| THE RULE-BASED MULTILATERAL SYSTEM OF INTERNATIONAL
Has a stage been opened that could lead to an eventual redesign of some
of its rules?
by Félix Peña
English translation: Isabel Romero Carranza
The current questioning of the WTO by the US, is based
on the fact that it is a system of rules derived from an international
economic reality that has long been overcome and whose rules can therefore
be considered obsolete. Moreover, these rules allegedly limit the country's
ability to defend its national interests in world trade.
The final declaration of the recent G20 Summit in Hamburg reflected
decisions aimed at addressing the ongoing questioning of the current rule-based
international trading system. Although it is a text that seeks to balance
the different positions, it does not give any indication as to how to
deal with the issue of preserving the rule-oriented trading system, which
has more than seven decades of existence, or how to deal with the redesign
of its most debated rules.
Furthermore, it should be noted that the questioning of some of the
rules of the GATT system and later of the WTO originated in the founding
moments and that, for the most part, were made by developing countries,
including several Latin American ones.
It is possible that some of the questions that arose in the months
leading up to the recent G20 Summit will also be present at the XI WTO
Ministerial Conference to be held in December in Buenos Aires. This could
open a new stage in the redesign of the system and its rules, based on
the explicit recognition by all the WTO members that institutions and
rules are necessary for the effectiveness of the system, and to guarantee
conditions that contemplate the differences of relative power among nations.
In such case, the G20 Summit that will take place in Buenos Aires
in November 2018, could become an opportunity to assess the progress made
in the redesign of the system and eventually, if necessary, to inject
the political drive that may be required to achieve this goal.
The G20 Summit of Hamburg (July 7 and 8, 2017) was held against the
backdrop of the questioning by senior officials involved with the trade
policies of President Trump's government -especially by the Secretary
of Commerce, Wilbur Ross- of the rule-based multilateral system of international
trade established in the GATT and later incorporated into the WTO.
Such questioning is based on the realization that it is a multilateral
system that originated in a global economic reality that has long been
overcome and, therefore, many of its mechanisms and rules can be considered
obsolete. Moreover, these mechanisms and rules would allegedly limit the
possibility of the US to defend its national interests in international
trade. The expression "America First" reflects a view that is
prevalent in Washington today in relation to this and other aspects.
Specifically, the most critical references to the system have been directed
at the principle of non-discrimination, embodied in the unconditional
most-favored-nation clause of Article I of the GATT; the trade defense
mechanisms and their limited effectiveness against what are considered
dumping practices in sectors such as steel, and the characteristics and
effectiveness of the WTO dispute settlement system. (In this regard, refer
to the April
2017 edition of this newsletter on http://www.felixpena.com.ar/).
The final G20 Summit Declaration of Hamburg failed to reflect the leaders'
decisions aimed at addressing the underlying questions that are being
raised to the current rule-oriented international trading system and some
of its main regulations. In this regard, the leaders merely pointed out
that: "We will keep markets open noting the importance of reciprocal
and mutually advantageous trade and investment frameworks and the principle
of non-discrimination, and continue to fight protectionism including all
unfair trade practices and recognize the role of legitimate trade defense
instruments in this regard". (Fort the full text of the declaration,
published in German and in English only, go to https://www.g20.org/).
Although it is a text that seeks to balance the different positions, it
does not give any indication as to how to deal with the issue of the preservation
of the rule-based multilateral system of international trade, which is
more than seven decades old, let alone how to address the redesign of
its most questioned rules.
Moreover, it should be noted that the objections to some of the rules
of the GATT system and later the WTO originated almost at the moment of
their creation and that, for the most part developing countries, including
Latin American ones, made them. Therefore, it is not only the current
US government that has expressed dissatisfaction with the multilateral
system of international trade.
The link between trade and development, for example, was on many occasions
at the heart of the critical arguments of Latin American countries with
respect to the GATT and later the WTO. The need to make such rules more
favorable for the early industrial development of many developing countries
and to make the requirements for exceptions to the principle of non-discrimination
more flexible in order to facilitate preferential agreements aimed at
promoting economic development, was often demanded by Latin American countries.
Following the frustrated experience of the International Trade Organization
-which resulted in the "provisional" entry of its Chapter IV
into the GATT- the subsequent establishment of the UNCTAD reflected the
dissatisfaction of the developing countries with the multilateral system
of international trade. Moreover, it was also present in the process that
led to the launch of the Doha Round.
It was not just the questioning of certain rules of the system. It was
also a disagreement with the predominance of an elitist vision of its
negotiation mechanisms, reflected in the so-called "Quad", and
the lack of transparency of some of its procedures.
It is possible that some of the abovementioned questions that arose
in the months leading up to the recent Hamburg Summit will be present
at the next WTO Ministerial Conference to be held in Buenos Aires in December.
They might not be included on the formal agenda, which is currently being
negotiated within the WTO bodies in Geneva. However, they might be present
on what could be considered an informal or parallel agenda, which in the
political perception might be regarded as the real substantial agenda.
As was noted previously (see our newsletter of last April) the region
can contribute greatly with ideas and initiatives to help with the increasingly
necessary redesign of the ground rules and institutions of the multilateral
system of international trade, which are now being put into question,
precisely, by the country that played a key role in establishing them.
This is especially so if we take into account that the WTO Ministerial
Conference of December and the 2018 G20 Summit will take place in Buenos
The next regional meetings, especially in the context of the initiative
launched at the time by the ALADI (see the March
2017 edition of this newsletter on http://www.felixpena.com.ar/)
and the link between the Pacific Alliance and Mercosur could provide opportunities
to try to articulate the positions of the Latin American countries.
The question to be answered in relation to the mentioned perspective
is: What changes in the design of the multilateral system of international
trade and its rules would be more relevant from the point of view of the
countries of the region, especially taking into account their strategies
for global commercial insertion, the requirements of their regional integration
processes and of their own processes of economic and social development?
In which aspects of this redesign could positions be articulated with
other WTO member countries, including the US?
Perhaps, the 11th Ministerial Conference will be the right time for WTO
member countries to strike a balance. This balance should be between the
political need to recognize the importance of a multilateral world trade
system based on rules, whose fulfillment is not simply left at the discretion
of each nation, and to redesign institutional mechanisms and ground rules
that the member countries consider necessary. Political need understood
in terms of international trade governance and, therefore, the need to
neutralize tendencies towards a new experience of international disorder,
such as those that led to the two great wars of the last century.
This could open a new stage in the redesign of the system and its rules
based on the acknowledgement by all WTO members, that institutions and
rules are necessary to guarantee conditions that take into account the
reality of economic asymmetries and the differences of relative power
In any case, the next G20 Summit that will take place in Buenos Aires
in November 2018 could be an opportunity to assess the progress made in
the redesign of the system and possibly, if necessary, to inject the additional
political drive that may be required to achieve this goal.
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Félix Peña Director
of the Institute of International Trade at the ICBC Foundation. Director
of the Masters Degree in International Trade Relations at Tres de Febrero
National University (UNTREF). Member of the Executive Committee of the
Argentine Council for International Relations (CARI). Member of the Evian
Group Brains Trust. More