Looking Ahead – The WTO in 2016

By | January 5, 2016

The collapse of the Doha Round a couple of years ago left the World Trade Organization with an unfortunate legacy, a wounded reputation as a negotiating forum as 10 years of effort essentially went up in smoke. Funeral rites for the Doha Round are now accepted by all save the most steadfast of believers.

This begs the question whether the multilateral trade negotiating system has run its course, ending an enviable success record, beginning with the 1947 General Agreement on Tariffs and Trade (GATT) through a successive series of rounds, culminating with the historic Uruguay Round and the launching of the WTO in 1994.

Some observers say the international community will never again replicate this degree of multilateral consensus. The result has been a turning away from multilateralism and greater reliance by governments on regional and bilateral trade initiatives, such as Canada-Europe and the recently-concluded Trans-Pacific Partnership (TPP) Trade Agreement.

While the multilateral system is under stress, it’s too easy to write off the WTO as a negotiating forum. Without being overly optimistic and recognizing the challenges, in fact the organization remains surprisingly robust. In spite of the many diverse and often opposing interests among its 162 member States, the WTO manages to make advances, incremental and less dramatic than the Doha Round, but noteworthy nonetheless.

Consider these four WTO-related initiatives.

  • A WTO Trade Facilitation Agreement (TFA) was concluded in 2013 and is slated for entry into force, possibly in 2016, once two-thirds of WTO members ratify. So far the number is 63, still some way to go. However, there is momentum here. Not a fancy bells and whistles kind of agreement but one that sets global rules to ease entry of goods across borders.
  • The Information Technology Agreement (ITA) was concluded in December at the WTO’s Nairobi Ministerial. The deal lowers duties on roughly $1.3 trillion in trade in high-tech informatics products, accounting for a remarkable 10 per cent of world trade in all goods. While less than a fully multilateral deal and awaiting entry into force, the ITA’s successful conclusion is another WTO achievement.
  • The Environmental Goods Agreement (EGA) continues under negotiation among major WTO member economies, including Canada, US, EU, Japan. It aims to reduce tariffs and improve market access on green products that contribute to reducing fossil fuels and carbon emissions. While a plurilateral – as opposed to multilateral – effort and not officially under the WTO umbrella, if it succeeds, reduced tariffs will be available to all WTO members on an MFN basis. Progress is slow but is being made.
  • Conclusion of a Trade in International Services Agreement (TISA) also making progress. It’s not been much in the limelight but is potentially a very big deal, covering telecommunications, financial services, computer services, retail distribution, transportation, environmental services, express delivery, energy services and professional services (e.g. accountants, lawyers, architects and engineers). The 23 participating countries agreed to hold more rounds in 2016 in hope of resolving remaining issues. The agreement envisages an accession process to allow other WTO members to join in the future.

None of these smaller-scale activities are earth-shaking in themselves. However, if these treaties ultimately do come into effect, they will be milestones of achievement in opening specific markets based on WTO-inspired principles of non-discrimination, national treatment, bans on import restrictions and discriminatory treatment for foreign investments and prohibiting unfair preferences for local goods and services.

These efforts are all within the framework of the WTO’s norm-creating (some might say “parliamentary”) functions. Even if comprehensive efforts such as the Doha Round have proven impossible, these smaller-scale initiatives add to the corpus of international trade law.

While focusing on these norm-creating efforts, not to be forgotten are the WTO’s adjudicative functions, deciding trade disputes among members through binding rules applied by neutral panels. While the process is lengthy and cumbersome, at the end of the day it (mostly) works.

Look at the latest Canada-US flare-up over the discriminatory American country-of-origin labelling requirements for Canadian agricultural exports. Canada could have applied retaliatory duties on American imports after winning a succession of WTO panel rulings but the case was settled and a trade war was averted. That’s the way the WTO system is supposed to work.

As the Trudeau government moves ahead on its trade policy agenda – not yet fully articulated– my sense is that Chrystia Freeland will continue Canada’s long-standing support for the multilateral system and for the WTO as an institution, a policy that was largely followed by her Conservative predecessor, Ed Fast.

In this one area at least, Canadian policy has shown a steady course in strong support of the WTO as an institution and demonstrated that it is possible to circumvent partisan politics in pursuit of a larger set of national objectives.