The WTO Hangs On

The WTO Hangs On

WTO Director-General Ngozi Okonjo-Iweala (right) is congratulated by Indian Commerce Minister Piyush Goyal after a closing session of a WTO ministerial conference in Geneva in June 2022.
WTO Director-General Ngozi Okonjo-Iweala (right) is congratulated by Indian Commerce Minister Piyush Goyal after a closing session of a WTO ministerial conference in Geneva in June 2022. Fabrice Coffrini/Reuters

WTO members confounded expectations last week by concluding a deal on fisheries subsidies, the first major multilateral agreement in nearly a decade. But the trade body is not out of the woods yet.

June 22, 2022 3:40 pm (EST)

WTO Director-General Ngozi Okonjo-Iweala (right) is congratulated by Indian Commerce Minister Piyush Goyal after a closing session of a WTO ministerial conference in Geneva in June 2022.
WTO Director-General Ngozi Okonjo-Iweala (right) is congratulated by Indian Commerce Minister Piyush Goyal after a closing session of a WTO ministerial conference in Geneva in June 2022. Fabrice Coffrini/Reuters
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Current political and economic issues succinctly explained.

The World Trade Organization (WTO) concluded a package of deals after a six-day marathon of negotiations last week at its twelfth ministerial conference (MC12). Generally, expectations going into the meeting were low, as the 164-member organization has struggled for years to agree to new rules.

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The pandemic certainly played a role in recent delays, but the failure to achieve substantive outcomes at the last meeting, in Buenos Aires in 2017, also weighed heavily on the organization. There, members could not even agree on the customary conference-concluding declaration. This led many to ask whether another failed negotiating round was the beginning of the end for the WTO. The situation was tense in the lead-up to MC12, with the meeting framed as a make-or-break moment for the organization. However, early Friday morning, trade negotiators were ecstatic as they wrapped up the WTO’s first major deal in nearly a decade.

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While there is cause for celebration, this does not mean that the WTO is out of the woods yet. In fact, as experts dug into the negotiating documents over the weekend, many raised questions about the substance and the durability of what was decided at MC12. However, three notable outcomes did emerge. Here’s a breakdown of what they include:

Fisheries Subsidies

A historic deal to rein in government subsidies to the fishing industry is the most significant outcome of MC12. Not only is it the first multilateral agreement that WTO members have signed since 2013, but it also marks the first time they have negotiated rules with sustainability as the focus. The new rules prohibit subsidies for fishing vessels or operators that engage in illegal, unreported, and unregulated (IUU) fishing, as well as prohibit subsidies that support fishing of overfished stocks (when the amount of fish drops below a specific threshold). Members also agreed to ban subsidies for fishing and fishing-related activities on the high seas (international waters), where biodiversity is threatened by unsustainable fishing practices.

Though it is a major achievement, the deal is incomplete because comprehensive rules to address subsidies that support overcapacity (the ability to fish beyond sustainable catch levels) and overfishing (separate from the fishing of overfished stocks, this is fishing at a rate that does not allow a species to replenish its population) were not included mainly due to objections from India; New Delhi called for a twenty-five-year carveout for developing countries that would significantly weaken the deal. Such subsidies include those for vessel construction, purchases of machinery and equipment, personnel costs, and fuel. Fuel subsidies are of particular concern because they make up 22 percent of total government subsidies in the fishing industry. Negotiations to expand the agreement to include more comprehensive rules will continue for up to four years. If a deal isn’t reached by that time, there is a provision under which the whole agreement automatically terminates.

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For now, WTO members have the chance to put these new rules into effect and make these subsidies more transparent through reporting requirements and regular dialogue via a newly created committee on fisheries subsidies. This is an essential foundation on which to build and gives members an opportunity to improve the text during future negotiations.

