Reglobalisation in action Part 4: Rethinking the role of the WTO

Given that global trade integration has produced great wealth and great inequality, its governance needs to be reformed in ways that preserve the former and ameliorate the latter.

Like so much in contemporary global politics, perceptions of the worth of the global trading system lie firmly in the eye of the beholder. In the United Kingdom, ‘leave’ supporters have lauded the World Trade Organisation (WTO) as a ready-made basis for an independent trade policy, a solution to the uncertainties of a no-deal Brexit, and a rules-based system from which a new commercial era can dawn. On the other side of the Atlantic, the WTO has found less favour. The Trump administration has done little to hide its disdain for the organisation or – for that matter – its hostility towards established trading arrangements; and it has not been shy of acting in instances where US trade interests are perceived to be threatened. 

While arguments about the WTO have been used instrumentally on both sides of the Atlantic, they nonetheless point to truths about the global trade system that warrant closer attention. On the one hand, the WTO has successfully overseen a rules-based system that has brought substantial areas of trade politics under the rule of law and enabled the creation of tremendous new economic wealth based on deepening commercial interconnections. On the other hand, this process has generated deep inequalities, both within and between states. As Branko Milanovic reminds us in his recent book, Global Inequality, most of the benefits of the ‘neoliberal’ globalisation of the last four decades have gone to wealthy individuals and corporations, while many marginalised groups have been further excluded.

It is not just trade outcomes that are the problem. Its governance has also begun to fail. Multilateral trade negotiations no longer deliver. Dispute settlement is faltering. Ecommerce remains unregulated. Agriculture continues to be heavily protected. And social and environmental ‘externalities’ – the negative effects of the way trade is governed – endure. Thus, trade and its governance are perfectly suited to a process of ‘reglobalisation’, by which we have in mind a change of course that seeks to maintain and enhance the benefits of trade integration, but does so in ways that ameliorate rather than exacerbate inequalities. Here we outline a handful ideas of how to take this forward, with others elaborated elsewhere.

Many of the problems with the current system are deeply rooted and demand fundamental reform, but others can be addressed with smaller, more immediately realisable changes. For instance, the process of negotiating packages of agreements as comprehensive rounds has largely outlived its usefulness. Requiring that WTO trade deals must be large-scale and multi-sector has made it increasingly difficult to bring negotiations to a conclusion. The pressure for rounds that produce significant global aggregate gains is matched by pressure on the negotiating teams of each member-state to secure a domestic ‘win’ in which their country’s gains exceed those of their competitors and outweigh any potential losses. The outcome is increased tensions and negotiation gridlock.

A simple step forward would be adopting, first, a process of continual negotiations on specific sectors, with standalone agreements adopted as and when consensus is achieved. The Trade Facilitation Agreement – the only multilateral deal the WTO has reached during the Doha Round which began almost two decades ago – is an example of this approach. It sought to balance the desires of the developed countries to expedite the movement of goods across borders with the need among developing countries for technical and financial assistance to implement the ensuing obligations in an internally balanced way. While there are potential problems – it would certainly not be a panacea for the WTO’s problems – it could form part of an incremental shift toward unlocking the multilateral agenda in a more positive direction.

Second, the WTO is, by design, highly state-centric. Given that it lies toward the hard, rather than the soft, end of international law and its rules impact on many aspects of society beyond simple commercial relations, the exclusion of non-state actors is problematic. If we are to achieve a more progressive trade system, a necessary step would be to address the narrowness of trade debates that occur in forums consisting only of states. The voices of non-governmental organisations, unions, business associations and other such civil society groups have an important role to play in ensuring that the gains from globalisation are more equitably distributed.

A more radical step would be to give actors other than states a formal role in decision-making within the WTO. It is worth noting that this would not be without precedent. The General Assembly of the League of Nations was originally intended to include civil society, business and other non-state groups, as part of Woodrow Wilson’s vision that it would express ‘world public opinion’; and the International Labour Organization (ILO) gave non-state actors a central part in its decision-making process within its tripartite organisational structure, binding governments, labour unions and business representatives in a common endeavour.

Whether or not this is achievable, the WTO’s decision-making processes are in need of attention. They may have been suitable for the GATT era (where they originated) but are increasingly dysfunctional. Additionally, the central role given to competitive bargaining within that system – in which each member has to fight for whatever concessions it can extract from others – inevitably supports the interests of the most powerful states, which have the most bargaining chips, the best negotiating resources and the greatest recourse to coercive tools.

However, incremental shifts are not going to bring about the lasting change that the trade system currently demands. More deep-seated reform will be required if the WTO is to start to operate in the interests of the marginalised and be rescued from its current crisis.

The WTO is not the first global institution to find itself in need of renewal and repurposing. Pertinent lessons can be drawn from the ILO, when it faced being discarded after the conclusion of World War II. The threat led the organisation to secure its future through three key means: (i) a conference was convened designed to re-affirm the organisation’s credentials and establish its continued importance in the post-war order; (ii) the conference updated and reoriented the ILO’s core aims around the nascent UN’s normative human rights agenda; and (iii) the organisation successfully fought to became a member of the UN family of institutions.

Each of these strategies has pertinence for the WTO today. The organisation requires that its core purposes are reconsidered, which would be best achieved through a comprehensive conference involving all members and other stakeholders. Arguably, the global trade system has not been at such a crossroads since the International Trade Organization discussions of 1944-47 ultimately ended in failure. While the outcome of such a conference must emerge from broad participation, we suggest the following for consideration.

The WTO’s aims and objectives ought to be reoriented around the concept of trade-led development-for-all, with a particular emphasis on helping the least able. The organisation’s success should be measured by the extent to which it creates broad-based trade opportunities. Crucially, this must look within states to target marginalised communities and groups within the global North as well as the global South. In furtherance of this aim, the WTO ought to be brought into the UN system.

Refashioned in this way, the WTO should move from an organisation driven by adversarial negotiations as the mechanism for distributing economic opportunity to a form of governance that facilitates trade-led growth. This would be done through: (i) developing strategic plans and strategies that further socially progressive global goals; (ii) facilitating the transfer of knowledge about global trade in a way that is genuinely equitable and which speaks to the specific economic circumstances of recipients; and (iii) establishing a development fund designed to nurture trade generating activities in hard-to-realise places.

None of this would be easy, but the consequences of inaction are growing. Already trade relations between the world’s two trading superpowers, the US and China, have moved largely outside of the existing institutions of multilateral oversight. A continuation of such a trajectory is in nobody’s interests and risks lasting damage to the principle of a rules-based multilateral system.