The fact that the WTO needs revitalization is rarely negated. Indeed, advocates and critics alike put forth comparable questions regarding the WTO and its future. Among the widely posed questions, the following are prevalent: Is the WTO effective for its goals in its current form? How can the WTO better address issues regarding sustainable development, such as poverty alleviation, development, and food security, as well as issues with climate change and sustainable fisheries? How can the WTO ensure that its weakest Members are fairly and efficiently represented while adjusting to shifting economic power structures in trade? Is the WTO’s current institutional structure suitable, or are there improvements—fundamental, incremental, or both—that would enable it to reflect and respond to current needs and those that are likely to materialize in the future more accurately?
To answer these questions, the WTO requires institutional changes to provide the structure and decision-making tools that it needs if it is to grow into a dynamic, adaptive, and accountable organization. Furthermore, the mandate of the WTO must be made clearer. WTO Members must work together to define and emphasize the purpose and direction of the organization to make it more relevant to governments, companies, and individuals alike in the twenty-first century.
In the Twelfth Ministerial Conference of June 2022, Members committed to striving toward the WTO’s necessary reform. They anticipated adjustments to enhance all of the WTO’s operations while upholding the fundamental values of the organization. They concluded that the changes must maintain transparency and inclusivity and must consider the interests of all Members as well as involve development-related concerns. This article aims to address some of the more salient concerns afflicting the WTO and propose solutions towards the betterment of the organization through reform.
II. Problems
While the economic theory of the WTO is still legitimate—prosperity through comparative advantage through free trade—the organization has been showing its age and has unmistakably entered a period of relative inefficiency and stagnation. That being said, the first step in addressing and solving an issue is to acknowledge and recognize its existence. Therefore, we have selected several key issues that are central to the institutional reform of the WTO, focusing on efficiency, responsiveness, economic development, and dispute settlement.
A. Decision-Making
A critical reason why the WTO struggles with efficacy in its decision-making and negotiation capacities is due to its Member-driven structure. The WTO’s decision-making structure is consensus-based, whereby no Member objects to a decision. This structure has its advantages and disadvantages. One significant drawback is that it oftentimes leads to impasse and blockage where little gets accomplished. With the WTO’s strictly Member-driven organization, any matter, regardless of its level of importance, is subject to consensus. While there could be alternate manners for decision-making such as distinguishing between substantive and non-substantive matters, even altering or adjusting the consensus-based structure would prove difficult. This is because, in order to realize change, a consensus would first be necessary. Whether or not the WTO can fulfill its objectives and obligations multilaterally is a core issue that the WTO is facing.
Recent events show that the consensus-based method is unsuitable for an organization with 164 Members, especially regarding policy concerns where it is extremely challenging to create an agreement among Members. Since the start of the Doha Round in November 2001, minimal achievements have been made because of the failure by Members to agree on crucial problems, largely due to differing perspectives from developing and industrialized economies. It is further demonstrated by one Member’s power, in this case, the United States under the Trump administration, to prevent the installation of the WTO’s Director-General, which President Biden did permit to proceed, and to prevent appointments to the Appellate Body and which, indeed, has continued into the Biden administration.
Because the rulemaking mechanisms of the WTO are so cumbersome, private entities and governments alike have been moving towards alternative forums. Many states have increasingly been turning toward the negotiation of preferential, regional trade agreements and settlements. Even though it has not been demonstrated that regional trade regimes offer the same economic advantages as multilateral agreements, there are significant commercial forces that push towards negotiating new regional accords, particularly in the world’s fast expanding economies. With no prior experience of regional trade agreements, developing economies are forming new regional trade alliances, particularly in Asia and Africa.
Both the United States and the European Union have begun to pursue aggressive plans to negotiate bilateral accords and regional trade agreements with other states and customs territories across the world. The proliferation of regional trade agreements is seriously undermining the multilateral trading system.
Processes for making decisions support and facilitate the ability to achieve legitimate results that are consistent with the WTO’s main objectives. In effect, the institutional rules and decision-making process used to generate outputs are intimately tied to outcomes and the legitimacy of results. Therefore, it is important to design structures and processes in a way that will help them accomplish substantive objectives. They must coordinate and align with one another and are indeed dependent. In other words, the institution’s legitimacy and authority depend on the proper substance-structure matches. Structures and procedures must adapt, alter, and evolve in tandem with substance. As is apparent in the history of the WTO’s decision-making capacities, the organization is certainly not exempt from the need for proper substance-structure alignment.
