Dilemmas and difficult conversations of a world trade summit
There are significant barriers to progress at the World Trade Organisation, but surprises are possible at this week’s ministerial conference, Geoffrey Miller writes.
New Zealand’s new trade minister is a busy man. Just weeks after taking office in late November, Todd McClay was also elected as vice-chair for the upcoming 13th Ministerial Conference of the World Trade Organisation (WTO).
A major gathering of trade ministers from the WTO’s 166 members, “MC13” will take place from today until Thursday in the United Arab Emirates (UAE) capital of Abu Dhabi.
This is not the first time McClay has held the vice-chair role – he was also chosen for the job when he last served as trade minister in 2017.
McClay will be one of three vice-chairs at the summit, to be chaired by UAE trade minister Dr Thani bin Ahmed Al Zeyoudi.
After accepting the role in December, the New Zealand minister said his priorities included removing fisheries subsidies, reforms to the WTO’s dispute settlement process and getting “a better deal for agricultural exporters”.
New Zealand, a big food producer, was a major winner in the 1990s Uruguay Round of the WTO’s forerunner, the General Agreement on Tariffs and Trade (Gatt). That deal put limits on state subsidies for agricultural products.
But as more countries joined the WTO, momentum began to dissipate. From the early 2000s, New Zealand increasingly focused on signing bilateral trade agreements instead. The first of these was signed with Singapore in 2000 and the latest, with the European Union (EU), was signed last year.
Still, the sheer size of the WTO means that the potential gains there remain immense. While bigger agreements have remained elusive, from New Zealand’s perspective there are still enough occasional small-but-significant wins to sustain a belief in the WTO’s overall mission.
For example, trade ministers agreed to eliminate export subsidies on agricultural exports entirely at the WTO’s 10th ministerial conference held in Nairobi in 2015. This kind of success perhaps explains why McClay is taking on what some might see as a thankless job for the second time.
McClay may need to hold some difficult conversations in Abu Dhabi.
This is because India and the United States – two countries with which Wellington currently wants much closer relations – are at present probably the two biggest single barriers to progress at the WTO.
Since 2017, the United States has blocked the appointment of new judges to the WTO’s appellate body over a belief that its rulings were overly unfair to it. The strategy has effectively rendered the WTO dispute settlement process pointless, as there is no way for appeals to be heard.
Notably, Joe Biden has continued with an approach closely associated with Donald Trump.
For its part, India’s position on “public stockholding” – governments paying farmers above-market prices for grain in the name of food security – is one of the big agricultural stumbling blocks.
Essentially, India and around 80 other developing countries would like to see changes to the WTO’s 1995 Agreement on Agriculture to legitimise the public stock holding process. This agreement, achieved in the Uruguay Round, limits farming subsidies in developing countries to no more than 10% of the value of agricultural production.
By contrast, developed countries – represented in the WTO by the Cairns Group that includes New Zealand as a member – tend to see the public stockholding programmes as distortionary and as chipping away at the letter and spirit of the 1995 agreement.
While very different in nature, both the appellate body and public stockholding issues threaten to undermine the drive for trade liberalisation backed by New Zealand and embodied by the WTO.
In the year to September 2023, the total value of New Zealand’s total goods exports to the world fell slightly for the first time in nearly a decade. Globally, world trade declined by around 5% last year – while trade barriers are being imposed at an ever-increasing rate. WTO reform could help to reverse the trend.
But so far, New Zealand officials have been reluctant to publicly call out their friends over their approach to the WTO.
A statement released by India’s Ministry of Commerce and Industry after McClay met his counterpart Piyush Goyal in December said that the pair “assured each other of co-operation and mutual understanding for a positive approach to reach a decision” in Abu Dhabi over the public stockholding issue.
McClay did not mention the WTO in a trade-focused speech he gave in Delhi in December, instead highlighting India’s involvement in the US-led Indo
Pacific Economic Framework (IPEF), a far more exclusive trade arrangement that Washington has developed as part of an economic coalition to challenge China.
Meanwhile, a joint statement issued by New Zealand and the US after then prime minister Jacinda Ardern visited the White House in 2022 somewhat ironically praised the “free and open rulesbased global trade system built on high standards and long-standing principles”, before pledging a “commitment to reform and strengthen the World Trade Organisation (WTO)”.
Following a change in New Zealand’s government, there are now even more reasons not to rock the boat.
In a speech to the US Business Summit just days after becoming foreign minister in November, Winston Peters said, “there are few relationships that matter more to New Zealand than our relationship with the United States”.
Both countries are looking to work together more closely on defence, particularly in the Pacific, with New Zealand seriously considering joining the “second pillar” of the Aukus defence pact.
Against this backdrop of deepening
NZ-US relations, US intransigence over the appellate body issue is something of an inconvenient truth.
To that end, Peters similarly made no mention of the WTO issues in his speech.
Trade is increasingly clashing with geopolitics, but back in Abu Dhabi, there are some reasons for optimism. The UAE’s hosting of the summit may provide an opportunity to push for bold moves forward.
Al Zeyoudi, the chair, is framing MC13 as a “pivotal meeting that is set to define the future of trade”, and the UAE is unlikely to be happy with a stalemate or merely nonbinding commitments.
Moreover, WTO ministers committed at the last ministerial conference in 2022 to restoring a functioning dispute settlement process by 2024.
It may be a case of now or never when it comes to making progress – despite big elections in both India and the United States this year.
For McClay, the WTO meeting may also bring other benefits – such as an opportunity to build closer ties with the trade-friendly UAE.
The UAE invited New Zealand to enter talks on a bilateral closer economic partnership agreement (CEPA) last year, a move partly driven by lack of progress on our free trade deal with the wider sixcountry Gulf Cooperation Council that has been in the works since 2006.
McClay travelled to the UAE in January to discuss both bilateral engagement and MC13 with the Al Zeyoudi – a chance for valuable one-on-one face time.
Overall, it must be said that expectations for the WTO’s Ministerial Conference are low. But this could be an advantage. We could see some surprises.
Geoffrey Miller is the geopolitical analyst for the Democracy Project at Victoria University of Wellington/Te Herenga Waka.
This article originally appeared at The Democracy Project.