This is a guest post by Bashar Malkawi, Global Professor of Practice in Law at the University of Arizona
The WTO system by and large is overloaded. Those who are involved in the WTO system frequently seek to extract more from the WTO system than the process can, practically and legally, provide. The boundaries of WTO have always been subject to debate, making the system susceptible to taking on more than it can effectively manage. In the past, there have been perceived threats to national sovereignty and the danger of too much International Trade Organization (an ambitious project which failed to receive adequate support in 1947) and later WTO intervention in markets. The WTO and its dispute settlement mechanism would prove to be too much supranational, creating unhappiness for some Members. Since its establishment, the interests of developing countries were inevitably pitted against those of developed countries at the WTO level. To remedy this situations, exceptions and extended periods of time for fulfilment of obligations, such as for compliance with the time limits for intellectual property reform, were the solutions. This at some point would lead to paralysis as things cannot move effectively, or at best move very slowly, under such conditions. As we have seen in recent years, there has been little enthusiasm for the broader free trade agenda that the WTO encourages, leading to an organization that cannot deal effectively with many current issues such as digital trade or trade in environmental goods.
The GATT 1947 was the beginning of a series of negotiations that ended up with the establishment of the WTO in 1994. Countries held eight rounds of negotiations which led ultimately to the birth of the WTO fifty years later with the successful conclusion of the Uruguay Round negotiations. Over the span of eight rounds, there has been a substantial increase in the number of the participating countries in those rounds, with the current membership numbering 164 nations. Countries shifted from negotiating tariff reductions to negotiating reduction of non-tariff barriers as they are being erected, such as voluntary export restraints or orderly marketing agreements. The GATT/WTO agenda covered traditional GATT subjects such as tariffs, non-tariff barriers, subsidies, and safeguards and then added intellectual property, services, agriculture and trade-related investment measures. Some of these WTO “related” topics are understandable, but there is disagreement to what degree the WTO should keep on adding new subjects to its mandate.
In one of its most impressive successes, the Uruguay Round negotiations creating the WTO provided a unified dispute resolution regime in the Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU). Perhaps, it is fair to say that the dispute settlement mechanism under the WTO is the only rule-based body in the system. The WTO Appellate Body (AB) has been paralyzed since December 2019 and there is no indication that it will be revived in the foreseeable future. Over the years, the AB developed a strong tradition of precedents even though there is no formal requirement of the use of precedent in the DSU. This subjected AB to criticism mainly by the U.S and eventually became a major, but not the only, factor, that led to the blocking the appointment of AB judges. The EU and other countries have agreed on an arrangement, known as the Multiparty Interim Appeal Arbitration Arrangement (“MPIA”). This is clearly at best a temporary fix since most of the Members do not participate. However, there is a deeper problem with the dispute settlement mechanism and WTO itself. Simply, there are too many agreements for which the WTO is given responsibility, not only the covered agreements but including supervision of bilateral and regional trade agreements (with its “related” issues such as labor, environment, corruption, investment etc..), exceptions, parties, and more. It has proved impossible to hold all these issues and parties together and appease everyone, or even carry out the intended oversight (as with free trade agreements and customs unions).
Throughout much of GATT and now WTO history, consensus has been the norm. for decision-making. Consensus ensures that we have a fair number of WTO members who participate in the decision-making process, and decisions and agreements are reached—if they are reached-- after careful discussions. The benefits of collective, consensus decision-making process after careful discussions is appreciated by democracy theory, but it often leads to gridlock, since any of the 164 members can prevent action by dissenting from the consensus. Clearly, there should be use of alternative systems of voting other than consensus. For example, articles XXV (3) and (4) of the WTO Agreement call for one vote per nation and decisions to be taken by majority vote. But those mechanisms are seldom utilized. As a result of adherence consensus, the WTO is often unable to move forward, as well have seen with the defunct Doha Development Round of negotiations. Instead, we see “plurilateral” trade agreements concluded among like-minded Members, or megaregional trade agreements concluded outside the WTO system. If the WTO is to survive as a meaningful entity, WTO members should be willing to go to extraordinary lengths to modify their consensus style of negotiations and agreements in favor of a system that at least in some instances operates by majority or super-majority votes (even though some major members such as China, the United States, India and Brazil are likely to object).
All these issues and others create systemic problems that cannot be sustained over the years. Membership should design the contours of a modified WTO system if they in fact with the WTO to revive. Any reform suggestions must be viewed in light of the burden it places on the system to ensure that the system has the necessary capacity to effectively absorb the reform suggested. There is a need for a radical reform and re-orientation. There is no perfect solution(s), and there will always be disagreements about what, exactly, the WTO is supposed to do. However, returning to the basics of GATT/WTO system and resist any attempt to add new topics and issues to the debate seems a helpful way of thinking. The WTO has core characteristics. Simply put, there are things that the WTO can achieve and there are things that cannot be achieved. An ever-evolving WTO system can create deficiencies. It seems that what the WTO aspires to do, what is written as rules, and practice are not aligned. There is a need to offload some trade “related” issues. Although the WTO system has never existed in a vacuum and interacts with other fields, there is a strong argument that it needs to focus on core WTO issues. Some of these trade “related” issues do no play to WTO strengths. Unless there is a radical shift in the thinking of policymakers, we risk further damaging and perhaps breaking the WTO system, or simply making it irrelevant.