B. Governance Structure
Tied into the issue of its Member-driven composition are defects in the governance structure of the WTO. Without improvement of this branch of the organization regarding flexibility in negotiations and new rulemaking, the WTO has a high risk of losing relevance in many critical aspects. Indeed, the executive arm of the organization is essentially nonexistent. It does not initiate proposals or execute all the analyses which would empower a more effective administration of the world trading system.
The capacity of the Director-General and the Secretariat are critical to the effective and efficient operations of any and every international organization. Unlike other international organizations, the Secretariat of the WTO has significantly limited authority to independently perform research and head proposals to the membership. Indeed, the WTO is not sui generis in nature among international organizations, however, certain rule making processes and management structures that are taken for granted in many other international organizations are lacking or even absent in the WTO.
Apart from the consensus of Members in collective action, the WTO lacks substantive executive powers to prioritize legislative agendas, suggest and/or approve new rules, and mechanisms to engage with stakeholders and civil societies, or even a functioning legislative body. It is, in many aspects, the least developed of international organizations. For the WTO to be on par with other international organizations, it must become more functional and efficient and increase its accountability to all its Members (including developing countries), stakeholders, and the public, and more formalized governance structures must be developed.
When discussing the governing body of the WTO, it is necessary to acknowledge the nature of the membership that is presided over. As the WTO approaches its third decade, one of the most significant changes is the membership’s growing heterogeneity. The coordination of negotiations between 164 Members is not the only problem that the WTO’s membership expansion offers, though this presents a formidable challenge on its own.
But in addition to the national diversity within the organization, there is an extensive diversity of legal, economic, and political cultures at a level that was not present in the GATT, nor in the founding years of the WTO. The challenge that the WTO faces is exemplified by its failure to conclude the Doha Round, given the conflicting interests at play and the role played by the BRICS (Brazil, Russia, India, China, and South Africa) emerging economies, as seen in the Ninth Ministerial Conference held in Bali back in 2013. As a result, over the past twenty years, the WTO has commissioned two major studies to examine the possibilities of reform and reinvigoration of the organization.
One such report, the Sutherland Report, a 2005 review of the Consultative Board to the Director-General on the Future of the WTO, observes that while respect for the Secretariat is not necessarily lacking, “the mutual confidence between delegations and the WTO staff has been less obvious than in the past.” Furthermore, the Secretariat’s office is viewed more as one of support as opposed to leadership or guidance, and demonstration of initiative on the part of the Secretariat is generally not very embraced by Members. Moreover, by nature of it being consensus-driven, Members would likely be hesitant to give the Secretariat or Director-General any substantial power.
C. Unfair Trade Practices
The fact that WTO Members have been able to exploit the ambiguity of many of the rules of the organization through unfair trade practices such as dumping, intellectual property theft, and state-owned enterprises has drawn significant criticism. Former United States president Donald Trump, in a speech addressed to the United Nations General Assembly in September 2018, said that “countries were admitted to the World Trade Organization that violate every single principle on which the organization is based.” The WTO’s “state-owned businesses” exceptions provide governments the power to manipulate the free market and ensure that the state-owned enterprise always comes out on top.
Such unfair trade practices should prompt a reaction from the WTO: it should be more responsive in addressing the violation of its obligations, and not only the letter of the law, but also the spirit. Failure to comply with notification requirements in developing countries, especially regarding subsidies, is also something that the WTO must adapt to address through more effective trade policy monitoring and transparency. There are certainly many Members who are deficient in their institutional capacity to comply with regulation requirements, but this deficiency is not true of all the Members of the WTO. This point leads to the subject of “developing countries” status in the WTO and the issue that it poses for the organization.
D. Special and Differential Treatment
Fisheries subsidies negotiations, particularly concerning India, are an example of the difficulties in achieving multilateral consensus within the WTO. This topic is critical not only regarding multilateral functionality, but it is also illustrative of the issue of developing countries and their status within the WTO. The current system was established through the GATT, which provides for “special and differential treatment” (S&DT) for Members labeled as “developing countries.” The provisions entail a lesser set of obligations depending on WTO agreements. These provisions are incorporated into numerous agreements and include, among others, longer implementation periods and less demanding notification and reporting requirements. This allowance can become an issue, however, because any Member can self-identify itself as a developing country and thus be subject to lesser, more lenient requirements.
