The WTO is Back in Business?

The building on Lake Geneva which houses the WTO stands as the symbol of the multilateral trading system and the bastion of global non-discrimination in trade governance. Meetings held under WTO auspices, whether physical or virtual, attract global participation by all trading partners. No other institution, and no other location, provides such a venue.

Recent frantic activity inside the WTO building, sadly last week without political decision-makers at Ministerial level, has managed nevertheless to magic up some valuable concrete outcomes.

Very importantly, services trade stakeholders witnessed last week the first trade facilitating outcome on services since the WTO was created. The OECD estimates this deal is worth USD150 billion in annual trade cost savings. This is not to be scoffed at. The announcement on 2 December of agreement at the WTO on a Reference Paper on Services Domestic Regulation is undoubtedly an outcome of historic significance. 67 WTO Members, accounting for 90 per cent of world trade in services have agreed to adopt best practice regulatory principles in a joint effort to cut red tape and ease compliance costs for business. Many more WTO Members are expected to sign on in coming months.

This negotiating outcome really matters. It matters because services trade has been on a long run growth path exceeding growth in trade in goods. Yet the goods sectors still dominate Geneva’s trade policy conversation and services sectors receive much less attention than they deserve. No-one can fail to notice however that traditional services sectors such as transportation and travel have plummeted due to the pandemic and have not yet recovered. Digital services trade might have proved more resilient but protectionist digital industrial policies increasingly threaten continued sustained growth.

With or without a WTO Ministerial Meeting, WTO members were right not to miss the chance to save USD150 billion in services trade costs right now. It was sensible for the 67 WTO Members participating in the WTO Joint Initiative on Services Domestic Regulation to go ahead and announce the deal last week. Ultimately Ministerial imprimata, while it would have been nice, was not essential.

This sensible approach has certainly brought the WTO system back from the brink. But what this agreement really demonstrates is that plurilateralism in trade policy-making is healthy and well. This might help renew faith in the WTO system but it does not eliminate the doubts. A new signpost has been erected: one that signals the plurilateral way as the way to go. But multilateral trade rule-making evidently still hangs awkwardly in the balance.

On the optimistic side, Ministers accepting that some things that are ready to be done, just had to be done without them, means there will be more announcements. Without the burden of needing everything ready simultaneously for one big Ministerial outcome, constructive announcements of progress on various issues, such as investment and environment, can and will continue to emerge over coming weeks. On the pessimistic side, this will not disguise the underlying reality.

The reality is that the Swiss travel restrictions imposed just one week earlier, and escalating over the weekend – precisely as some WTO Ministers were disembarking long-haul flights into Europe and others were embarking on short haul journeys within Europe – probably avoided a WTO train wreck.

There was a chance that this first meeting of Ministers in more than four years could do the trick and save the system. But it was always going to be a slim chance. As long-haul Ministers boarded their flights, unanimous agreement, which is what the multilateral system requires, was still elusive. Landing zones were in sight. But no-one could have confidence that everyone was ultimately ready to join an emerging consensus.

Of the difficult issues, WTO reform is ultimately the most difficult and the most essential for the long term. It may well fall to 2022 G20 decision-making, under Indonesian chairmanship, to try to progress this agenda.

So yes, the WTO is back in business for now. But for how long? Time, after all, is not on the WTO’s side. WTO credibility with the business community depends ultimately on whether the WTO can make it over the line into the digital age or be left behind in the annals of yesteryears.

Even the most optimistic participants accept that the negotiations on E-Commerce require another year of work. But much can happen in a year. It will not take long for increasing digital regulatory heterogeneity to get to a point of no return.

Already the economic instinct to decouple rather than integrate has entered the trade policy conversation. This is the most dangerous of all genies to let out of its bottle. All businesses and all consumers will lose from global market disintegration. All trading nations will lose.

But none lose more than the poorest and smallest and weakest.

It’s time for everyone to speak up, throw their weight behind the WTO and come to the multilateral party. It’s now or never.