO affairs;
  4. Review the WTO’s strategy on external transparency (including its web presence and documentation).

2. Ensuring the Multilateral Trading System’s Effectiveness and Efficiency  

The failure of the Doha Round has kindled doubts over the WTO’s effectiveness and efficiency. Critiques question the organisation’s ability to serve as negotiating platform, to manage the multilateral trade regime and to resolve trade disputes. Such criticism may be unjust and misdirected in part. Yet, it is clear that the WTO has to adjust to an altered policy-making context. Multilateral trade negotiations are unlikely to happen in the foreseeable future. The WTO’s legislative function as a producer of trade law and market access commitments largely falls away. Instead the WTO’s executive and judicative function will be at the heart of WTO work. The WTO Secretariat, the Committee system and the Dispute Settlement Body (DSB) will have to fill the void left by the collapse of the Doha Round and adjust the multilateral trade regime to the evolving realities of global trade in order to maintain its effectiveness and efficiency. The following proposals aim at strengthening the organisation in this regard:

  1. Creation of a WTO Executive Committee for better leadership;
  2. Stronger agenda setting powers for the WTO Secretariat;
  3. Enhance the WTO Secretariat’s research and data collection capacity;
  4. Adjust the WTO Secretariat and Committee structure;
  5. Get domestic regulators involved in Committee work;
  6. Promote the use of Good Regulatory Practices in the WTO and in WTO members;
  7. Establish the WTO as platform for dealing with GVCs for instance through Supply Chain Councils;
  8. Integrate transnational private regulatory activity in WTO work;
  9. Develop a strategy to anchor the WTO Dispute Settlement Body in a complex trade regime of Preferential Trade Agreements and Plurilateral Agreements.

3. Transforming the Multilateral Trading System into a Negotiating and Knowledge Platform for Regional and Plurilateral Agreements

A cause and a symptom of the collapse of the Doha Round is the unseen surge in preferential trade agreements (PTAs) and plurilateral agreements (PAs) during the last decade. States increasingly turn away from cumbersome multilateral negotiations toward regional and plurilateral venues. For the WTO to remain relevant and to safeguard the multilateral trade regime, the WTO must reconceive itself as a knowledge and negotiating platform for PTAs and PAs. It may thereby ensure that these agreements constitute ‘building’ rather than ‘stumbling’ blocks for the multilateral trade regime. The following proposals may help the WTO to assume its new role:

  1. Create a ‘PTA’ exchange as a clearinghouse and expert platform;
  2. Introduce multilateral impact assessments to ensure the multilateral-friendliness of PAs and major PTAs;
  3. Establish a Committee to coordinate, to avoid norm overlap and incoherence across PAs and to develop guidelines on multilateral-friendly PAs;
  4. Provide technical assistance for developing and least developing countries to join PAs.