Each Member of the WTO is free to categorize themselves as a developed or developing country; there is no mechanism for graduating to developed country status when income levels rise. About two-thirds of WTO Members identify as developing countries, and many of them use this classification to argue for “special and unequal treatment.” Several rich economies, including Singapore, Kuwait, Qatar, and the United Arab Emirates are included in the category of Members that self-identify as developing. The self-designation framework sends a clear message that seriously undermines the legitimacy of the WTO.
Countries that were indeed developing countries in the 1970s have now surpassed that label (by per capita Gross Domestic Product (GDP), for example), but these countries are still under the self-adhered title of “developing countries” and, consequently, are able to take advantage of S&DT. The lack of consensus on the question of how to define and graduate developing countries remains an issue still to be addressed in the WTO. Without addressing this issue, reform will not be achievable.
E. Appellate Body
Much of the WTO membership still views the organization’s binding dispute settlement mechanism as being the foundation of the multilateral trading system. This issue is the central focus of WTO reform to date. Independent, third-party adjudication of trade disputes, which is embodied in the notion of depoliticized conflict resolution, is a key component of the “value proposition” provided by the WTO.
Since its establishment, the more developed WTO Members have used the dispute settlement system extensively. This use has witnessed over 600 consultation requests since 1995. In its early years especially, the system was seen to be highly effective. Many of the contentious situations or problems in the GATT system that had resulted in obstructed panel reports were successfully resolved. But that is certainly not the case under the WTO’s current framework.
The system has virtually stopped producing adopted panel reports as of the start of 2020. There were twenty-one appeals unresolved as of January 2022, which includes all twelve panel reports issued in 2020 and 2021, except for two. Members are still engaging in the panel process, but they are rejecting the conclusions. Losing parties often accepted the outcomes under the GATT system, but under the WTO system after the Appellate Body’s collapse, they do not. The parties may wish to leave all options open until the dispute settlement problem is resolved, so this could be a momentary hiatus, but it could also herald a tenser time in trade relations. In any case, the backlog of appeals keeps growing and it is a challenge that will likely make resolving the current issue more difficult.
The WTO’s Appellate Body has not been functioning since the end of 2019. The binding dispute settlement mechanism has been disabled due to an obstruction in the designation of adjudicators and thus not performing as it was designed to. This was a result of years of pressure from the United States, starting with the Obama administration in May 2016 when it decided to block the reappointment of a South Korean judge. While this was the first time that one Member obstructed the election of another Member’s judge, it was certainly not the last. The Trump administration continued to do so until December 2019, when the Appellate Body officially lost its capacity to hear cases as the number of active judges fell to one as the others’ terms expired and the appointment was blocked. This blockage has continued through to the Biden administration, which maintains the block on new appointments.
Thus, the Appellate Body is essentially paralyzed. The United States has conveyed its disapproval of the legally binding rulings and corresponding precedents as critics hold that, in this manner, the WTO is infringing on United States sovereignty. By disabling the Appellate Body, the Trump administration was able to directly address those Members that it considered to be involved in unfair trade practices and impose unilateral measures.
For new agreements to be negotiated and for current WTO agreements to continue to have value, an efficient dispute settlement process is essential. The ability of signatories to implement negotiated agreements determines their worth. There will be severely negative effects on future WTO rulemaking attempts if the chances of effective enforcement decrease. With the paralysis of the Appellate Body, Members can essentially overlook unfavorable or disadvantageous rulings while their appeal pends indefinitely in the system.
The status of the Appellate Body and the way it became paralyzed highlights the dangers of the consensus, member-driven structure of the WTO. The fact that the dispute settlement system, a central element of the WTO, is so immobilized presents, without a doubt, an illustrative and clear case for reform.
III. Solutions
The political and economic interests of the WTO’s many Members determine its course. Unsurprisingly, no set plan for WTO reform exists. But reform suggestions are necessary, and they would amount to a wave of advancement that would put the WTO back at the forefront of international economic integration. In the following sections, this article puts forth policy proposals to take into consideration as solutions to the select problems that the WTO faces, which the sections above outlined.
