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WTO Reform: The Time to Start Is Now

Summary by Uri Dadush

Core Content

The World Trade Organization (WTO), established in 1995, has played a vital role in maintaining stability and predictability in global trade. However, it has failed to deliver on its promise of fostering new trade rules and liberalization. The Doha Development Agenda (Doha Round), though a diluted version of the original 2001 initiative, remains critical for preserving the WTO's credibility and capturing the remaining trade gains. Despite its conclusion by the end of 2010, the need for further reform persists, especially as the global financial crisis has highlighted the limitations of current WTO disciplines in areas such as food security, financial regulation, and climate change.

Main Issues and Challenges

• Ineffectiveness in Key Areas: The WTO has struggled to reduce agricultural subsidies and liberalize services trade. Its dispute settlement system, while effective, has not kept pace with the growing complexity of trade issues.
• Protectionist Pressures: In a world of sluggish growth and rising protectionism, the need for strong, enforceable trade rules has become more urgent.
• Autonomous and Regional Liberalization: Multilateral negotiations have lagged, while unilateral and regional trade agreements have advanced trade liberalization more effectively.
• Doha Round's Limited Impact: The benefits for developing countries have diminished significantly, from over $100 billion to less than $20 billion annually. The current Doha proposals offer minimal binding commitments for developing nations.

Key Findings

• The WTO's role in trade liberalization has been increasingly overshadowed by regional and bilateral agreements.
• The institution has not kept up with the rapid changes in global trade dynamics, particularly in areas like services and digital trade.
• The Doha Round's conclusion is necessary but insufficient for addressing the systemic issues within the WTO.
• A more flexible and inclusive negotiation approach is essential to meet the diverse needs of member states.

Proposed Reform Agenda

1. Initiate Analysis and Consultation: Begin a serious process of reflection and consultation on WTO reform even before concluding the Doha Round. This would enhance the institution’s credibility and encourage progress.
2. Promote Plurilateral Agreements: Move away from the consensus-based approach and support plurilateral agreements that can be negotiated by a critical mass of members, ensuring they are inclusive and subject to dispute settlement.
3. Engage with Regional Agreements: Recognize the value of regional trade agreements (RTAs) and work to harmonize and reduce their external tariffs. The WTO should encourage well-designed RTAs that minimize discrimination.
4. Multilateralize Progress: Translate the achievements from unilateral, plurilateral, and regional channels into enforceable multilateral rules. This could be done through targeted agreements rather than comprehensive, time-consuming rounds.
5. Empower the WTO Secretariat: Strengthen the Secretariat’s capacity to support trade reform, particularly in areas like country-specific and behind-the-border regulations.
6. Enhance Ministerial Engagement: Encourage more active and ongoing participation of ministers in WTO processes to ensure better alignment with global trade priorities.

Conclusion

WTO reform is not only necessary but urgent. The institution must adapt to the evolving trade landscape by becoming more flexible, inclusive, and responsive. The upcoming WTO Ministerial Conference in Geneva in November 2009 presents a timely opportunity to begin this process. By addressing the shortcomings of the current system and embracing new approaches, the WTO can once again become a central pillar of global economic integration.

Key Recommendations

• Begin formal discussions on WTO reform at the November 2009 Ministerial Conference.
• Shift from consensus-based negotiations to plurilateral agreements that reflect a broader range of interests.
• Engage constructively with regional trade agreements to promote global liberalization.
• Strengthen the WTO Secretariat’s role in supporting trade reform and policy analysis.
• Ensure that reform efforts are inclusive, particularly for smaller and poorer countries.

Additional Notes

• The Doha Round’s conclusion does not eliminate the need for reform.
• The WTO must address the growing gap between its current disciplines and the needs of the international community.
• The G20 can play a role in encouraging reform, especially through ministerial involvement.

Author Information

Uri Dadush is a Senior Associate and Director at the Carnegie Endowment for International Peace, focusing on global economic trends and the implications of developing countries’ growing influence. He has extensive experience in trade and economic policy, having previously worked at the World Bank and the Economist Intelligence Unit.

Resources

• Global Economic Prospects: Trade, Regionalism, and Development (2005) – World Bank
• The Future of the WTO: Addressing Institutional Challenges in the New Millennium (2004) – WTO
• The Multilateral Trade Regime: Which Way Forward? (2007) – Warwick Commission
• Why Is It So Difficult? Trade Liberalization Under the Doha Agenda (2007) – Will Martin and Patrick Messerlin
• From Doha to the Next Bretton Woods: A New Multilateral Trade Agenda (2009) – Aaditya Mattoo and Arvind Subramanian