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The WTO Between Crisis and Reform

The United States has been arguing for the need to reform the WTO since well before Donald Trump unleashed his world tariff war. In 2015, Michael Froman, President Barack Obama’s trade representative, denounced the failure of the Doha Round, a major negotiation underway since 2001 but bogged down in its own ambition to reach a comprehensive agreement among all countries on every aspect of world trade. Froman’s solution was pragmatic multilateralism, capable of proceeding through sectoral agreements or between small groups of nations.

Behind the arcane formulations of international law, Washington’s real accusation against the WTO, then as now, is that it has facilitated the spectacular rise of China’s industrial power.

Longstanding issues

Decisions on WTO reform can only come from its Ministerial Conference, held every two years. Following the lack of progress in Geneva (2022) and Abu Dhabi (2024), Director-General Ngozi Okonjo-Iweala has announced a turning point for the meeting at the end of March in the Cameroonian capital, Yaoundé.

The main proposals on the table have been unchanged for years. First, to allow so-called plurilateral agreements between subsets of member countries to be implemented and incorporated into the WTO’s legal framework. This proposal is reminiscent of the enhanced cooperation discussed within the European Union.

Second, to move beyond the practice of unanimous decision-making, which in effect amounts to a paralysing right of veto for powers hostile to further liberalisation, a role traditionally played by India.

Third, to redefine the exemptions and concessions of the special and differential treatment accorded to developing countries, which the major emerging powers are accused of abusing. On this point, Chinese Premier Li Qiang offered a significant concession at the UN General Assembly in September, announcing that Beijing would no longer seek special treatment in current and future WTO negotiations, while retaining its self-definition as a developing country and the associated privileges under existing agreements.

Fourth, to restore a fully-functioning dispute settlement mechanism, overcoming the opposition of the US, which since 2019 has paralysed the Appellate Body and ignored its rulings.

A new Atlantic development

In recent months, a new element has been added to the old topics of discussion listed above. The reforms proposed by the US and the EU also call into question the principle of most-favoured nation (MFN), according to which a country wishing to grant more favourable trade conditions to another must extend the same favourable treatment to all other members of the system. This commitment to non-discrimination is the conceptual and legal foundation of the WTO: it is enshrined in Article 1 of its founding treaties.

The official US position, published in December, calls for moving beyond the most-favoured-nation rule, designed for an era of deepening convergence among trading partners, when it was believed that all countries would adopt open market economies. That expectation was naive, and that era has passed. Today, non-discrimination is an obstacle to liberism: It sets an impossible requirement of negotiating the same terms with all members, resulting in an all-or-nothing approach that typically ends in ‘nothing’.

The European proposal for WTO reform, released in January, also calls for reflections on the role of the MFN principle in today’s context. In an article in the Financial Times, European Trade Commissioner Maroš Šefčovič points to the need to rethink the functioning of this rule, which some countries have exploited. Access to lower tariffs cannot be unconditional: it must be earned through stronger, credible commitments to the core principles of free and fair trade.

Flexibility and breaches

In February, China asserted the opposite position: The MFN principle shall remain the bedrock of the WTO — necessary all the more at a time when Trump’s tariff offensive is overturning every convention of the multilateral system, signalling the return of power-based trade relations.

In a commentary for Borderlex, former European official John Clarke laments that Brussels is leaving it to China to play the role of noble defender of the multilateral system. Clarke points out that there are already ample exceptions to the most-favoured-nation rule: national security grounds, free-trade agreements, the special treatment of developing countries, anti-dumping duties, and so on. However, non-discrimination is the most important single rule of the WTO, its firmest bulwark against protectionism. Moreover, the fact that Washington and Brussels are calling for its revision now will be interpreted by the rest of the world as an attempt to get ex-post blessing for the agreements that the EU and many other countries have signed with the US under the threat of Trump’s tariffs, in violation of the spirit and the letter of the multilateral system. It is true that the founding treaties of the WTO provide for as many exceptions as there are rules, but even an elastic band has its breaking point.

