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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
2018 | 2017 | 2016 | 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | 2009

HAS THE WTO GROWN OLD?
The upcoming G20 Summit could provide the necessary political boost for a convenient renewal.


by Félix Peña
September 2018

English translation: Isabel Romero Carranza


 

The issue of the "aging" of the WTO, already raised at other times by senior officials of President Trump´s administration, may have very different but complementary approaches. Two of these approaches deserve our attention, among many others.

A first approach refers to the fact that, since the creation of the GATT and later of the WTO, many changes have taken place in terms of the distribution of global economic power- and therefore in the relative power of member countries-and in the composition of the global exchange of goods, services and investments. These changes in realities are influencing the perspective of those who consider that some of the mechanisms and rules of the multilateral system are becoming obsolete.

The other possible approach refers to the qualities of efficiency and effectiveness expected from the institutions and rules that affect global trade governance, understood as an essential aspect for the sustainability of a reasonable world order.

In this last perspective, it becomes especially relevant that the issue is included in the agenda of the next G20 Summit, to be held at the end of November in Buenos Aires. More than a detailed approach on the contents of a negotiation aimed at strengthening and eventually reforming the WTO, what can be expected from the G20 Summit is a clear political boost to address the issue.

In any case, if the G20 failed to promote the reforms of the current system, what would be the future of the WTO? and which would be the alternatives in order to have a multilateral international trading system that is efficient and effective?

Another question now becomes relevant for Latin American countries. In the light of President Trump's recent statement about the eventual withdrawal of his country from the WTO, it can be formulated as follows: what would be the reaction of the countries of the Latin American region to a substantial change in the multilateral trading system such as the one that would result from the withdrawal of the US, a key protagonist of world trade and also founder of the GATT-WTO system?


In our previous newsletter we addressed the issue of the possible reforms to the WTO (see the August edition on www.felixpena.com.ar) in view of the upcoming G20 Summit, to be held in Buenos Aires at the end of November. However, this is not the specific forum where to advance the negotiation of the reforms that may be considered necessary. The most appropriate forum is that of the WTO itself. But given the political significance that a growing deterioration of the WTO may have on global governance -and not just on trade governance- it is logical to expect an explicit political boost from the G20 Summit, to what is already perceived as a necessary process of renewal of the global multilateral system of international trade.

This need has become more evident after President Trump's statement in the interview published by Bloomberg News on August 30: "If they don´t shape up, I would withdraw from the WTO" (see Bloomberg News, www.bloomberg.com). In the perspective of the current American government, behind this threat lies their point of view on issues such as those considered unfair trade practices contrary to WTO rules, or the effectiveness of the mechanism for the settlement of disputes, In addition, these statements are made simultaneously with the news about the "bi-lateralization" of the NAFTA, evinced by the agreement with Mexico and the difficulties still underlying the talks with Canada. As the Financial Times has pointed out, the President's statements imply a new attack on one of the pillars of global economic governance (see www.ft.com). In any case, they can't be underestimated.

The question of the "aging" of the WTO, already raised at other times by senior officials of President Trump's administration, may have very different but complementary approaches. Among these, two deserve special attention.

A first approach refers to the fact that, since its inception and, even more so, since the founding of the GATT, many changes have taken place in terms of the distribution of global economic power -and therefore of the relative power of the member countries-and in the composition of the global exchange of goods, services and investments. Such changes in realities would be affecting the views of those who consider that some of the mechanisms and rules of the multilateral system are becoming obsolete. Or, at least, they perceive it to be so in relation to their current national interests, which are not necessarily the same they had at the founding moments.

The other approach refers to the qualities of effectiveness and efficiency expected from institutions and rules that affect global trade governance, understood as an essential aspect of the sustainability of a reasonable world order.

