Since March 1st, the Nigerian economist Ngozi Okonjo-Iweala has been the new director general of the World Trade Organization. Like a coach hired by a team languishing at the bottom of its league — writes Larry Elliott of The Guardian — Okonjo finds herself in the happy position of taking over at the WTO when the only way is up
, This historic international institution is unlikely to experience extinction or irrelevance. However, the appointment of Okonjo does not in itself remedy WTO’s deep troubles.
An alternative in plurilateralism
The negotiating function of the WTO has been lacking for twenty years now. The latest ambitious goal of liberalising trade in goods and services, announced in Doha in November 2001, became bogged down by the impossibility of a general compromise between old powers and large emerging economies.
In 2015 Michael Froman, President Barack Obama’s Trade Representative (USTR), officially called for the abandonment of the Doha Round. Froman’s alternative proposal was a pragmatic multilateralism
, which would allow the WTO to host so-called plurilateral negotiations, limited in scope by the issues involved and the participating states. That year the WTO ministerial conference in Nairobi closed with the unprecedented admission of different views
on the future of the Doha Round. Froman claimed a turning point
representing the possibility of tackling new issues with a plurilateral approach, had been achieved between subsets of WTO member states, overcoming the practice of multilateral consensus. The same position was held by Robert Lighthizer, USTR of President Donald Trump.
The subsequent 2017 WTO Conference, in Buenos Aires, closed for the first time without a shared final declaration. The Doha Round seems definitively shelved. Lighthizer celebrates the moment when the impasse at the WTO was broken
, in favour of plurilateral solutions, which disarm the veto power of individual nations. Some initiatives, such as the Joint Statement Initiative (SI), are launched from the Argentine capital, with the participation of about half of the 164 member states of the WTO and dedicated to specific topis, including the increasingly important e-commerce sector.
Delhi-Cape Town axis
Okonjo’s debut at the WTO General Council in early March was greeted by a combative stance from India and South Africa against the aforementioned JSIs. A document expressing the Indo-African position defends the multilateral underpinnings of the WTO
and consensus based decision-making
. The crucial point is that to introduce new rules in the WTO, it is necessary to involve all member states in the decision-making process. The Indian representative Brajendra Navnit explains that renouncing the tradition of unanimity will create a precedent for any group of Members to bring any issue into the WTO [...] undermining balance in agenda setting, negotiating processes and outcomes
. The issue on the table is who makes decisions, how and on what matters. In the form of an abstruse legal dispute, via articles and treaty clauses, a political battle is being waged over the functioning and the very nature of the WTO.
The position held by India and South Africa in the course of the discussion in Geneva was criticised by the delegates of many capitals. The representative of the European Union, the Portuguese João Aguiar Machado, affirms that the WTO’s negotiating arm has not been able to deliver [many of the significant improvements in the multilateral trade rulebook
, therefore it is vital to maintain the option of developing rules that correspond to the economic and trade realities of the 21st century through plurilateral agreements
. Otherwise, there would be no other option than developing such rules outside the WTO framework. This would increase fragmentation and risk eventually condemn the WTO to irrelevance
, As already demonstrated at the Nairobi and Buenos Aires Conferences, in substantial alignment with the White House, the EU takes sides in favour of open plurilateral negotiations.
A realist genesis
Within the WTO there are two plurilateral agreements - on public procurement and civil aviation - which are referred to as closed, because their benefits are accessible only by the participating states. These two agreements, negotiated under the terms of the GATT back in the 198os, are the only plurilateral agreements which survived the transition to the WTO. The ITA agreement on information technologies, however, is an example of an open plurilateral agreement. Its benefits also extend to non-signatory states, based on the ‘most favoured nation’ mechanism. According to historian Craig VanGrasstek, WTO rules show an ambivalent view towards plurilateral agreements
. On the one hand, they recognise plurilateral agreements, which are considered binding only for the participating states. On the other hand, they consider the consensus of all member states as necessary to integrate a new plurilateral agreement into WTO rules. The consensus of all member states is indeed one of the legal arguments used by India and South Africa.
In general, VanGrasstek highlights the contradiction between the fundamental WTO principle of non-discrimination and an international reality divided by hundreds of preferential trade agreements, bilateral and regional Agreements, customs unions and even the European single market, In VanGrasstek’s interpretation of WTO history [The History and Future of the World Trade Organization, WTO Publications, 2013], the winning states of the Second World War, under the direction of Washington, established the GATT with the ambition of creating a multilateral system, but had a realistic awareness that the international order’s needs for discriminatory instruments. Therefore, they foresaw that the GATT could coexist with preferential agreements, under certain conditions (article XXIV), and allow protectionist measures motivated by national security (article XXI). This is the legal loophole which was abused in recent years by the tariff offensives of the Trump presidency.
