Key takeaways:
- With the global trade discourse veering towards fair trade from free trade, geopolitics has come to play a major role in the multilateral trading framework. The growing rivalry between the major powers is particularly becoming a major hindrance to the effective and credible functioning of the WTO.
- The future of the WTO will be driven by the commitment of its member states. Without the commitment of the member states, the reform proposals and amendments within the framework of the WTO are neither feasible nor effective and the WTO as an entity is likely to fail.
- The key pillars of the WTO – negotiating mechanism, dispute settlement mechanism, and monitoring function – are today deeply embedded in geopolitical considerations and have been severely damaged by power-based trade relationships.
- It is in the strategic interest of the European Union (EU) to ensure the effectiveness of WTO and hence EU is increasingly focusing on multilateralism in its new trade policies. The new EU trade policy aims to establish a new consensus for trade policy based on openness, sustainability and assertiveness and WTO reform is a key priority to deliver on these objectives.
- It is in the best interests of WTO to focus on:
- having a functioning and binding dispute settlement system which caters to the ever-changing geopolitical landscape; and
- reviving the negotiation function.
- The EU perspective is also that the WTO should focus on the most pressing issues that are faced by all member states, i.e. economic recovery and development as well as environment and social sustainability. EU also believes that the WTO should start with concluding the multilateral fisheries negotiation.
- From an Indian perspective, a big issue is that the multilateral framework is being broken up into plurilateral processes. All the current negotiations in the WTO are the joint statement initiatives between different countries.
- WTO needs to revitalize itself and ensure that it benefits all members equally. It needs to focus on the least developing countries. The big global players should take a lead in initiating a dialogue within the WTO to make it a more democratic forum.
- The five key development trends that are shaping the geopolitics of the trade industry and the future of the WTO are:
- Traditional champions of the rules-based international trade order are undermining the multilateral trade system.
- Rising protectionism and backlash against globalization is concerning. With national security and economic security concerns on the rise, there is a major turn towards protectionism.
- There is a need to engage with China and manage the competition and cooperation between the world and China.
- WTO cannot perform without the big powers like USA and EU working together. The USA and EU are working in cooperation on a lot of their shared concerns. However, it is important for both the players to manage the underlying bilateral tensions.
- There is a shift from multilateralism towards a more regionally focused and plurilateral or sectoral strategy for dealing with trade issues.
- The WTO has struggled to address newer trade issues relating to supply chains, technology advancement, etc. Moreover, the rules of WTO have not kept pace with this changing environment. WTO needs to effectively counter the interventions that have negative spill-over effects on the economy, and it needs to create a balance between 20th century issues and 21st century issues.
- There are 3 key items that are preoccupying global trade and are equally prominent for the WTO:
- Building resilience of supply chains has turned into a question of minimizing sourcing dependency.
- Ensuring global transition through a clean energy environment. This involves technology that are dual use in nature and countries and can be misused by countries. Similarly, there is an apprehension that some countries will not hesitate to weaponize the issue of carbon standards in trade.
- Promoting sustainable development gives rise to the question of countries competing on sustainable projects across the world.
- There are 3 key issues that need to be tackled urgently to revitalize the WTO:
- Progress on sustainability issues by first concluding the fishery subsidies negotiations
- Updating the rules for regional trade and innovation
- Tackling the negative spillovers of the state intervention on the economy
- Dispute settlement needs to be addressed and made the priority in process of revitalizing the WTO.
- WTO needs to change the structure that it inherited decades ago as it is not relevant today. It has to find out a way to keep pace with the changing times to remain a credible and effective framework for global trade.