It is especially in this last perspective that it becomes relevant for the issue to be included as part of the agenda of the next G20 Summit, to be held at the end of November in Buenos Aires. In other words, it would draw attention if the political leaders, gathered in a forum intended since its creation to address problems that impact the world order and, therefore, require collective responses, met without discussing the issue of how to revamp a global forum such as the WTO when it is losing its effectiveness and efficiency. Moreover, this omission would draw attention since the public opinion would not understand how a matter of such relevance to current international relations -reflected, for example, in the so-called "commercial wars"- might not merit the attention of its political leaders.

Therefore, more than a detailed approach on the content of a negotiation aimed at strengthening and eventually reforming the WTO, what can be expected from the G20 Summit in Buenos Aires is a clear political boost for the issue to be addressed. The negotiation as such should be defined and undertaken by the organs of the WTO itself. But after the experience of the Doha Round, it is hard to imagine that this could happen without a strong political impulse originating in a G20 Summit.

The abovementioned statement by Donald Trump does not necessarily have to be interpreted as the expression of a real intention to carry out the implied threat. The experience of the Brexit illustrates how difficult it can be for any country, but especially for a great economic power, to realize its withdrawal from a system of rules that affect its commercial insertion in the world and, even more so, to replace it with an alternative that is both reasonable and credible. Most likely, time will show that we are before the expression of a negotiating tactic aimed at achieving the reformulation of some of the rules and mechanisms of the multilateral global system.

As noted in our previous newsletter, at their July 25 meeting, the Presidents of the United States and the European Commission pointed out some of the issues to be addressed in the analysis that they entrusted to the working group composed of "close advisors". These issues were those related to unfair trade practices, theft of intellectual property, forced transfer of technology, industrial subsidies, distortions created by state-owned companies and overcapacity.

It is obvious that, from the point of view of other countries, there are other relevant issues on which to focus in a negotiation. The experience of the Doha Round indicates how difficult it will be to reach an agreement on the possible agenda for negotiations between the 164 WTO member countries. This would limit the scope of the political thrust that results from the G20 Summit in Buenos Aires. It may also account for the relative caution that is being observed with regard to the future of the WTO, especially in the days leading up to the Trade Ministers meeting, to be held in Mar del Plata on September 12 and 13. This caution is aggravated by President Trump's statements, which makes the question of whether the G20 will succeed in promoting the reforms of the current system more pressing. If the G20 were to fail in this endeavor, what would the future hold for the WTO? and what would be the alternatives in order to have an international multilateral trading system that is both efficient and effective?

Another question that now becomes important for Latin American countries is: what would be the reaction of the countries of the region to the substantial change in the multilateral trading system that would result from the withdrawal of the US, a key protagonist in world trade and also founder of the GATT-WTO system?

In any case, answering these questions would imply not only having a correct diagnosis of the reasons that lead to consider that the WTO has aged and needs to be renewed but, above all, keeping in mind the reasons that led to the creation of the GATT and later the WTO. It is particularly important to understand the reasons that led to some of the principles, mechanisms and institutions that are now being questioned, such as, among others, the principle of non-discrimination, the treatment of developing countries and the dispute settlement mechanism. The history of those founding moments and especially of the period that led to the genesis of the multilateral system of world trade -that is, the periods that preceded both World Wars- is very illustrative and deserves to be reviewed today. It is relevant to help us understand the factors and deep forces that affect the tension between international order and chaos, that is, between peace and war among nations. (As reference on the factors that led to the creation of the multilateral system of world trade see, among others, the following books: Craig Van Grasstex, "The History and Future of the World Trade Organization", World Trade Organization, Geneva 2013; Robert E. Hudec, "Essays on the Nature of International Trade Law", Cameron May, London 1999; Richard N. Gadner, "Sterling-Dollar Diplomacy in Current Perspective. The Origins and the Prospects of Our International Order", Columbia University Press, New York 1980; Gerard Curzon, "The Diplomacy of Multilateral Trade", Fondo de Cultura Económica, Mexico 1960; Elimma C.Etzeani, "The WTO and its Development Obligation. Prospects for Global Trade", Anthem Press, London-New York 2010; John H. Barton; Judith L.Goldstein; Timothy E.Josling; Richard H. Steinberg, "The Evolution of the Trade Regime. Politics, Law, and Economics of the GATT and the WTO", Princeton University Press, Princeton and Oxford 2006; Andrew G. Brown, "Reluctant Partners, A History of Multilateral Trade Cooperation 1850-2000", The University of Michigan Press, Ann Arbor 2003).