Moratorium on E-Commerce Duties

The moratorium on e-commerce duties was extended, though there were real concerns leading up to MC12 that it would be the first time a WTO meeting increased barriers to trade instead of reducing them. The moratorium, which has been in place for twenty-four years, prohibits the application of tariffs on electronic transmissions such as email, streaming services, and software. Some countries have argued that the moratorium prevents them from collecting revenue, though studies suggest [PDF] that any tariff revenue would be offset by the economic losses from new restrictions on digital trade.

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India, Indonesia, Pakistan, South Africa, and Sri Lanka led the charge against renewing the moratorium this year but relented after members agreed to have a broader discussion about the moratorium in the future. It is set to expire at the next ministerial meeting in December 2023, or in March 2024 if that conference is postponed.

IP Waiver for COVID-19 Vaccines

WTO members have been negotiating a waiver of parts of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) with the hope of facilitating greater access to COVID-19 vaccines and therapeutics worldwide. Waiver proponents argue that patents are preventing poorer countries from manufacturing vaccines. The waiver was a major sticking point in the lead-up to MC12, although the extent to which it would improve vaccine equity has been hotly debated.

Initially, negotiating lines were drawn largely on the basis of income level, with wealthier countries opposing the waiver and many poorer countries supporting it. But the United States soon switched sides and signaled support for a waiver, even though it has historically been a staunch supporter of intellectual property rights. However, European Union (EU) member states and other countries home to pharmaceutical giants remained skeptical; and U.S. support for a broad waiver was less than robust.

The final agreement provides for a limited TRIPS waiver for COVID-19 vaccines, and further talks on expanding it to include therapeutics are set to take place in six months. The pharmaceutical industry and supporters of a waiver alike have expressed dissatisfaction with the result. Some suggest that the waiver comes too late, since vaccine supplies are now plentiful, but major challenges remain in the distribution of vaccines and public health campaigns to encourage vaccination. As the waiver takes effect, WTO members will get a better sense of its value and what additional actions might be needed to ensure equitable access to life-saving COVID-19 vaccines and treatments. Additionally, this deal could provide a framework for responses to future pandemics.

What’s Next for the WTO?

Trade ministers are undoubtedly feeling energized about multilateral trade talks after MC12, but the hard work is only getting started. It’s important to keep in mind that the work of trade ministers over a few days pales in comparison to the years of work put in by negotiating chairs; delegates at the missions in Geneva; and the WTO’s administrative arm, the Secretariat, which plays a critical role in supporting negotiations. The daily, often mundane work of the WTO goes largely unnoticed [PDF]. That work resumed on Monday and will be essential to maintaining the momentum generated by MC12.

The top three outcomes underscore that the WTO remains relevant in both traditional and new trade issues, and they should be celebrated. However, trade ministers should keep their sleeves rolled up and prepare for more wrangling over implementation.
Inu Manak, CFR Fellow for Trade Policy

Among the work still to be done, members failed to agree on a plan for future negotiations on agriculture, which are likely to remain highly contentious [PDF]. And although members agreed to limit restrictions on food exports, commitments to address food insecurity amid the Russian war in Ukraine remain shallow. Members will need to hold each other to account and continue cooperative efforts where possible to avoid putting more strain on already stressed agricultural commodity markets. Meanwhile, the so-called plurilateral negotiations—which involve smaller groups of countries rather than the entire WTO membership—also did not advance. Agreements on e-commerce, plastic pollution, and investment facilitation are still uncertain. However, members did commit to work on the broader issue of WTO reform, including fixing the broken dispute settlement system, which has ground to a halt due to the U.S. refusal to appoint new members to the WTO Appellate Body.

After many years of deadlock and frustration, WTO observers prepared again for failure. But at MC12, the WTO proved it is hanging on. Most importantly, the ministerial showed how WTO members can advance reform by working through negotiations. The top three outcomes underscore that the WTO remains relevant in both traditional and new trade issues, and they should be celebrated. However, trade ministers should keep their sleeves rolled up and prepare for more wrangling over implementation.

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