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Blog Post June 20, 2022

The WTO Ministerial Agreement – Problematic Progress

By Barbara C. Matthews

Today in Geneva, World Trade Organization (WTO) ministers triggered headlines proclaiming an historic trade agreement. In reality, their accomplishments are far more mundane. Many are relieved that the WTO even continues to exist amid deepening geopolitical splintering.

Of course, the agreements concerning e-commerce, fisheries subsidies, and COVID-19 vaccines deserve to be celebrated.  But most of the agreements are temporary in nature.  Deep divisions among WTO members remain, as evidenced by various silences across the official documents released as of this morning. The most notable of silences involve Russia and China.

The E-Commerce Moratorium Decision

It is true that the moratorium regarding customs duties on electronic transmissions has been extended. But the extension is temporary, lasting only 18 months. The short-term nature of the extension suggests just how hard it was to reach agreement.

While the agreement provides “Ministers or the General Council” at the WTO the ability to extend the moratorium, the agreement itself sets March 31, 2024 as a clear expiration deadline. If the WTO Ministerial Council has not met by this date, the moratorium expires, and a new waiver or extension will be required.

The Fisheries Subsidies Agreement

The WTO also officially required its Members to cease subsidizing fishing activities that are “illegal, unreported, and unregulated.” It also required them to cease subsidizing fishing activities regarding overfished stocks and fishing operations outside their own jurisdictions. Yet, Members remain responsible for determining what constitutes “overfishing.”  Implementation, if it occurs, will be slow. The agreement only becomes effective two years after the decision has been become a formal amendment to the WTO Treaty.

In other words: fishing subsidies have not been eliminated except with respect to activities that domestic law already declared as illegal. Moreover, the implementation period extends well into the future. While the WTO Secretary General declared that the Fisheries Agreement constitutes the first WTO agreement “with sustainability at its heart,” the preamble was more modest. The formally agreed text only identifies the elimination of “overcapacity” as its core objective and the word “sustainability” is markedly absent.

Finally, Act. 12 of the decision may be the most important part of the Fisheries Agreement. It indicates that today’s agreement “shall stand immediately terminated” if the decision has not been implemented through “comprehensive disciplines within four years of the entry into force of this Agreement.”

The COVID-19 Vaccine Decision

The intersection of intellectual property rights, biotech manufacturing, trade rules, and public health ironically highlighted the fissures in the post-war multilateral system. Today was no exception. Indeed, no intellectual property waivers have been granted regarding COVID-19 vaccines

As U.S. Trade Representative Ambassador Katherine Tai noted, the agreement merely “produced accommodations to the intellectual property rules for COVID-19 vaccines that can facilitate a global health recovery.” UK International Trade Secretary Anne-Marie Trevelyan was more direct: “…this is not about waiving intellectual property rights.  This decision should make it easier for developing countries to export the vaccines they produce within existing guidelines.”

Intensifying Pressure Points

Official sector statements communicate with negative space (silence) at least as much as they do with their words. These silences provide clues about the scope and scale of disagreements. The silence emanating from Geneva speaks eloquently about the fragility of the multilateral trading system and indirectly illustrates why today’s announced agreements are so tentative, temporary, and limited.

The formal press statement from the WTO makes clear that no consensus on the WTO’s future agenda exists. It specifically highlights four familiar areas that block progress: food stockpiling, subsidies, cotton, and market access. The impasses surrounding market access and food stockpiling should sound alarm bells for those seeking assurances that the WTO will survive the decade as a functioning institution.

Market Access and Subsides (China): China’s well-known policies regarding market access have been generating tension within the WTO for over a decade in addition to Beijing’s controversial push for “market economy” status. A number of economies continue to object to granting China market economy status in large part due to its extensive subsidy and state-owned enterprise economic structure.

None of these issues was resolved during the marathon negotiating sessions in Geneva this week. This is not a situation in which the issues are unclear or technically difficult to address. Rather, the inability to resolve these differences reflects a deep disagreement on whether (or not) the multilateral trading system and its members will retain their commitment to market economy principles.

Food Stockpiling (Russia): The WTO issued a long Declaration on food insecurity which largely “reaffirms” its commitment to existing standards that permit Members to implement export restrictions to address food insecurity and urges Members  “with available surplus stocks to release them on international markets consistent with WTO rules.” The Declaration is silent on the cause for an intensifying food crisis globally: the war in Ukraine.

The WTO documents do not highlight that the Russian Federation was present at the Geneva meetings. The long list of concerns and causes concerning the intensifying food crisis mention rising prices three times and trade disruptions, but never note (much less condemn) the blockade of Ukraine’s Black Sea ports by Russia – through which Ukraine’s considerable exports of wheat and sunflower oil and other agricultural commodities flow to the global economy. Nor does the statement call out the considerable disruptions in supply chains associated with Russia’s illegal invasion of Ukraine. Strikingly, the European Union has not yet released a statement supporting or discussing the WTO outcomes.

Conclusion

The Bretton Woods structure of economic interdependence sought to make war too expensive to wage.  To that end, it sought to create positive economic incentives for peaceful dispute resolution (alongside the United Nations). The end of the Cold War made it possible to pursue a fully integrated global economy, ushering in WTO memberships for Russia and China. But the WTO’s silence regarding the key issues of the day strongly suggest that the multilateral system is far more fragile than the headline-making (but very temporary) agreements on fisheries and e-commerce announced today.


Barbara C. Matthews is a non-resident Senior Fellow with the Atlantic Council’s Geoeconomics Program.  She is also Founder and CEO of BCMstrategy, Inc., a data company that quantifies public policy risks using patented technology.  She has had a distinguished career in global financial and economic policy, including government service as the first U.S. Treasury Department Attaché to the European Union with the Senate-confirmed diplomatic rank of Minister-Counselor and as Senior Counsel to the House Financial Services Committee.

At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.

Image: Geneva, Switzerland - September 3, 2020: Entrance of the World Trade Organization (WTO) headquarters, an intergovernmental organization dealing with regulation of international trade between nations.