Top WTO meeting in Abu Dhabi seeks reform amid division
About 7,000 delegates will arrive in Abu Dhabi next week for the World Trade Organisation’s 13th Ministerial Conference, where officials will negotiate key trade agreements.
The gathering of the world’s ministers comes amid mounting concerns about the impact of geopolitical tensions and looming elections on international commerce.
The event, from February 26 to 29, will aim to achieve results particularly on fishing subsidies, agriculture, e-commerce and reforming the WTO’s dispute resolution system.
However, disagreements remain between the WTO’s 164 members, making consensus difficult, say analysts.
The talks come against the backdrop of coming US elections, the wars in Gaza and Ukraine, Red Sea shipping attacks by Yemen’s Houthi rebels that have disrupted global trade, and US-China tension.
They also take place at a time of fragmentation in trade due to rising geopolitical tensions between major world powers and trends of “near-shoring” or “friend-shoring” – where manufacturers move their supply chains closer to their home base or to allied states.
Changes to WTO rules require consensus, which has limited its ability to reach global deals because one country alone can block an agreement.
Dr Thani Al Zeyoudi, Minister of State for Foreign Trade and chairman of MC13, urged the general council meeting to continue working on narrowing their differences before ministers arrive in Abu Dhabi. “We need to settle the low-hanging fruit now and show more flexibility across the different issues and areas,” he said. “It is important we are able to create a conducive environment for negotiations that will help advance the future of trade.”
The World Trade Organisation and its framework of multilateral agreements have long served as the backbone for the rules-based international trading system. However, in recent years, there has been a surge in the number of bilateral and regional agreements, or RTAs, marking a shift in the global landscape.
As these agreements take centre stage, questions arise about the WTO’s role and relevance in a world increasingly marked by geopolitical blocs. As member states gather in Abu Dhabi for their 13th Ministerial Conference next week, these questions gain even greater significance.
At present, there are 364 RTAs in force, compared to 71 at the start of the century. Their proliferation can be attributed to several trends. First, many countries seek to address issues that are not covered by the WTO. Regional trade agreements are not only increasing in number, but also in scope. Many include provisions on gender, the environment and labour issues.
Second, the complexity of negotiating at the WTO makes reaching a regional or bilateral agreement faster and easier. The organisation operates on a consensus basis, requiring agreement by all 164 members. Successful negotiations for new multilateral agreements are rare and where successful, it is a slow process.
The recent Agreement on Fisheries Subsidies was a historic step towards eliminating harmful subsidies. However, it took more than 20 years to be concluded. Countries are often unwilling or unable to wait this long. Negotiating with a smaller group of countries often proves to be more manageable, allowing them to tailor their agreements to their specific needs and priorities.
Another critical contributor to the rise of RTAs has been the shift in politics. The politics that drove multilateralism after the Second World War have been replaced by a focus on economic nationalism, security and protectionism. Rather than looking to the WTO, countries are looking inwards and seeking alliances with neighbours and allies.
While the rise of RTAs reflects a new reality, it also fuels the fragmentation of the global order into geopolitical blocs. These overlapping agreements can create confusion, leading to barriers to trade and hindering the ability to address common challenges globally.
Moreover, as big economic powers focus on achieving benefits within these blocs, there is a risk that they can exclude or marginalise the interests of developing countries, preventing their full participation in the global economy. WTO economists estimate that fragmentation of the global economy into two rival blocs would reduce real incomes by 5.4 per cent on average throughout the world. Additionally, geopolitical tensions arising between blocs increase the likelihood of trade conflicts that disrupt trade flows, stability and resilience to economic shocks.
In this context, the WTO stands at a critical juncture, requiring adaptation if it wants to survive.
The organisation must home in on the functions it has performed the best while accepting the new reality in which it operates. In a world increasingly fragmented, the WTO still brings together countries representing 98 per cent of global trade, putting the smallest economies such as those of small island states across the table from the biggest, including the US, EU and China.
While serving as a forum for negotiations, the organisation’s strength has been in providing a framework for transparency and dialogue. For example, the WTO Trade Policy Review Mechanism provides a tool through which the entire trade policy of each member is reviewed and subjected to scrutiny by other members. Through its committees, ranging from market access to technical barriers to trade, members have a forum to raise their concerns in a non-adversarial way.
Despite a relatively small staff, the organisation’s secretariat provides a wealth of technical expertise and knowledge. This support plays a vital role in trade facilitation and building the capacity of developing countries to participate effectively in negotiations.
Moreover, there are a number of key trade areas where only a multilateral or WTO approach is likely to be effective or efficient. A prime example is digital trade, where the standards will need to be set at a global level, as regional standards could lead to a lack of interoperability between competing systems.
Similarly, adopting two or more sets of regulations for all services or intellectual property rights – one for RTA partners and a different set of regulations for all others – would be extraordinarily cumbersome. Likewise, the efficiencies brought about by the Trade Facilitation Agreement’s “onestop” for customs clearance would be severely undermined if bifurcated between goods to or from RTA partners versus non-RTA partners.
Next to the functions it performs well, the WTO must also address those functions that it has either never performed, or no longer performs, well. This includes its negotiating function as well as its dispute settlement system.
When it comes to negotiating, it is time to adopt a modern alternative to consensus – a responsible consensus – one where members stop using their votes as a bargaining tool and exercise their veto power only when they have a substantive basis to object. Further, plurilateral approaches must be seen as a tool for building such a responsible consensus. One example is the Investment Facilitation for Development Agreement, a plurilateral initiative involving more than 120 WTO members. This popular agreement could be adopted into the WTO legal framework if those who do not want to join simply allow it to move forward without them.
As the organisation evolves, it is often forgotten that liberalising trade is not a goal in itself but rather the means to an end. The preamble to the WTO holds that trade should be conducted “with a view to raising living standards”, “in accordance with the objective of sustainable development” and in a manner consistent with the needs and concerns of countries at different levels of economic development. These objectives should stand at the core of the organisation as it navigates reform.
The WTO still plays a crucial role in the international trading system. While the need for reform is evident, the contributions that the system still offers, even while in crisis, are undervalued. By leveraging these strengths and reaffirming its core objectives as it navigates these turbulent waters, the organisation can continue to serve a purposeful role within the global trading system, fostering inclusive growth and sustainable development for all its members.
The organisation must address the functions that it has either never performed, or no longer performs, well