A summary of the papers and studies the GED project has published on WTO reform.

The WTO is the operating system of the global economy. Trade in goods and services substantially relies on its rules and governance. But the WTO hasn’t had an update in a long time. Now is the time to deliver this update, so the institution is fit to support the relaunch of the global economy. Here we summarize the ideas that the GED project has developed recently to foster WTO reform.

The CoVid19 induced economic crisis is going to have a lasting impact on the global economy. Last week, the WTO forecast that trade would contract much more than during the Great Financial Crisis of 2009. But once the economic crisis is over, trade will have to play an important part in helping the recovery. But trade can only pick up if barriers to trade remain low and respect for the rules governing global trade is high. Both are guaranteed by the WTO and its rulebook.

However, the member states of the WTO have found it difficult to agree on ways to update the institution and adapt it to the needs of the 21st century. It is vital they do so now, so a global recovery is not hindered by beggar-thy-neighbor policies, rising trade costs, and uncertainty about whether members will adhere to the common rules.

Over the past months, GED published a series of papers that make precise suggestions for certain areas of WTO reform. This blogpost wants to provide an overview of these contributions. You can also view a recording of the virtual roundtable we hosted on April 16th with the authors of these papers, where they talk you through the main points.

The remainder of this blog post deals with the following issues:

  • First, we are going to present the ideas on fixing the Appellate Body. No rules-based system can exist for a long time unless there is some enforcement mechanism of the rules.
  • Second, we are going to move to a tool to make the WTO more flexible. The current practice of consensus is no longer practical in an institution with 164 member states with diverging interests. Open Plurilateral Agreements can make the institution more flexible while maintaining the spirit of multilateralism and binding rules.
  • Third, we are going to turn to the much-debated practice of subsidies for key industries, which is generating negative international spillovers. Here international institutions can play a larger role in mitigating such spillovers.
  • Fourth, and finally, we are going to look at ways how work in the WTO can be made more efficient, by adopting new practices in WTO committees. There is also a fifth section, which is slightly different. Rather than making concrete reform proposals, this section looks at the WTO in general and at the role it has as a public good.

Another paper by Ignacio Garcia Bercero can serve as a good entry point to the subject of WTO reform. It contains an analysis of the roots of the crisis and makes suggestions to move forward. More detailed provisions can be found in the subsequent sections.

Full Paper: What do we need a World Trade Organization for? 

Appellate Body Crisis

The Appellate Body has often been referred to as the crown jewel of the WTO. Since December 2019, it is missing. After the nomination of new members of this second stage of the trade dispute resolution mechanism has been blocked for years, there are no longer enough members to decide on trade disputes. In this series of publications, we look at whether the criticism of this institution is justified and shared by practitioners and develop a set of ideas on how it could be relaunched in an improved way.

Summary Paper

Full Paper: WTO Dispute Settlement and the Appellate Body Crisis – Back to the Future?

Full Paper: WTO Dispute Settlement and the Appellate Body Crisis – Insider Perceptions and Members’ Revealed Preferences

Open Plurilateral Cooperation

The WTO used to operate under a Single Undertaking mechanism and strict consensus – agreements were packaged, and everyone had to agree. In an organization with a large and heterogeneous membership, such an approach is no longer viable. Flexibility is essential. Therefore, “coalitions of the willing” must be allowed to go forward within the WTO, even if other members do not wish to be part of these initiatives. However, to maintain the spirit of multilateralism, it is important that such initiatives remain open for other members to join later and that support  be given to build up capacities to implement new obligations. The tool of “Open Plurilateral Agreements” and assurances given to non-members are described in more detail below.

Summary Paper

Full Paper: Open Plurilateral Agreements, Global Spillovers and the Multilateral Trading System

Industrial Subsidies

One of the most contentious areas in trade policy is the role of negative spillovers of industrial subsidies. Subsidies can help to address market failures and therefore might have a good economic rationale. But there might be ways to minimise negative spillovers of such measures on trading partners. In the light of the CoVid19 crisis and the economic stimulus packages expected to facilitate the relaunch, it is vital that these issues be addressed in international organizations.

Summary Paper

Full Paper: Subsidies, Spillovers, and Multilateral Cooperation

Full Paper: Rethinking International Subsidy Rules

Full Paper: Yours is Bigger than Mine! How and Index like the PSE Helps in Understanding the Comparative Incidence of Subsidies

Working Practices

Compared with the other areas of WTO reform, looking at working practices could be considered as low hanging fruit. It can, however, be very effective as these “tweaks” can generate a more forward-looking WTO agenda and more political buy-in from member states.

Summary Paper

Full Paper: Is World Trade Organization Information Good Enough?

Full Paper: Informal Learning and WTO Renewal – Using Thematic Sessions to Create More Opportunities for Dialogue

Full Paper: Why and How to Improve the Use of “Specific Trade Concerns”

Looking at the WTO as a Public Good

The WTO constitutes a valuable public good. It deserves more political buy-in from its member states. But it is an institution that also doesn’t get much attention in the public eye; in fact, it could be described as a fading institution. Two recent publications look at the WTO in a larger perspective without making concrete reform proposals: The first looks at the macroeconomic benefits that the WTO has brought to the world economy and the second at the public perception of the WTO.

Full Paper: The WTO at 25

Full Paper: A Fading Institution