Introduction

In February 2024, trade ministers will convene for the 13th edition of the World Trade Organization’s (WTO) biennial Ministerial Conference (MC13). Historically, these negotiations have proven challenging, often yielding limited outcomes. The preceding Ministerial Conference (MC12) required hard-won compromises resulting in a limited patent waiver for COVID-19 vaccines, an incomplete fisheries subsidies agreement, narrow disciplines related to export restrictions to ease food insecurity, and broad commitments toward WTO reform. Thirty years after the creation of the WTO, there are concerns about its relevance. These concerns stem from perceptions that its three critical functions –negotiation, dispute settlement, and transparency through monitoring– are inadequate in addressing the challenges posed by climate change, the digital divide, and the proliferation of investment restrictions, economic sanctions, economic coercion, and industrial and agricultural subsidies. At the heart of these discussions lies the efficacy of the WTO in navigating contemporary challenges, raising questions about its adaptability in a world marked by a polycrisis. Hence, the question remains: how might MC13 contribute to shape the future of world trade? We look to the most recent WTO Public Forum for guidance.

The Public Forum is the WTO’s largest annual public event, drawing over 2,000 participants from civil society, academia, business, government, international organizations, and media outlets worldwide. Each year, it serves as a platform for discussing the latest developments and challenges within the multilateral trading system. In the 2023 forum themed “It is time for action,” sessions focused on exploring how trade can foster a greener and more sustainable future, including through digital technologies and services.

It is widely acknowledged that international trade contributes to climate change, primarily through emissions associated with the production, transportation, and distribution of goods. However, at last year’s Public Forum, leading trade experts also came together to examine how trade tools can be harnessed to combat climate change and support the transition to a greener economy. The conference was full of hope and ambition, centering on the imperative to modernize trade rules to address contemporary challenges, including not only climate action but also the digital transition.

In this blog, we delve into three key topics that embody hope and ambition for MC13: the environment, digital trade, and WTO reform. We urge both members and the WTO Secretariat to prioritize these topics, striving to achieve substantive outcomes that effectively address these pressing challenges.

The Environment

There is increasing recognition of the role that trade plays in climate action. This was not only evidenced at last year’s Public Forum but also at the recent COP28 UN Climate Summit in December of 2023. Trade was featured in COP28’s agenda for the very first time through the inaugural “trade day” with side events from the WTO, UNCTAD, ICC, and ITC. However, trade-related climate action is not without challenges. Current WTO rules fall short in recognizing the legitimacy of trade measures taken for climate action, particularly when these measures restrict trade. Challenges include the absence of a comprehensive WTO approach to green subsidies, unresolved issues regarding tariff and non-tariff barriers on environmental goods and services dating back to the Doha Round, and inconsistencies in setting and enforcing of environmental standards.

Moreover, despite the recognition that climate change is a global challenge requiring global cooperation and solutions, there has been a rise in unilateral climate measures, particularly from developed countries. Measures like the European Union’s Carbon Border Adjustment Mechanism and Deforestation Regulation and the United States’ Inflation Reduction Act have faced criticism for their inward focus and for failing to consider the needs of developing countries or the impacts of these measures on their economies. Disagreements over such measures arose at COP28, and were also present at the Public Forum, where equity and unilateral measures were at the forefront of the discussions.

Looking ahead to MC13, while expecting new rules on green subsidies or comprehensive and harmonized standards may be overly ambitious, several feasible outcomes exist. There are several plurilateral workstreams, such as the Dialogue on Plastics Pollution and the Trade and Environmental Sustainability Structured Discussions (TESSD), that have been making significant progress toward promoting environmentally sustainable trade practices. The Ministerial Conference offers an opportunity to reinforce these initiatives and promote an overarching green trade at the WTO. For example, by reinforcing the WTO’s commitment to sustainable development. In the Marrakesh Agreement establishing the WTO, members recognized that “relations in the field of trade and economic endeavour should be conducted… in accordance with the objective of sustainable development, seeking both to protect and preserve the environment and to enhance the means for doing so in a manner consistent with their respective needs and concerns at different levels of economic development.” This commitment could be reaffirmed through a Ministerial Declaration re-emphasizing the preamble.

A second potential outcome is expanding dialogue to ensure that trade-related measures taken for climate objectives are balanced and inclusive of different types of stakeholders. As part of the TESSD, 76 WTO members have been engaging in informal working groups on trade-related climate measures, environmental goods and services, circular economy, and subsidies.  Bringing other international bodies such as the UNFCCC into these discussion through the establishment of a joint working group or dialogue on trade and climate issues could be another meaningful outcome for MC13.

Finally, integrating environmental sustainability into every Trade Policy Review could ensure climate considerations are central to every country’s approach to trade policy. The Trade Policy Review Mechanism has long served as a tool for drawing attention to Member’s domestic trade policies and highlighting its strengths and weaknesses. Therefore, this mechanism could be used to trigger more environmentally sustainable outcomes.

Digital Trade

The WTO holds significant potential to shape the digital landscape, necessitating the ramp-up of purposeful discussion. With digital trade growing at a rate of 8% per year and digitally deliverable services constituting more than half of total service trade amid an environment of uncertainty, there is a need for proactive rulemaking to ensure smooth, predictable, and free trade flows. As emphasized in the 2017 Global Review of Aid for Trade, the inclusion of developing countries is paramount in bridging the digital divide. Director-General Okonjo-Iweala has repeatedly highlighted the future trade prospects offered by digitally delivered services.

