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WTO failure raises concerns about decline

The World Trade Organisation’s latest conference ended with a lot of talk but no meaningful action. With the United States continuing its attacks on the body and a lack of leadership from other countries, where does the WTO go from here? Sam Sachdeva reports.

They may have been in the home of the tango, but countries at the WTO’s latest ministerial conference in Buenos Aires were far from dancing to the same tune.

The three-day meeting ended in a widely panned stalemate, with no major agreements signed off by the group’s 164 members.

As Stephen Jacobi, executive director of the New Zealand International Business Forum, notes: “Expectations weren’t high, but even then they managed to be dashed.”

Even Trade Minister David Parker was not in a mood to mince words, summing up the event as “a lot of money spent on not a lot of progress by a lot of countries that I think left plenty of people frustrated.”

With what is supposed to be the world’s premier trade organisation in a state of dysfunction, where does it go next - and what are the consequences for New Zealand?

Dealing with the past?

Auckland University law professor Jane Kelsey, who attended the conference, argues one of the main issues dogging the WTO has been the growing tension between developing countries who want to address “legacy issues” and lingering inequalities from previous talks, and developed countries keen to “close the door” and move to new issues like e-commerce and investment facilitation.

Kelsey says developed countries have been employing “backroom and high-pressure tactics” in an attempt to convince developing countries to turn the page and focus on new issues - an approach which failed.

While there was rhetoric in Buenos Aires about the need to recognise the “global backlash” against unfair trade deals, that wasn’t accompanied by any meaningful attempts to fix the rules that disadvantage developing countries but instead declarations “basically full of platitudes”.

Parker insists New Zealand is open to the worries of developing countries, saying he argued on behalf of cotton-producing countries Burkina Faso, Benin, Chad and Mali - known as the C4 - while at the conference.

Issues like e-commerce, he says, benefit not just developed countries but developing ones too, by opening up new areas of the world to developing economies.

Tracey Epps, a trade law consultant at Chapman Tripp and former New Zealand trade negotiator, agrees that the schism between developed and developing countries is a big part of the current impasse.

“That kind of division has been a problem for some time, and nothing’s changed to make that any better.”

“The WTO usually looks to the US for a certain degree of leadership - without that leadership it’s going to be pretty difficult to get anywhere.”

Epps says some of the problems dogging the WTO are also due to the United States having stepped back from its traditional leadership role when it comes to international trade.

“The WTO usually looks to the US for a certain degree of leadership - without that leadership it’s going to be pretty difficult to get anywhere.”

The US has blocked the appointment of new members to the WTO’s appellate body, which arbitrates trade disputes between members and is described by Epps as “one of the most successful parts” of the organisation.

Parker says the issue of the appellate body came up in talks at the conference, and admits New Zealand is worried by what may happen if it is unable to function.

For little countries like New Zealand, he says, it is often the only way to resolve trade disputes, pointing to recent success against Indonesia over its blocks on beef imports.

One of the reasons why New Zealand is keen to advance the CPTPP is to ensure it has alternative ways of pursuing action against countries that breach trade rules.

While the US concern about the WTO predates President Donald Trump, it has been heightened under his administration: his chief trade adviser Robert Lighthizer accused it of “losing its essential focus” and becoming “a litigation-centred organisation”.

If there is one silver lining to be found, says Jacobi, it is that the United States did not withdraw altogether and throw the organisation into peril.

“The US didn’t manage to break apart the WTO: it's still in business, it's still talking, although goodness knows it's been doing that for long enough without much to show for it.”

Kelsey argues the US “kind of had a bob each way”, vocally criticising the WTO’s performance while signing several side agreements that it believed to be in its own interests.

“The US is very happy to override any other country’s sovereignty, but very precious about their own.”

Parker suggests it is too early to suggest the US has permanently abandoned its leadership role on trade.

“I don’t think it’s yet clear what the long-term position of the various US arms of government will be and which of those views will prevail.”

US withdrawal from the WTO “wouldn’t be good for the world, and it wouldn’t be good for New Zealand, and it wouldn’t I believe be good for the US either”.

Consensus-based approach

Another wrinkle is the requirement for unanimous agreement amongst all 164 WTO countries in order for a deal to progress - an issue that EU Trade Commissioner Cecilia Malmstrom highlighted as one of its biggest problems.

Plurilateral agreements were instead the order of the day, with several countries banding together to work on a range of issues, including a ministerial statement on fossil fuel subsidies led by New Zealand.

Parker says the issue of consensus came up during the conference, although it is difficult to find a way forward.

“The question's easy to raise, the answer is difficult, partly because flawed though the WTO’s rules might be, they’re better than anything else that we’ve got, and countries like New Zealand would be concerned that if you hand over control of those rules to a subset of larger countries, they may be changed to the detriment of smaller countries like New Zealand.”

Epps argues the lack of consensus could actually be seen in a positive light, as a sign that countries are genuinely engaging on difficult issues at the WTO after items were “pushed through by a small group” in its early stages.

“Is the fact that we can't make progress a sign it’s going badly, or is it actually a positive sign because we've got everyone talking, which they weren’t doing 20, 30 years ago?”

Getting over 160 countries, each with drastically different levels of development and interests, to agree on an issue is an inevitably difficult task, she says.

Working on plurilateral agreements within the umbrella of the WTO allows like-minded countries to work on areas of mutual interest, before encouraging remaining members to sign on at an advanced stage.

Where for the WTO?

So where will the WTO go next, and what is New Zealand’s role in it?

Kelsey says countries are right to be worried about the current stasis, given the historical value of the body.

“It does raise really serious questions about the role of the WTO - for many developing countries it’s the only arena in which they have some collective leverage.”

She argues New Zealand could lead the way in developing an “inclusive, progressive trade agenda”, showing to the rest of the world what can be accomplished and restoring confidence in the WTO.

If that doesn’t happen, she says there are two possibilities: either developing countries like South Africa and India cave to the bigger countries’ demands, or the WTO remains “in paralysis” with a reliance instead on plurilateral and mega-regional agreements (which themselves are falling over).

In the medium term, she believes China and possibly Russia could play a much more dominant role within the WTO, although she “wouldn’t claim to have a crystal ball” as to how the different dynamics will play out.

Epps believes traditional “liberalising countries” like Australia, New Zealand, Japan, Peru and Chile could pull together and keep moving forward, even without a single country leading the way.

“A lot can be done by coalitions, you don’t always have to have that one leader.”

“I’m very pessimistic, very dismayed about that because as I say we’d much rather be negotiating things in the WTO, and the longer it goes on, the more uncertain things are.”

Even without the US on board, countries clearly see the benefits of the WTO she says, reducing the chance of any collapse.

Jacobi is less optimistic about someone filling the void, saying major countries are “preoccupied with their own backyards”.

“I’m very pessimistic, very dismayed about that because as I say we’d much rather be negotiating things in the WTO, and the longer it goes on, the more uncertain things are.”

Businesses have no interest in the WTO at the moment, as it focuses on “solving problems of the last century”.

For his part, Parker is “reasonably confident that it's not going to be blown up tomorrow”.

He says New Zealand has been and can continue leading the way on environmental issues, ending illegal fishing subsidies, and tackling fossil fuel subsidies.

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