The World Trade Organization (WTO): Challenges and Solution (with Valbona Zeneli)
February 2016
The World Trade Organization (WTO) and its predecessor, the General Agreement on Tariffs and Trade (GATT) has been one of the most successful international institutions. But besides its positive effects, the WTO’s framework has also brought some sense of discomfort, fear, and painful economic adjustment to meet international competition. Even at its peak surrounding the Uruguay Round (1986 to 1994), the question arose whether the WTO could effectively handle broader social issues. Pollution, global warming, diseases, and structural unemployment were possible macroeconomic factors seeking inclusion into the WTO framework. None of these issues have been effectively addressed, much less solved, by the WTO.
The Doha Round of negotiations started in November 2001 aiming at achieving major reforms in the international trading system with an explicit focus on developing countries. It has failed and still remains incomplete until this day. Major obstacles still remain over several key issues such as agricultural sectors, free trade of services, and intellectual property rights. The number of WTO members has grown from 27 in 1948, and 123 nations in 1994 to 162 and has made the system unwieldy. The continuation of the unanimous voting requirement for progress and agreement has brought a slow and squealing forward motion to a standstill.
It is not surprising that, in the light of pervasive terror threats, politicians tend to focus on the high-intensity politics of national security and war, as opposed to the low-intensity politics of trade and investment.
The global recession only intensified this tendency to ignore international economic issues, as attention shifted to domestic job creation, security, and protection of domestic credit markets.
In consequence to continued stalemates and disagreements in the Doha round, it appears that liberalization has taken a new approach outside the WTO. The last two decades have led to a do-it-yourself approach, defined by mega-regional agreements and preferential plurilateral trade negotiations, handmade for only a limited number of players. According to WTO data, as of December 2015, there are 619 Regional Trade Agreements (RTAs) under negotiation globally, with 265 of those currently in force. Such agreements rest on the ambition to further liberalize and promote a global 21st century by selectively addressing trade and investment barriers. A number of the topics discussed are similar to those not finalized by previous multilateral talks. The Trans-Pacific Partnership (TPP) and the Trans-Atlantic Trade and Investment Partnership (TTIP) are two major new trade agreements which may shore up the international trade system.
With baby boomers retiring and millennials starting to staff today’s corporations, there is remarkable cultural change and challenge within organizations, which exert effect on the political structures of the next decade, including trade and the WTO.
The last 20 years have given fertile ground to criticism regarding the WTO, particularly to claims that the organization has reached its limit of complexity. Some suggest that future negotiations might be conducted as individual initiatives with limited objectives, as opposed to large negotiation rounds that aim to accomplish numerous goals simultaneously. Successful implementation of a “plurilateral plus model” could eventually create a higher equilibrium by extending the benefit of regional and bilateral agreements to all WTO members, even if the obligations would bind only the initial members of the agreements and others as they join it.
On the other side, the WTO system does not operate in isolation of other international trade policy. Liberalization coming by other means (unilaterally and bilaterally) is likely to push for further liberalization at the WTO negotiations too. Similarly, the Uruguay Round was knocked on track because North America signed the NAFTA agreement and Europe created its single market. The fear factor is important. Fear of missing out on new benefits concentrate political minds.
It may also be possible to introduce new groups of countries in the WTO, and having their negotiation concentrated on one of four key areas: to grow, to make, to create economic activity, or to coordinate economic activity. That should make decisions more pertinent and rapid. The WTO also broadens its reach, including nongovernmental organizations and other political actors.
Finally, the WTO could help implement activities that support social causes. Many other organizations, such as the International Labor Organization and the World Bank, already focus on issues surrounding socioeconomic development. The WTO should play a supportive, but not a primary role in these issues. For example, the International Trade Centre, co-sponsored by UNCTAD/GATT, could provide training on how to commercialize rain forests without causing excessive damage to the environment or communities within them.
The core contribution of the WTO, however, will be in the fact that the flag follows trade and investment. Over time, increased economic ties will cross-pollinate cultures, values, and ethics between economic partners and, together with the income effects on individuals and countries, cause changes in the social arena, which need to be supported in their impact.