The GATT precedent
Attacking the Indo-African position, the European ambassador Machado recalls that plurilateral agreements have been a driving force under the GATT and beyond and paved the way for many of the multilateral agreements that are today an integral part of the WTO agreement
. In fact, as Bernard Hockman and Petros Mavroidis argue for the European University Institute, PAs were quite prevalent under the pre-WTO GATT regime
, The Kennedy Round and the Tokyo Round, spanning the 196os and 19705, created a series of plurlateral agreements, at the time defined as ‘codes of conduct’, binding only the few signatory states [WTO ‘a la carte’ or WTO ‘menu du jour’? Assessing the care for plurilateral agreements, EUI, 2013].
German academic Nicolas Lamp adds lesser-known historical detail: during the Tokyo Round, least-developed countries (LDCs) asked in vain that the adoption of such plurilateral ‘codes’ be subject to decision by consensus or at least by a broad majority. That initiative, led by Yugoslavia, challenged the lack of transparency and In inclusiveness in the Tokyo Round negotiations. In many cases, for example for the anti-dumping agreement, LDCs were invited to negotiation tables only when the general form of the ‘code’ had been determined by the United States and European countries (The club approach to multilateral trade lawmaking
, Vanderbilt Journal of Transnational Law, 2016. Above all, writes Lamp, when the advanced countries agree separately on their priority issues, the LDCs fear that they will lose control of the agenda
at the GATT. This is the same political issue raised by India and South Africa today at the WTO.
Imposed agreements
In the transition from the GATT to the WTO, many plurilateral ‘codes’ of the Tokyo Round were made multilateral. This was possible, explains Hockman, because the dominant states of the GATT inserted the ‘codes’ in a take it or leave it package deal
, that is, as part and parcel of accession to the WTO
. In Hockman’s retrospective opinion, this stratagem looks much less strategic
The fear of being forced to adhere to these agreements, in fact, has motivated a many LDCs to use unanimity to oppose any WTO decision on new issues.
In line with Brussels’ position, Hockman proposes returning to the GATT model
and carrying forward the JSI as open plurilateral agreements [Plurilateral cooperation as an altemative to trade agreements: innovating one domain at a time, BUT, 202 1). Lamp argues this compromise should be accepted by India and South Africa for two reasons. First, if the Indo-African duo would veto the JSI, albeit with good legal reasons, they would risk finding themselves in an isolated, politically unsustainable position. Further, even a successful veto could not prevent the JSIs from materialising, as preferential agreements outside the WTO, unnecessarily damaging the multilateral institation. Second, the current fault in the WTO does not clearly divide old and new powers. Comments on the March WTO Council include a notable Chinese silence. On the one hand, China speaks out on every occasion in defence of multilateralism, in line with President Xi Jinping’s speech at the Davos forum. On the other hand, Beijing participates in the contested JSIs, along with many other emerging countries and LDCs.
Functional fragmentation?
The evolution of the WTO is matter of international economics and politics, not a matter of law. VanGrasstek highlights the real change that, in the decades after the Second World War, enormously expanded world trade and transformed the balance of power between powers. Industrial production is increasingly international and the global political order is increasingly multipolar. Starting with customs duties alone, the scope of issues under discussion has expanded to include non-tariff barriers, intellectual property rights, trade in services and so on. From the 23 founders of the GATT, the states involved increased to about fifty in the 1960s, a hundred in the 19705, up to the current 164 members of the WTO.
These objective complications are reflected in the timing of the liberalisation processes, In the first fifteen years of the GATT system [1947-1962], 5 rounds of tariff reduction were completed, lasting an average of 7 months each. After that, the Kennedy Round was extended to 37 months [19641967], the Tokyo Round doubled to 74 months [1972-1979], and the Uruguay Round took 87 months [1986-1994] to negotiate the switch from GATT to the WTO. The Doha Round, the first and last major multilateral negotiation of the WTO era, has not been closed since 2001.
Five years ago, commenting on the Euro-American proposals for plurilateral ‘clubs’ within the WTO, we wondered if they would mark growing fragmentation and dysfunctionality for the institution or, on the contrary, if they would facilitate a dialectic among coalitions and the definition of new balances, helping to safeguard the unitary sign of the WTO. We can reassert that question, as ambivalent as the WTO itself, guarantor of the general interest of capital in an open world market and, at the same time, arena for the irreconcilable clash of infinite particular interests.
Lotta Comunista, March 2021