A. Decision-Making
To combat the issues related to consensus decision-making within the WTO, a proposal put forth by John Jackson and endorsed by the 2007 Warwick Commission (The Multilateral Trade Regime: Which Way Forward?) remains valid. It consists of the “critical mass” concept. Although the introduction of an executive board is typically associated with the weighted voting system, in practice, this need not be the case. The proposal involves developing a system and practice whereby Members would refrain from blocking a consensus when a critical mass of Members endorses the change. This critical mass would be factored both by a formidable majority of Members as well as a considerable amount of trade weight in the world. For example, ninety percent of both factors—majority and trade weight—could represent the critical mass, and there could be other elements to factor in such as GDP, the openness of markets, population, and such other considerations. It could be generally comparable to the so-called Luxembourg compromise of the European Union.
Steering toward critical mass negotiations would shift the WTO back to a negotiation strategy with a successful track record. While the current system of one-Member, one-vote depicts the prescribed equality of Members, it is imbalanced and one-dimensional because it does not consider other elements of the economic or political power of states. This proposal would allow for higher efficiency in multilateral decisions, negotiations, and progress that is so lacking in the organization.
Furthermore, the critical mass approach could allow for the development of a more efficient and responsive WTO and enable a methodical and structured differentiation of the level of rights and obligations in an organization comprised of so many diverse and varied economies. These considerations suggest that reform efforts would be better focused on tools to aid in the process of “getting to yes” given the existing large scope to apply critical mass and equivalent approaches that allow difference throughout the membership.
One other comparable approach would be the utilization of plurilateral agreements. Considering the economic diversity of its Members and the hurdle that it poses for reaching a consensus on a given issue, plurilateral agreements have been proposed by various studies, including the Warwick Commission. Such agreements can be thought of as a hybrid between the preferential trade agreements and what has otherwise been the WTO’s “Single Undertaking” approach.
Plurilateral discussions can result in agreements quicker than the multilateral method by focusing on specific topics with a limited group of willing players. They lessen the possibility of “hostage-taking” by Members attempting to further particular objectives. Additionally, plurilateral agreements, like free-trade agreements, can open the door for the expansion of rules into other spheres. This stepping-stone strategy has the advantage of keeping talks within the WTO and allowing Members to join when they are ready to take on new obligations.
Plurilateral agreements are not, however, a cure-all. They have their own challenges related to the formation and maintenance of coalitions with states with similar viewpoints. Divides still need to be bridged, particularly between wealthy and developing economies, and trade-offs made. It is crucial to support strategies that make plurilateral agreements less exclusive and bound to an efficient dispute resolution process that protects the weakest to move forward with a small number of such agreements that reflect the interests of smaller, poorer economies as well as those of larger, richer ones.
Furthermore, depending on the nature of a given plurilateral agreement, issues could surface regarding the association between participants privy to the agreement and non-participant Members. Plurilateral agreements provide unconditional treatment where the benefits of the agreement can include all other Members of the WTO through Most-Favored-Nation (MFN) treatment, an underpinning principle of the organization. This extension of benefits can generate controversy and a “free riding” problem in that non-participants can profit off an agreement whether they commit to the trade liberalization measures in question or not. One way to approach this free-riding problem would be to require the number of participants for the plurilateral agreement to amount to a critical mass (generally accepted to be equivalent to ninety percent of global trade in the industry or product covered by the plurilateral agreement).
Despite their drawbacks, plurilateral negotiations can advance several policy issues if separate multilateral agreements cannot be completed. The domestic regulation of services, e-commerce, investment facilitation, small and medium-sized enterprises, digital trade, subsidies, environmental goods, and regulatory cooperation are a few examples of the many areas in which they might be helpful. Plurilateral agreements must not make it more difficult for non-parties to join after the original creation. Indeed, they need not replace multilateral agreements, but, rather, can complement them and promote overall global trade governance as long as they are organized in an open manner that allows for further membership expansion. Finally, in order to multilateralize them, they should remain within the purview of the WTO. The alternative, which would involve bilateral and multilateral trade and investment agreements negotiated outside the WTO framework, may be worse since it would continue to divide the global trading system.
B. Governance Structure
Tying into the WTO’s decision-making practices, the issues related to that function of the organization lie not only in the behavior of Members, but also in the internal governance structures of the organization. Regarding the executive arm of the WTO, the role of both the Secretariat and the Director-General needs to be emphasized and elevated in both function and authority. In addition to the membership encouraging more in-depth policy study and overall intellectual production, the Secretariat should play a role as the WTO system’s guardian.
