The World Trade Organization (WTO) is currently facing significant challenges, with mounting unresolved disputes and increasing concerns among its member nations. This situation underscores the critical issues the organization is grappling with.
Since late 2019, the WTO has been dealing with the repercussions of the United States' decision to block the appointment of new judges to the WTO's Appellate Body, citing concerns over judicial overreach. This action has left 29 cases unresolved, dealing a substantial blow to the dispute settlement system. Notably, countries such as China, the Dominican Republic, India, Indonesia, Morocco, Pakistan, South Korea, and the United States have filed cases that remain pending.
Former Deputy Director-General Alan Wolff recently emphasized the need to address these issues, urging countries to refrain from initiating new appeals from 2024 onwards. This date coincides with a commitment made by WTO members to address the issue collectively.
The WTO has also raised concerns about what it terms a "polycrisis," which includes the challenges posed by the COVID-19 pandemic, the war in Ukraine, and inflation. These factors are contributing to a diminishing faith in globalization and a growing disregard for global trading rules among WTO members.
The organization warned that a surge in unilateral measures, if left unchecked, could lead to the fragmentation of the global economy, potentially resulting in a 5% reduction in global income.
While import restrictions have somewhat eased since 2018, when former U.S. President Donald Trump imposed tariffs on goods from China and other countries, export curbs have surged, rising from an average of 21 per year between 2016 and 2019 to 139 in the previous year.
This increase in export restrictions has led to a rise in "trade concerns" brought before the WTO. These concerns encompass issues such as Indian rice exports, subsidies related to clean tech initiatives, and national legislation like the U.S. Inflation Reduction Act, which favors production in North America.
Furthermore, the WTO faces challenges from various regions, including the United States, which intends to raise local content requirements under the Buy American Act, and the European Union, which seeks to bolster domestic supplies of critical minerals and green production.
Keith Rockwell, a senior fellow at the Hinrich Foundation, has voiced concerns about the WTO's relevance, noting that nations no longer feel constrained by their WTO obligations, in contrast to the situation a decade ago. The WTO, which was once a driving force behind the rules-based trading system, is no longer a focal point for the United States.
Some countries have exploited exceptions in WTO rules, such as national security concerns, to limit trade, as seen with the United States restricting metal imports and some Gulf states curtailing trade with Qatar. Additionally, Beijing and Washington have both taken actions that prioritize national security over global trading rules, further complicating matters.
The WTO's 164 members broadly agree on the need for reform, but any substantial changes require unanimous consent. Proposed reforms range from restoring the Appellate Body (which the United States opposes) to addressing discriminatory practices of state-owned enterprises, particularly those of China.
Reform discussions could also encompass contemporary issues such as climate change, data flows, and artificial intelligence, which were not initially considered when the WTO was established.
Reform will be a prominent topic at the WTO's 13th ministerial conference (MC13) scheduled for February. However, challenges, including Indian opposition and U.S. disinterest in further trade liberalization, are expected to complicate the reform process.
The WTO emphasizes the importance of a renewed commitment to integration, which it terms "re-globalization," as a means to address challenges ranging from climate change to poverty reduction. It underscores that 75% of global goods trade is still based on WTO tariff terms extended by member nations to one another, emphasizing the significance of preserving a rules-based system.
Director-General Ngozi Okonjo-Iweala has noted that abandoning such a system could lead to chaos and a shift toward a power-based, rather than rules-based, global trading order.