Recommended Reading:


  • Archivos del Presente, "Migración y Economía Global", Revista Latinoamericana de Temas Internacionales, Fundación Foro del Sur, Year 21- N. 67, Buenos Aires, 2018.
  • Arguello, Jorge, "Cómo evitar una guerra comercial. La responsabilidad política del G-20", in "La Nación" Newspaper, Opinions Section, August 22, 2018, p. 31.
  • BID-INTAL, "La Tecno-Integración de América Latina. Instituciones, Comercio Exponencial y Equidad en la Era de los Algoritmos", Coordinación de Ana Inés Basco, Buenos Aires, 2017.
  • BID-INTAL, "Algoritmolandia. Inteligencia Artificial para una Integración Predictiva e Inclusiva de América Latina", BID-INTAL-Planeta, Buenos Aires, 2018.
  • Cahill, Thomas, "De Cómo los Irlandeses Salvaron la Civilización", Machado Libros, Madrid, 2018.
  • Camroux, David, "ASEAN is Indonesia's past, not its future", East-Asia Forum, August 22, 2018, http://www.eastasiaforum.org/.
  • Cornejo, Rafael A., "Estrategias y Mecanismos para la Convergencia de los Acuerdos Comerciales en América Latina", BID, Sección Integración y Comercio, Resumen de Políticas, Nro IDB-PB-270, Washington DC. March 2018.
  • Garton Ash, Timothy, "Free Speech. Ten Principles for a Connected World", Atlantic Books, London, 2016.
  • Garton Ash, Timothy, "History of the Present. Essays, Sketches, and Dispatches from Europe in the 1990s", Vintage Books, New York, 2001.
  • Illescas, Nelson; Jorge, Nicolás; Perini, Sofìa, "El Arte de la Guerra Comercial. Implicancias para la agroindustria argentina de la escalada del proteccionismo", Fundación INAI, Instituto para las Negociaciones Agrícolas Internacionales, Buenos Aires, 2018.
  • Instituto de Relaciones Internacionales, "Relaciones Internacionales", IRI, Universidad de La Plata, Year 27 - N.54, La Plata, January/June 2018.
  • Kagan, Robert, "The Return of History and the End of Dreams", A.Knopf Book, New York, 2008.
  • Mesquita Moreira, Mauricio (coord.), "Conectando los puntos. Una hoja de ruta para una mejor integración de América Latina y el Caribe", Special reporto on integration and development, Interamerican Development Bank,
    (IDB), Washington DC, 2018.
  • O'Dowd, Sarah, "Power play's in the Pacific", East-Asia Forum, August 21, 2018, http://www.eastasiaforum.org/.
  • Pavón Piscitello, Daniel, "Derecho de Integración: Eficacia Jurídica de la Normativa Común. Semejanzas y asimetrías entre Unión Europea y Mercosur, lecciones aprendidas, propuestas de solución", EUCC-Colección Thesys, Córdoba, 2018.
  • Perkins, Dwight H., "Has China`s economic reform already peaked?", East-Asia Forum, August 30, 2018, http://www.eastasiaforum.org/.
  • Schwarcz, Lilia M.; Starling, Heloisa M.,"Brazil. A Biography", Translated from the Portuguese, Farrar, Straus and Giroux, New York 2018.
  • Serbin, Andrés (editor), "América Latina y el Caribe frente a un Nuevo Orden Mundial: Poder, globalización y respuestas regionales", Icaria Editorial-CRIES, Barcelona- Buenos Aires, 2018.
  • Turcsanyl, Richard Q., "China is raising its flag in Central and Easter Europe", in East-Asia Forum, August 31, 2018, http://www.eastasiaforum.org/.

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 information.

http://www.felixpena.com.ar | info@felixpena.com.ar


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