Reviving the Secretariat in terms of its mission, authority, and character is a relatively simple yet effective way to boost the functional vitality of the WTO. Doing so would provide it a new metaphorical role—that of stewardship—by which the relationship among its constituents, the organization, and the community may be articulated. The stewardship model reframes thought leadership in the WTO as a collaborative, as opposed to a competitive, process directed by the Secretariat, with the potential to greatly improve the WTO.
This article supports more leadership by the WTO and less deference to Members’ various state interests. A firm and persuasive institutional voice for the WTO is needed. The executive should be able to uphold and advance the ideals agreed upon if Members are unwilling or unable to do so. The Secretariat has very little voice in the WTO, which is a member-driven organization. The “Member-driven” tagline has traditionally been interpreted by the WTO as preventing the Secretariat from acting to support the functioning of the organization. Rethinking this is necessary.
If one were to compare the WTO to other international organizations, they would be able to observe a significant lack in management structures. While the WTO lacks a legislative body, parliament, or executive board, the European Union, for example, includes a Council of Ministers, a Commission, and a Parliament each with responsibilities in the executive role and rulemaking (legislative) process. While the WTO should not necessarily imitate the model of the European Union, it is, nevertheless, illustrative of the necessity for the world’s sole global international organization to have a larger and more comprehensive governance structure.
The responsibilities of the Secretariat go beyond simply serving the membership. The Secretariat plays a key role in defining the agenda and key issues to address in formal meetings. Additionally, it serves as the institutional memory for the trading system, which is a crucial function given the frequent rotation of delegations in Geneva. Moreover, it produces a large portion of the documentation for dispute resolution panels.
Taking the stance of the Sutherland Report regarding the role of the Secretariat, this article proposes to expand the power and strengthen the capacity of the governing body, especially in terms of intellectual leadership and institutional authority. The Sutherland Report urges Members to strengthen the Secretariat’s position so that it can carry out greater intellectual leadership and policy analysis. Former Director-General Pascal Lamy echoed the Sutherland Report by insisting that the Secretariat be more effective in gathering and publishing data on trade and trade policies, as well as improving research, analysis, and dissemination capabilities. The WTO would, thus, become a more reliable source of information and analysis on global trade data and policy, enhancing its capacity to support negotiations, oversight, dispute resolution, technical cooperation, and outreach activities.
A step in the right direction could be to give the Secretariat more freedom to gather and present data and analysis while leaving up to the Members the choice as to whether and how to use those facilities. It might be possible to allay potential worries among WTO Members about allowing the Secretariat more latitude to support the organization’s work by creating rules or a code of conduct for the exercise of such discretion to assure the impartiality and independence of the Secretariat. The capacity for Members to comment on any information or analysis produced by the Secretariat should be added as a part of this endeavor to gain a more complete understanding of the relevant topics.
Additionally, the Secretariat’s capabilities can be used to provide information and analysis that are pertinent to WTO bodies and constituencies through increased engagement with international business organizations, sectoral regulatory communities, and representative non-governmental organizations as well as increased cooperation with other international organizations dealing with various aspects of trade policy and related regulation.
The Secretariat would obviously need to rethink the goals of public conversations about global trade and expand the available topics for discussion to focus on issues that go beyond the WTO and the Doha Round to reengage important segments of civil society. This exercise would require some creativity on the part the Secretariat, which could only come with the help of civil society. One initial strategy could be to host civil society meetings focused on subjects such as mega-regional trade agreements, poverty reduction, debt and finance, and sustainable development, among others.
In other words, the conditions of participation in and by civil society should not just reflect what the Secretariat believes and desires. They ought to be chosen after dialogue with stakeholders outside the WTO. A committee with a variety of Members who represent the full spectrum of thought should oversee the choice of themes for any such public forum so that everyone is compelled to engage in conversation.
Whatever structure the WTO ends up assembling—if and when—is sure to be more legitimate, transparent, responsible, and democratic than anything that has taken place before. It might even result in something genuinely revolutionary and transformative—a result that challenges accepted wisdom and inspires fresh concepts focused on issues of health, welfare, and sustainable development. A more dynamic and active Secretariat would not only operate as the custodian of WTO agreements and provide thought leadership, but it would also provide coherence and continuity within the WTO system. Improvement in these functions would significantly aid in the revival of the organization, ensuring that the WTO remains supportive of its full constituent membership and relevant to the contemporary global setting.
