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The test of globalization: World Trade Organization meeting offers test of free trade system

The WTO ministerial meeting, scheduled for June 12-15, will attempt to tackle some of these trends, albeit at the margins. If the organization fails to reach a consensus even on low-hanging fruits like easing fisheries subsidies and maintaining a ban on e-commerce tariffs, there is little hope that it will can achieve more ambitious goals such as contributing to the fight against global climate change or strengthening food systems as global hunger soars.

“That’s why this is such a critical time for the system,” said Rufus Yerxa, a former WTO deputy director-general who now works for McLarty Associates, an international trade consultancy. “Because if we really gut the WTO now, it will be harder to use it in the future to achieve these kinds of goals.”

“I think it’s important that the WTO be seen as part of the solution to the simultaneous crises we are facing in the world right now,” WTO Director-General Ngozi Okonjo-Iweala told POLITICO. in an interview. “All these crises at the same time that no country in the world can solve. You need multilateralism. You need international cooperation.

Recent crises like the Covid-19 pandemic and the Russian invasion of Ukraine, however, have only served to further divide the world – between wealthy countries able to rapidly produce their own Covid vaccines and low-income countries. who could not; and between Western democracies, which have rallied to isolate Russia, and much of the rest of the world, which takes a much more ambivalent stance on the conflict. The crises have also exacerbated the rivalry between the United States and China, the two main world economies, which put forward very different models of trade and governance.

President Joe Biden has repeatedly described this rivalry as a battle to prove that democracy still works better than autocracy in the 21st century. And his administration, including Treasury Secretary Janet Yellen, has advocated a new model of economic engagement that focuses on working with friendly countries, or “friend-shoring.”

Okonjo-Iweala, however, warned this week that the Global Economies Division and political bloc supply chains would have adverse consequences – noting that WTO economists have made a preliminary estimate that dividing the world into two economic spheres would lead to a 5% drop in real world GDP in the longer term .

“That’s a pretty astonishing number,” the WTO chief said. “I would like us to be careful. This multilateral trading system has been built over 75 years. He has helped lift over a billion people out of poverty. He brought peace, which is one of the things he was supposed to do, through interdependence.

Yet Russia’s war in Ukraine has further fractured the international community and propelled the world into an unprecedented hunger crisis as inflation and conflict drive up the price of food for those on the lowest incomes. of the world.

Okonjo-Iweala said she does not expect Russia’s participation next week to prevent deals being struck, even if many delegations refuse to meet with them. Negotiators have found ways around that hurdle over the past few months, she said.

“Without a doubt, there will be tensions as there have been in every meeting. We hope this does not prevent us from doing our job,” Okonjo-Iweala said.

But the war adds to the range of problems that distract from the rules-based trading system embodied in the WTO.

“I can hardly imagine a more difficult context for a WTO ministerial meeting than this,” Yerxa said. “I think the biggest challenge, obviously, is trying to get governments to recognize that the risk of destabilizing multilateralism even further is that it won’t improve their domestic politics in the long run, it will make them worse.”

Next week’s meeting was originally scheduled for June 2020 in Kazakhstan, but was postponed for over a year due to the pandemic. An attempt to hold it in December 2021 in Geneva was canceled at the last minute when a number of countries, including WTO host Switzerland, imposed new flight restrictions after the Omicron variant crossed the Europe and other parts of the world.

Okonjo-Iweala, who took over as head of the global trade body just over a year ago, is trying to score two big wins in the form of deals that could potentially expand Covid vaccine production and reduce environmentally harmful fishing subsidies.

It also pushes the WTO to craft a broader response to the pandemic – though many see any deal at this point as too little too late – and issue a statement aimed at keeping food flowing across borders by discouraging export restrictions.

To do so, it will have to get all countries on side – or at least persuade them not to voice their objections – because of the consensual nature of WTO rule-making. Failure to do so could reinforce the idea that the WTO is incapable of making big deals involving all 164 members or of solving difficult problems like climate change.

US-China tensions play out in Covid-19 vaccine talks, where the US wants Beijing specifically excluded from using the proposed deal to make generic versions of foreign vaccines, such as those produced by Moderna and Pfizer.

They’re also on display in the fisheries subsidies talks, where Washington is pushing for countries to agree on a provision that would require WTO members to report annually on what they know about the fishery. use of forced labor in the seafood industry.

India, meanwhile, has issues it is pursuing in a number of negotiations that could thwart efforts to reach an agreement. One of his demands could lead to the end of a 24-year moratorium on the collection of rights on digital goods such as films, software and video games, as well as an array of digital services.

Members also squabbled over the wording of a paragraph intended to set the stage for discussion on modernizing the WTO’s underlying rules.

Most countries support a “simplified” WTO reform statement containing three elements: a recognition of the broad consensus on the need for reform, the need for the process to be transparent and inclusive, and the need for it responds to the interests of all members.

But India and a few other members favor a more prescriptive and strictly multilateral reform process that would open the possibility of revising the Marrakesh Agreement Establishing the WTO. “It is a program that goes back and reopens what we negotiated 30 years ago,” said a Geneva-based trade official.

This disagreement only highlights how difficult it is to make progress in an institution that requires total unanimity to function, and why members like the United States and the EU are increasingly attracted to pacts. plurilateral relationships among smaller groups of WTO members rather than across the organization.

Adding to the jitters: The WTO has a history of producing big flops at its ministerial meetings, including spectacular meltdowns in Seattle in 1999 and Cancún in 2003. The group’s last ministerial conference in Buenos Aires in 2017 s ended without any tangible results.

“I see this as a moment of truth for the WTO,” said Wendy Cutler, a former senior US trade negotiator who is now vice president of the Asia Society Policy Institute.

If trade ministers leave Geneva next week without showing anything for their efforts, it would accelerate “a trend we are already starting to see where countries want to work with other like-minded countries to set the rules”, said Cutler. “WTO rules have kept everyone in the same room, and as the WTO becomes less and less productive and efficient, its ability to be relevant in this complex and complicated world diminishes.”

Kelly Ann Shaw, a former Trump administration trade official now at the Hogan Lovells law firm, agreed: “If they can’t even agree on language that just invites countries to think about reforming the WTO, it’s really hard to think about how they’re actually going. to reform it.

Days before the meeting, US Trade Representative Katherine Tai was cautious about the chances of big breakthroughs at MC12.

“There are a lot of important conversations that we need to move forward. Whether or not we can get them across the finish line, I don’t know,” Tai said Monday at an event hosted by the Washington International Trade Association. “But it’s really important for us to have MC12. And then it’s really important for us to wake up the day after MC12 and feel that we have a vision of what we would like MC13 to be.

Critics complain that the Biden administration has done little to shape that view, other than a speech Tai gave last year, where she repeated U.S. complaints about the dispute resolution system. the WTO and urged members “to start really listening to each other” instead of spouting their favorite talking points.

“Historically, U.S. Trade Representative Office officials have worked diligently, often behind the scenes, to bring members to positive outcomes,” Bill Reinsch, trade policy specialist at the Center for Strategic and International Studies. “That doesn’t seem to be the case this time around.”

Despite this, even modest progress would give a boost to a world that is becoming less and less stable.

“If we invest in it now and reaffirm its centrality in more multilateral trade cooperation, it becomes possible in the future to broaden the agenda,” Yerxa said.


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