European ambiguity

Calling into question the cornerstone principle of the WTO is not the only paradox of the European line. On the one hand, the defence of the old liberal order that the powers like to describe as rule-based has taken on the menacing form of armed liberism on the continent, with a major rearmament drive led by Germany, unprecedented in peacetime. On the other hand, Brussels’ response to Trump’s economic nationalism in the last decade has in practice taken the form of a series of free-trade agreements with Canada, Japan, Singapore, and Vietnam, culminating in the major recent agreements with the South American bloc Mercosur and India.

As with the major regional trade initiatives of recent years — the Trans-Pacific TPP and the Asian RCEP — we have also described the EU’s bilateral agreements as a possible multilateralism, a way of proceeding along the liberist path towards greater international economic integration, effectively circumventing the stagnation of multilateral negotiations in Geneva. The European Union seeks to remain within the legal framework of the WTO, which provides for an exception to the most-favoured-nation rule for free-trade agreements that meet certain requirements. However, as the former US trade official Mark Linscott, referring to the latest hastily concluded EU-India agreement, said: When added to the many FTAs already in existence, this is clearly an example of the exceptions swallowing the rule.

Coalitions and blocs

The WTO reform proposals published by the US and the EU are also united by the call to unblock plurilateral agreements, in which mutual benefits and commitments are reserved for members of the club — a path that is formally possible but politically blocked by the veto of emerging nations such as India and South Africa. China also agrees on this point, calling for flexible plurilateral initiatives to be able to proceed at different speeds. Without abandoning the practice of unanimous decision-making, the WTO must seek a middle way between the poles of moving all together or not moving at all.

This is an international political battleground dominated by ambiguity. Trade areas are also diplomatic initiatives aimed at creating or consolidating strategic spheres of influence. Free-trade coalitions of the willing can turn into hostile blocs. In the United States, the idea of a NATO of trade has been circulating, with membership implying certain criteria of political alignment. Clyde Prestowitz, a veteran of American trade policy, proposed in 2021 to Joe Biden’s Democratic administration that it promote a Free World Free-Trade Agreement, uniting the North American USMCA, the TPP, the EU, India, and all the so-called market democracies. Conversely, today, Singapore’s Prime Minister Lawrence Wong advocates convergence between Europe, the Japanese-led TPP group, and the Asian ASEAN bloc, with the Chinese-led RCEP area in the background. Projects presented as inclusive, yet whose core lies in the exclusion of strategic adversaries.

Crisis without divorce

In recent years, certain American proposals to expel China from the WTO have been countered by European suggestions of a WTO without the US. Both perspectives seem unrealistic. As many have noted, despite having decreed the United States’ withdrawal from dozens of multilateral institutions within the UN system, so far Trump’s US has remained in the WTO. Washington has also resumed paying its contribution to the organisation, it participates in its work and puts forward proposals. The same can be said of the International Monetary Fund and the World Bank, the other two great pillars of the Bretton Woods system, established by the US after its victory in the Second World War. Could this be a modest confirmation that, at the level of international superstructures, the crisis in the world order has not yet plunged into a phase of breakdown?

In its reform proposal for a WTO 2.0, the Japanese business association Keidanren states: From the viewpoint of the business community operating globally, it is desirable that common rules are applied worldwide. In this respect, the role of the World Trade Organisation (WTO) comprised of 166 members remains vital. Since the world market is an established historical fact, a system of shared norms and standards remains an objective general interest of big capital, even in the context of imperialism’s perpetual economic war. Ideally, the WTO could even survive the breakdown of the world order, as the Bank for International Settlements (BIS) in Basel did in the 20th century, serving as a forum for dialogue and coordination between central banks active even in the midst of world war.

Amid recurring pronouncement of its demise, the WTO endures, and it is significant that there is at least the staging of a debate on its reform while the wars of the crisis in the world order rage across the globe.

Translated from the original work by , published in Lotta Comunista, , p. 20.

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