C. Unfair Trade Practices
A rules-based approach calls for a response to unfair trade practices, which put into question the WTO’s legitimacy and reputation. It would make political and economic sense to enhance the regulations that apply to state-owned enterprises (SOEs), particularly those of non-market economies. To end state favoritism and put SOEs on a more commercial foundation, a firmer mandate is needed. It is necessary to impose stricter regulatory and subsidy disciplines. Once more, the focus needs to be placed on eliminating unfair competition.
Indeed, the need for a clear and strong approach toward Members that holds them accountable for any illiberal trade practices and anti-market behavior is crucial. If the WTO can address unfair practices and breaches in the organization’s key obligations, then it will be more equipped and resilient to deal with infringements.
This article proposes that a key step for the WTO to take would be to properly recognize Members that predominantly rely on SOEs as non-market economies. In addition, such Members should be called to prove that they have not used unfair subsidies and trading practices. This shift in burden of proof is central to tackling the issue.
A further stipulation must include a commitment to refrain from retaliation should such measures be imposed. To ensure that SOEs and other components of non-market economies receive proper treatment under WTO rules, these regulations must also be amended. While some disciplines may need to be renegotiated, other disciplines may be imported by Members from existing accords.
Moreover, for the WTO to be able to play a role in resolving tensions and concerns over alleged unfair trade practices, additional transparency, constructive discourse, and a readiness to engage in plurilateral negotiations are all, arguably, prerequisites. Importantly, the support of the major players—the United States, China, the European Union, and Japan—would be indispensable to negotiate clearer rules of engagement. Without it, there would be a larger chance of retrenchment into regional blocs and economic decoupling, which would produce ever more disruptive unilateral policies.
Apart from taking a critical approach toward unfair trade practices, this article holds that significant expansion and modernization of WTO rules is essential. The WTO rules need to be updated to more effectively address non-market-oriented policies and related unfair trade practices, regulate new technologies like digital trade, enhance provisions on intellectual property and services, among other areas covered in contemporary free trade agreements, and address politically significant areas like labor and the environment.
Other forms of protecting producers from unfair trade practices may be more effective, economically and politically, than anti-dumping regulations. Members might decide to revise the WTO Agreement on Safeguards, which is currently far simpler to implement than antidumping regulations, especially by developing economies, as there is no need for complicated margin calculations.
The Agreement on Safeguards permits the temporary protection of industries that have been significantly harmed by imports or that are at severe risk of such harm, giving those industries time to reorganize and become more competitive with imports. In contrast, the Anti-Dumping Agreement does not necessarily achieve this purpose because it targets specific foreign producers in those customs territories. These measures would be a positive and constructive starting point for the WTO to defend its obligations, develop its backbone, and revive legitimacy and goodwill among its Members.
D. Special and Differential Treatment
Any attempt at resolving the issue of differentiation of the developmental status among Members requires answering the following question: how should the WTO accommodate the needs of developing economies while also ensuring that the costs of multilateralism are shared equitably?
Because there is no accepted definition of what represents a developing country in the WTO, Members can essentially self-declare their status and operate according to their proclaimed distinction within the organization. Developing country Members accept “special and differential treatment” which can involve more favorable conditions such as more time to complete their obligations. Thus, it should not come as a surprise that close to two-thirds of the WTO membership self-designate as developing countries.
Although some Members are entitled to such classification and special treatment, it is debatable whether other Members, even with some of the largest economies in the world, can be considered developing countries. One of the main points of disagreement is the fact that eight of the G20 nations presently claim developing country status at the WTO. Furthermore, it has been questioned whether special and differential treatment actually helps emerging economies experience growth and engage in trade. It is unclear whether simply exempting WTO Members from some of their commitments is, in truth, beneficial to them.
This point aside, for all intents and purposes, the reality is that the current model of special and differential treatment is, to a large extent, ineffective and problematic. With the size of the WTO and the diversity of membership, graduation is necessary and economic indicators must be implemented effectively. A new system of graduation—ranging from the developing to the developed—with clear and sound degrees of differentiation would be an optimal solution for the problem. In this case, larger economies that have a more significant role in global trade would have a corresponding set of higher expectations regarding their obligations. But with a new system of differentiation, developing countries will be engaged with more and monitored through economic indicators to ensure that the playing field is as fair as possible. This article proposes that a standard or criterion should be created for graduating some less developed countries and developing countries from certain benefits of special and differential treatment based on their economic strength and other such factors.
