WTO faces louder calls for reform

The drum beat for reform at the World Trade Organization (WTO) is growing louder against the background of escalating trade tensions between the US and China, the world’s two biggest economies.

Country representatives called for updates and overhauls to the global trade body’s governance and enforcement mechanisms during the United Nations Conference on Trade and Development’s World Investment Forum in Geneva, even while lamenting threats to global trade and investment flows.

“It is becoming apparent the WTO, the bedrock of the multilateral trading system, is under stress and is in need of an update,” says Osamu Onodera, director-general for trade policy at Japan’s ministry of economy, trade and industry, citing lack of transparency in the organisation’s oversight mechanisms and dysfunction in the dispute settlement system as key areas of concern.

Japan will use its chairmanship of the G20 group of developed nations next year to push the WTO reform agenda, he added. 

The WTO, for its part, put forward dire warnings on the economic impact of a breakdown of the global trading system it stewards. Deputy director-general Karl Brauner told the forum that a full-blown trade war could knock 17% off world trade flows and two per cent off global GDP.

“We’ve seen a remarkable increase in investment restrictions for inward and outward FDI flow. These are troublesome, especially given the need to achieve the Sustainable Development Goals development framework by 2030,” he warned.

Under President Donald Trump’s administration, the US has slapped tariffs on billions of dollars’ worth of goods from the EU, Canada, Mexico and China in a bid to to recalibrate trade relationships he believes are bad for the US. His counterparts have responded in kind.

Mr Trump also took the step – unheard-of in recent decades – of invoking the WTO’s national security exemption as a pretext for restricting steel imports from Canada, Mexico and Europe into the US. All are US allies.

Some developing countries view the emergence of this issue as a positive as they look for avenues to reset current tariff regimes. “The developing countries have had this issue of securitisation for many years, for as long as the WTO has existed, because we are fragile economies,” said Ghana’s minister of trade and industry Alan John Kwadwo Kyermaten.

He believes tariff advantages granted by the WTO to richer nations are at least partially responsible for the failure of many commodity-exporting countries to develop value-added industries, threatening national stability. “The issue goes to the core of the governance architecture of the WTO… It has to do with balance of power at the WTO,” he said.