WTO's Drifting Away From Multilateralism, Development Goals A Serious Concern

The 13th Ministerial Conference of the World Trade Organisation (WTO) in Abu Dhabi last week came at a time when the multilateral trading system found itself trapped in a series of contradictions caused by the intransigence of several major economic powers.

The most significant of these is that the dispute settlement mechanism (DSM), long considered as the “jewel in the crown” of the WTO and without which the rules of this “rules-based organisation” cannot be enforced, has been in complete disarray after President Donald Trump refused to allow the appellate body to function.

The negotiating arm of the Geneva-headquartered organisation that is expected to consider issues through the involvement of the entire membership now looks increasingly splintered.

The Doha Development Agenda (DDA) under which negotiations were being conducted with the involvement of all members was virtually abandoned in 2017, and almost on cue, several groups of countries issued joint statements to initiate negotiations on issues of their choice.

More importantly, these so-called Joint Statement Initiatives (JSIs) cover issues like investment facilitation and electronic commerce whose inclusion in the WTO was rejected by India, South Africa, and many other developing countries.

It is, therefore, an irony that the WTO, in which decisions are taken by consensus, is now witnessing a complete rejection of the “consensus principles”.

The Doha agenda, drawn from the fourth ministerial conference of the WTO held in 2001 in Qatar's capital, has been summarily dismissed, while the joint statement initiatives on which there is no consensus among member nations to conduct negotiations are now holding the centre stage in the WTO.

In short, what was witnessed in the Abu Dhabi Ministerial was a travesty of multilateralism. The fact that this happened at a meeting of the multilateral body that will complete three decades of existence soon is indeed ironical.

This was especially so as the joint statement initiatives and the plurilateral agreements that are being conducted on the basis of these statements, are flagrant violations of the principles on which the WTO stands, which are elaborated in the Marrakesh Agreement of April 15, 1994 that gave birth to the WTO.

The Marrakesh Agreement underlined in its preamble that “trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand …”.

Questionable Claims

The development benefits of issues that are the subject matter of the joint statement initiatives can be seriously contested.

For instance, proponents of the JSIs on investment facilitation, strongly backed by China, have argued that adopting an agreement would bring tremendous benefits to developing countries without any evidence.

It wants to “improve regulatory transparency”, that is streamline regulatory mechanisms for foreign investment in member countries; speed up administrative procedures; and among other things – implement provisions for responsible business conduct.

Till date no objective assessment of the nature of benefits that could accrue to the developing countries have been carried out from these measures. In fact, the entire set of negotiations for concluding plurilateral agreements were conducted in a non-transparent manner.

One aspect of these proposed plurilateral agreements is quite clear: they would impose significant administrative burdens on countries on developing countries. For instance, the proposed agreement on investment facilitation would require the host countries to “improve” their regulatory standards keeping in view the interests of foreign investors.

Most developing countries, and the 35 least developed country members of the WTO in particular, would need greater financial resources to upgrade their institutional capacities for so doing. Proponents of the proposed plurilateral agreements have argued that developing countries would be provided additional financial assistance, including through WTO’s Aid-for-Trade initiative.

However, what they do not consider is that a large number of low-income countries are reeling under debt burden, and that they are in no position to increase their financial liabilities. Yet proponents of the plurilateral agreements showed undue haste for adopting these agreements.

Missed Opportunity

The ministerial conference in Abu Dhabi should have been the occasion to begin the process of remedying the systemic problems facing the WTO. Without addressing them, the multilateral trading system would be rendered totally ineffective.

But it was clear even before the Ministers arrived in Abu Dhabi, that the agenda of the dominant group of members was not to fix the broken arms of the WTO, namely the negotiating arm and the DSM, back on track.

Under such circumstances, the developmental issues and concerns that were being addressed through the Doha agenda have fallen off the list of priorities, an undesirable outcome given that the WTO has a crucial role to play in moving towards the realisation of the Sustainable Development Goals.

One example of the short shrift given to development concerns is the refusal by the United States and a few other countries to work towards a permanent solution for India’s public stockholding for food security purposes.

Recently, the Indian government announced that over 810 million poor citizens will be provided subsidised food grain until the end of 2028, and public stockholding is the enabling mechanism for this welfare measure.

However, this move remains shrouded in uncertainty as the agricultural subsidies’ discipline introduced by the Agreement on Agriculture, militates against the interests of developing countries like India which want to save their poor from starving.

For the past quarter of a century, these countries have argued that the level of price support should not be measured on the basis of international prices between 1986-88, but a more recent period.

Unfortunately, decisions on agriculture in the WTO are taken by the global agri-business companies for whom the United States and other advanced countries act as proxies. And, since these companies have refused to let India off the hook, the vexed issue of public stockholding does not find even a mention in the Abu Dhabi Ministerial Declaration.

As recessionary tendencies grip the global economy, protectionist tendencies are becoming even stronger. An effective rules-based WTO was designed to counter trade protectionism, a role which it is unable to play in its current state of disarray.

When USA, the largest economy has decided to break the dispute settlement mechanism and thus prevented enforcement of the rules of the institution, is the multilateral trading system passé?

(The author is former professor of economics at Jawaharlal Nehru University and a distinguished professor of the Council for Social Development -- a New Delhi-based think-tank. Views expressed are personal.)