Asia-Pacific needs the WTO to stay relevant in an increasingly uncertain world

  • Bilateral negotiations never favour smaller economies and losing the WTO’s multilateral dispute settlement channel would be a major loss for the Asia-Pacific. We cannot afford to take the WTO for granted, weakened as it is and in sore need of reforms.

To walk along the autumn shoreline of Lake Geneva to the headquarters of the World Trade Organisation (WTO), kicking fallen conkers from horse chestnut trees, is to occupy a steady, constant world light years away from the conflicts and challenges addressed by the many United Nations institutions settled there for the past 70 years.

The last time I was there was 25 years ago, in the frenzied final days of negotiation on the Uruguay Round of trade liberalisation that created the WTO.

Of course, the Swiss sense of frenzy will always have a different heartbeat from the frenzy we might feel in other parts of the world, but it was noticeably frenzied nevertheless, and a high watermark of commitment to multilateralism and support for trade and investment liberalisation.

At the time, across in Indonesia, leaders of the Asia-Pacific Economic Cooperation (Apec) were about to sign up to the Bogor Goals – free and open trade and investment across Asia-Pacific by 2020. No ifs, no buts, as Britain’s Boris Johnson might say over his ambition to seal Brexit.

Twenty-five years later, Geneva’s tranquillising autumnal calm is as therapeutic as ever, but the mood is darker, and the innocent optimism of the Uruguay Round negotiators has ebbed.

Eighteen years of deadening deadlock around the Doha Development Round – the now-moribund trade negotiation that was intended to extend the progress of the Uruguay Round – has staunched ambition for “free and open trade and investment”. Talk is as much focused on preventing backsliding as on liberalising progress.

This was the context for our Apec business delegation, led by Richard von Appen, the Chilean chair of the Apec Business Advisory Council (ABAC), to meet WTO Secretary General Roberto Azevedo and the Apec caucus of WTO ambassadors – the first such mission in about seven years.

“The WTO has underpinned decades of prosperity, in the Asia-Pacific region and around the world. WTO trade reform has lifted millions from poverty. It has enabled even small and developing economies to have a voice. It has helped to level the playing field,” von Appen said.

“The key message in Geneva is that the Asia-Pacific business community is united in its strong support for the WTO. We urge WTO member economies to engage constructively and urgently to sustain and reform the WTO.”

A key motivation for the delegation was to warn of mounting business concerns about economic decline across Asia, and signs of slippage towards a global recession. This decline is being caused in general terms by rising protectionism, increased public scepticism about the merits of trade liberalisation, and doubts about the benefits of globalisation, and in particular terms by the US-China trade war.

For example, Ho Meng Kit, CEO of the Singapore Business Federation and one of Singapore’s ABAC members, talked anxiously of the sharp decline in economic growth in one of Asia’s most open economies, with gross domestic product growth this year forecast to slip to 0.6 per cent, compared with a long-term trend of 2-3 per cent.

“There can be no winners from policies that close off markets, increase prices for consumers and manufacturers, disrupt global value chains, all of which undermine sustainable and inclusive growth, especially for the most vulnerable groups and economies in our region,” ABAC members reported.

The mission was also driven by anxiety over the imminent collapse of the WTO’s multilateral trade dispute settlement system, where US refusal to allow appointment of new judges to the final appeal body, called the Appellate Body, means that from December 11, there will no longer be enough judges to hear final appeals on international trade disputes.

Voicing concern that disputes need to be settled through this multilateral channel and not through bilateral ones in which smaller economies will always negotiate from a position of deep disadvantage, von Appen noted:

“We cannot afford to take the WTO for granted; in the current global environment it would be almost impossible to create a new organisation like that if the current one were to disappear, which would negatively impact developing as well as developed economies. In all our discussions we have stressed the need to reform trade rules to make sure that the WTO remains relevant and fit for purpose.”

Officials in Geneva are keenly aware of how little they have delivered since the Doha Round talks ground to a halt.

And as Secretary General Azevedo prepares for the next WTO ministerial meeting in Nur-Sultan in Kazakhstan next year, he realises this will be the last chance in his term of office to secure any meaningful reforms. At present, just about all he has on the menu is an attack on fisheries subsidies – important, but hardly earth-shaking.

This is where there is much talk about the “Joint Statement Initiative” driven by the Ottawa Group – or in the WTO’s acronymic world, “JSI” – a bundle of specific initiatives taken up in Buenos Aires out of the embarrassing discord of the last WTO ministerial meetings.
This classically inscrutable title hides a substantial set of initiatives intended to liberalise trade in e-commerce, and on investment facilitation, liberalisation for small and medium-sized companies, and services.

The JSI process – aimed at enabling progress on “bite-sized” problem areas rather than hold liberalisation hostage to WTO consensus rules that have allowed a handful of countries to wield veto power over WTO rule-making – also includes initiatives on subsidies, on women, and on climate change, but none of these are “text ready”, and so unlikely to find closure in time for the Kazakhstan meetings.

Nor does there seem to be optimism about any significant progress on reforming rules on “Special and Differential Treatment”, which allow “developing” economies to opt out of trade liberalisation commitments, and allows the countries themselves to decide whether they should be regarded as “developing”.

In the run-up to next June’s Kazakhstan ministerial meeting, there will be multiple efforts to deliver substance, and demonstrate that the WTO has relevance, as protectionism and trade conflict threaten to lead the global economy into recession.

The top-level reception given to the ABAC delegation, and the repeated requests for businesses to keep our WTO ambassadors’ feet to the fire, suggest they would like us to come again. But it is hard to associate Geneva’s cosy calm with any sense of urgency. The cold breath of global recession seems far away, whatever a business mission from Asia might forewarn.

David Dodwell researches and writes about global, regional and Hong Kong challenges from a Hong Kong point of view


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