The WTO should implement standards for Members to exit the classification of developing countries to restore credibility, effectively putting an end to the ongoing attack on the special and differential treatment system. If this is not practicable, the WTO should put additional pressure on the more advanced developing countries to graduate on their own, or at the very least stop, claiming benefits.
The implementation of a system such as this, however, would depend greatly on the future of decision-making in the WTO, like almost every other issue that the organization is facing today, as the entire issue of reform is tied into WTO’s consensus-based decision mechanism. Realistically, it seems unlikely that the WTO will be able to reach a consensus on changing the current system of special and differentiated treatment. Over time, nevertheless, specific Members may offer to renounce or waive their designation as developing countries. That is what Brazil demonstrated. Brazil and the United States came to an understanding whereby Brazil would no longer classify itself as a developing country in exchange for United States support for Brazil to join the Organization for Economic Co-operation and Development. That appears to be a proven and more realistic reform scenario.
E. Appellate Body
It is critical that the overarching goal of any reform of the Appellate Body should be centered around maintaining the de-politicized nature of WTO dispute adjudication. This independent, third-party element of the WTO dispute system is a major aspect of the “value proposition” offered by the organization to its membership.
The Appellate Body’s primary responsibility is to provide guidance on “conflicting interpretations, constitutional and systemic issues, non-discrimination and transparency principles, the relationship between trade and non-trade concerns, the connection between the various WTO agreements, the relationship between these and arrangements outside of the WTO, such as bilateral trade agreements, and the relationship between other fields of international law.” The Appellate Body has certainly reduced the fragmentation in International Law. This achievement “is worth preserving in recalibrating WTO dispute settlement while allowing panels to excel in assessing the context of the scope and meaning of the detailed rule book of the WTO.”
An immediate solution to the Appellate Body crisis does not seem apparent right away as the organ depends to a great extent on the actions of the bigger WTO Members. In addition to preserving its neutral characteristics, finding common ground, therefore, is another key factor in solving the crisis.
Possibly reinventing and returning the scope of the Appellate Body to the role it played in 1995 at the founding of the WTO would be a place to start. The United States, the critical player for the future of the Appellate Body, already shares this objective of essentially limiting the scope of the body. In 1995, the Appellate Body was expected by members to play a relatively confined role. While this is criticized by some WTO members who have objected to the validity of United States’ grievances, nevertheless, contesting the viability of these concerns does nothing to resolve the issue at hand. Debating over the different perspectives and visions of how the system should optimally function will not lead toward a path forward that can realize the basic objectives and fundamental goals of the WTO. It could prove more advantageous to narrow the goal and make it more feasible than to have a larger more idealistic goal that would be impossible for every stakeholder to agree to. It may be better to make incremental progress by achieving some common ground and building up from there, regardless of how basic or rudimentary it may seem.
With the leverage that the United States holds in the reform process, the Appellate Body must address the legitimate concerns of the United States and other Members to end the paralyzing appointment impasse. The Trump administration’s complaints that led the United States to conclude that the Appellate Body had overreached its mandate revolved around six points: the failure of the Appellate Body to complete appeals within the established ninety-day deadline; the pattern of Members of the Appellate Body continuing to serve on appeals after their terms have ended; the Appellate Body’s misuse of its constrained power to examine legal matters, including conclusions on the nature of a WTO Member’s domestic law; the publication of advisory opinions on subjects unrelated to the subject of the appeal; the use of Appellate Body reports as precedent; and a tendency to make decisions that go beyond the WTO agreements’ explicit language, either increasing United States obligations or reducing its rights.
Many of the six pivotal concerns put forth by the United States have legitimacy and are indeed shared extensively both domestically in the United States and abroad. It is true that appeals rarely get addressed and closed within the stipulated ninety-day period. Appellate Body Members have, in fact, remained on cases beyond the completion date of their term. Appellate Body reports frequently go beyond the key matter required to settle a disagreement. Indeed, appeals “frequently re-examine facts rather than solve precise legal questions”, and “too much is often made of past decisions.” Other Members and even senior WTO personnel concur with the United States critiques concerning the Appellate Body. Whether the stated trends amount to judicial overreach is another question.