Looking ahead to MC13 and beyond, WTO members should set their sights on achieving two deliverables in the realm of digital trade: the sustained continuation of the e-commerce moratorium and progress on the Joint Statement Initiative (JSI) on e-commerce. The e-commerce moratorium, established in 1998 at MC2, provides for the non-imposition of customs duties on electronic commerce. While the moratorium has been consistently extended, recent MCs have seen opposition against the moratorium. Another extension of the e-commerce moratorium at MC13 should be supported by further studies addressing concerns raised by India and South Africa regarding its practical impacts.

The JSI on e-commerce, initiated in 2019 with the participation of 90 members, has consolidated twelve Articles covering electronic contracts and cybersecurity. Members aimed for substantial conclusions to the negotiation by the end of 2023. Despite its uncertain legal legitimacy due to a lack of participation and consensus, the JSI on e-commerce could revitalize the WTO’s negotiation arm in a challenging environment where few negotiations have resulted in agreements.

To effectively navigate these deliverables in MC13 and beyond, the WTO should engage in evidence-based discussions and collaborate with international and national counterparts. Collaborative efforts amplify the WTO’s capacity to make meaningful contributions for all. For example, the recent Handbook on Measuring Digital Trade co-authored by the WTO, IMF, OECD, and UNCTAD deserves recognition. These endeavors facilitate accurate assessments of digital trade impacts and support capacity building. Furthermore, strategic disclosure of the consolidated text of the e-commerce JSI and advocacy for its progress in platforms such as the Asia Pacific Economic Conference and the G20 Digital Ministerial Meeting could enhance awareness of the JSI and bolster the WTO’s impact and relevance in shaping contemporary international trade dynamics.

WTO Reform

 Dispute Settlement

Reform of the WTO is pivotal to restoring trust in the multilateral trading system. Following the Doha Round’s failure and the backlash to the dispute settlement system, the WTO has been facing challenges with defining its purpose. The WTO dispute settlement system, once hailed as the organization’s “crown jewel,”  ensured Members’ adherence to the WTO agreements and facilitated trade liberalization. However, amid growing geopolitical tensions and widespread skepticism surrounding the benefits of trade liberalization, more countries are moving away from WTO rules and casting doubt on the existing trade framework. For example, it has become commonplace in the U.S. to assert that strict enforcement of WTO rules negatively impacts American jobs and industry while enabling China’s rise as a mercantilist superpower.

The WTO’s Deputy Director-General describes reform as “updating all of the WTO’s core functions — transparency and monitoring, negotiation, and dispute settlement.” Although most Members agree that “a fully and well-functioning dispute settlement system” is key to addressing contemporary global trade policy challenges, returning to a system where decisions based on de-facto precedents are binding and enforceable may prove challenging. With prospects for the swift restoration of the WTO dispute settlement system, including the functioning Appellate Body, looking bleak, countries are turning to Regional Trade Agreements (RTAs) for an alternative. RTAs offer greater flexibility in addressing specific country needs through provisions targeting particular firms, sectors, and products. For instance, the Rapid Response Labor Mechanism established under the US-Mexico-Canada Agreement (USMCA) targets labor issues within particular factories. RTAs and the Multi-Party Interim Appeal Arbitration Arrangement (MPIA) can be a source of inspiration for resolving cross-border trade tensions beyond the existing WTO framework.  Although provisions under RTAs may lack binding enforcement, they can still provide the way to effectively address issues through substantive content  and dialogue.

The WTO should consider incorporating these new approaches into its existing framework for dispute settlement. There are many ways to settle disputes. By fostering open discussions on future dispute settlement mechanisms, the WTO can clarify what “a fully and well-functioning dispute settlement system” means for all its members.

  Accessions and Public Engagement

The importance of expanding membership in the WTO should not be underestimated. Since Afghanistan’s accession in July 2016, no new members have joined the organization. However, there has been encouraging progress for several interested economies including Comoros and Timor-Leste. Accomplishing new accessions during the upcoming MC, would send a positive signal to the world, indicating that the multilateral trading system still has momentum. It would be essential to honor the General Council Guidelines on LDC Accessions, as reaffirmed in the MC12 outcome document. These guidelines prioritize accommodating special and different treatment and providing necessary technical assistance to aspiring WTO members.

In addition to reflecting the voices of historically underrepresented countries, attention should also be given to private actors’ perspectives. The WTO has been actively engaging stakeholders such as businesses and consumers to ensure that trade rules reflect their interests. Continuing these initiatives is crucial, as these stakeholders are the most directly affected by policy changes. In addition, there is an opportunity to include the voices of youth at MC13. Similar to the G7 and G20 Summits, which have official engagement groups for youth, the WTO could establish a platform to hear from younger generations. Given that young generations will be significantly affected by climate change and the digitalization of the economy, their input is invaluable for shaping future trade policies.

Conclusion

The WTO needs to function as a practical and effective institution for advancing sustainable development. Merely advocating for free trade without considering its broader impact is no longer acceptable. It is time to think boldly about the role of trade in climate action and the digital transition and consider how the WTO can support progress in these areas. This blog post identified three key topics through which MC13 could contribute to shaping the future of trade: the environment, digital trade, and WTO reform. It also identified specific and feasible initiatives within each category. The 2023 Public Forum vividly showcased the potential of trade to contribute meaningfully to society. Inspired by the spirit of hope and ambition evident at the Public Forum, we are optimistic that MC13 can live up to these expectations.