Priorities the new WTO DG must have

February 24, 2021 7:15 AM

Bridging the broken trust amongst members of the WTO and updating the rules to meet the 21st century realities are the priorities of Ngozi Okonjo-Iweala. MC12 needs urgent attention, as does the moribund state of the Appellate Tribunal. While the new DG will try and set the WTO house in order, India can chip in and ensure that trade multilateralism which is close to India’s heart succeeds

India should not lose this opportunity to chip in her positive best for the cause of trade multilateralism so close to her heart.

By Augustine Peter
The World Trade Organisation (WTO) has 164 members and 22 countries are in the process of acceding to it, making it a veritably universal multilateral institution. However, as it turned 25, the WTO has found itself in distress on many counts. Its Director General (DG) bowed out prematurely on August 31, 2020. Unilateral actions by some members resulted in trade-war-like situations. The WTO has been found wanting on all its major mandates: (a) it failed as a negotiating forum, with the Doha round of trade negotiations launched in 2001 not making much headway; (b) governance remains under stress with many members seriously concerned at the poor notification regime and compliance; and (c) the jewel in the WTO’s crown, the Dispute Settlement System, is in shambles with the US succeeding in singlehandedly blocking appointment of judges to the Appellate Body.

To top it all, the Covid-19 pandemic struck the globe, with a large number of members turning to protectionism and export restrictions. Global trade registered a steep decline. The 12th Ministerial Conference (MC12) has been delayed at least until end-2021.

The change of guard at Washington on January 20, 2021, has come as a welcome relief to the multilateral system in general and to trade multilateralism in particular. One of the first decisions of President Joe Biden was to re-join the Paris climate agreement. Biden also conveyed strong support to the candidature of Ngozi Okonjo-Iweala, former finance minister of Nigeria and a former World Bank senior executive of 25 years, leading to her appointment as the DG of the WTO with effect from March 1, 2021.

The task before the new DG is unenviable. The chorus against vaccine nationalism and for free vaccine and removal of intellectual property (IP) restrictions on vaccine distribution is loud. The joint paper by India and South Africa is still under discussion in the TRIPS Council. The new DG in her first address to the General Council after her selection as DG revealed her mind: addressing the issue of vaccines and containing the pandemic, and “making WTO stronger, more agile and better adapted to the realities of today.”

Having been the board chair of Gavi, The Vaccine Alliance, she understands the importance of access to vaccine by developing countries. She was of the view that relaxing WTO rules on IP is one way to address the issue. Licensing, as has been done by AstraZeneca to the Serum Institute in India, is a more viable idea and here the IP issues are not coming in the way.

Bridging the broken trust among members of the WTO and updating the rules to meet the 21st century realities are obviously her priorities. MC12 needs urgent attention. The US-China trade issues continue in spite of the Dispute Settlement Body (DSB) ruling against the US trade restrictions. The good tidings from the US is a great positive. However, will she be able to build the trust by remaining in Geneva and interacting with the ambassadors? Most probably not.

She would need to move around the capitals and convey the urgency. She needs to use her persuasive skills and draw on the abundant goodwill as the first African and first woman DG in the GATT-WTO history.

Next in her priority would be the MC12. While the Doha agenda remains unaddressed in any substantial way, there are serious efforts for rulemaking on new issues. In the absence of consensus on multilateral negotiations, plurilateral route has been initiated by a section of the WTO membership for discussions on issues like domestic regulation on services, e-commerce, investment facilitation for development, and MSMEs. Many members are joining the discussions. It has also been clarified that the WTO members that did not participate in the process could join at any later stage and that any negotiated deal would be available to all the WTO members on MFN basis.

MC12 would be the test of the new DG’s mettle. She needs to show results: at least on fisheries subsidies and vaccine issues, besides some forward movement on agriculture. In her early statements she had spoken of the need to have an agreement on a permanent solution to the issue of public stockholding programmes for food security purposes and also agreement on cotton, at MC12.

The moribund state of the Appellate Tribunal needs urgent attention. The new DG, naturally, places hope in the support of the Biden administration for addressing this issue. The proposed arbitration arrangement based on Article 25 of the Dispute Settlement Understanding (DSU) would not serve the purpose on a permanent basis. Solutions have to be found within the dispute settlement framework as it exists now.

The issue of laxity of compliance of notification requirements is a major concern of many members, including the US and the EU. The main target is obviously China’s subsidy programmes. This requires a medium-term strategy by the DG.

Graduation of so called ‘self-designated’ developing countries to developed country status so that they cease to avail of the Special and Differential Treatment (S&DT) provisions in WTO agreements is another area of conflict at the WTO, with a strident US stand under the Donald Trump administration. The target again is China, and also India.

Meanwhile, South Korea (per capita income over 16 times that of India) and Brazil (per capita income 3.45 times that of India) have declared that they would not avail of the S&DT provisions under WTO agreements. The EC has struck a rather conciliatory note and has argued for substitution of blanket flexibilities to developing countries with mechanisms of ‘graduation’. The EC holds that S&DT should be targeted, needs-driven and evidence-based. India does not need to have concern on this count as any criteria applied would invariably have India continuing as a developing country, with the per capita income of China and the US 5.77 times and 34 times, respectively, higher than that of India.

While there is going to be a serious effort by the new DG to set the WTO house in order, how can India chip in and ensure that trade multilateralism which is close to India’s heart succeeds? India had thrown her weight at the Doha and Cancun ministerial conferences (2001 and 2003) and had her way on Singapore issues and also in ensuring flexibility under the TRIPS agreement for public health. Since 2001, two decades have passed.

The Indian economy grew to being the fifth largest. However, it is doubtful if she enjoys the same clout now as in Doha, at the multilateral trade forum. This is largely because India remained less flexible in the multilateral trade discussions even as the world has been changing fast. Digital economy and e-commerce have taken centre stage. This is an opportunity to save trade multilateralism, and the course open to India is to recognise the changed realities in the global economy and consider being open to discussions on new issues like e-commerce and investment promotion for development so that the issues of India’s concern in agriculture, fisheries subsidies, etc, can also be taken forward. At initial interactions the new DG referred to India along with the US, China and the EU for taking the WTO process forward at this critical juncture. India should not lose this opportunity to chip in her positive best for the cause of trade multilateralism so close to her heart.

The author is former member, Competition Commission of India, and currently visiting fellow, RIS

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