The European Union has played an important role in taking steps towards a solution and advancing the thinking and discussions for strengthening and safeguarding the WTO’s dispute settlement function. In 2018, the European Union, with eleven other WTO Members, proposed an agenda identifying five issues aimed at improving the dispute settlement system while simultaneously addressing the concerns raised by the United States. These include: disregard for the ninety-day deadline for appeals; continued service by appointees who have expired their terms of office; advisory opinions on issues not necessary to resolve a dispute; Appellate Body review of facts and domestic law de novo; and use of reports as precedents.
While such proposals and coalitions have real potential, achieving a permanent solution to the crisis is contingent on revitalizing the WTO’s rulemaking function. If the WTO’s rulemaking role is reinforced and its rules are updated and amended, the impasse in the organization’s dispute process might be resolved effectively. Improved regulations will lessen the Appellate Body’s need to interpret the law in poorly defined areas and prevent the use of its reports as precedents.
The long-term functioning of the Appellate Body must count on the support and trust of the entire WTO membership, and that of the United States. Taking this into account, establishing a basic and practical consensus as a groundwork for progress is essential. The project’s success depends on the planning phases, which must be carefully prepared for and carried out. The new system must be viewed as a credible effort for it to work, and this rests in large part on buy-in from all stakeholders, which can only be obtained through deliberate conversations.
IV. Conclusion
One of the key cornerstones of globalization is the WTO. Despite the WTO’s flaws and gaps, it significantly helps stabilize and predict trade relations. The importance of rules and the need to reinforce them becomes more essential in a world of slow growth and growing protectionist tendencies.
It is undoubtedly easy to criticize the WTO and its shortcomings, but it is now time for WTO Members to act. Although a multilateral approach would be ideal, given the conflicts in the globe and among WTO Members, many trade issues can only be resolved in a plurilateral manner. The hope is that WTO Members will either eventually multilateralize the plurilateral accords that are successful or see them as a stepping stone towards universality if they can resolve MFN difficulties.
To conclude, the core of all reform processes seems to be intrinsically tied to the future of the consensus-based system of the WTO. Proposed reform revolves around this issue, affecting the future of the Appellate Body, the effectiveness and responsiveness of the WTO, and the economic development of its membership.
Ultimately, the policy proposals put forth in this article hope to realize a WTO that is transparent, fair, accountable, and representative. It proposes an international organization whose membership is engaged, properly represented, and whose proceedings are legitimate and respected. This can be accomplished with direction from the WTO itself through the Secretariat together with voices from the corporate and civil sectors advocating for the interests of world citizens to supplement the voices of state governments advocating for their own interests. These various sectors have the potential to collaborate to develop a new system of global governance that is truly suited to governing a globalized world.
Indeed, along with the reform proposals put forth, a way to make all reform cohesive and sustainable, and to further utilize the great resource that is the WTO to help address the challenges of today, would be to enhance the WTO’s role as a global forum. To strengthen its capacity in this manner so that Member states and non-state actors alike can address and discuss common issues that they face. Advancing social and environmental sustainability, dealing with an evolving trading system, growing digital trade, and rapid technological development can be discussed through the forum gathering government representatives, civil society, the private sector, and academics to help countries and societies develop further towards resilience.
Institutions, frameworks, and processes are not ends in and of themselves. Rather, they should encourage and facilitate the fulfillment of substantive objectives. Determining whether, how, and to what degree the WTO can multilateralize “what is occurring in regional and other fora and fill in the gaps in terms of what is not being (and cannot be done) among subsets of” Members is the challenge moving forward.
For the WTO to be revitalized, support for further analysis of the results of national trade policy and the organization’s functioning is essential. Pessimism tends to materialize into reality. A first step in re-establishing an atmosphere that enables constructive engagement and regenerates the trust required to renew the WTO negotiation function is to launch procedures focused on policy dialogue and institutional learning.
Although the international system is undergoing a difficult period, ideas for change can act as a strong beacon to direct improvements in institution development. Progress will be gradual and a pragmatic approach is required. Even though the trading system is undergoing a rigorous strain, the current crisis presents an opportunity. It is hoped that it will mark the beginning of a process leading to a multilateral trade regime that is more suited to the realities of today’s world.
