Another Fish Story From The WTO

The World Trade Organization (WTO) isn't a serious forum. That's what I was thinking as I sat through the triumphant finale of the four-hour opening session of the 14th Ministerial Conference in Yaoundé, Cameroon, on March 26.

The WTO's leadership was playing a self-congratulatory song about progress on an incomplete agreement on fisheries subsidies. I tried in vain to gauge the reactions of other trade ministers, but comparatively few had even bothered to make the trip. The US government assessed that only a couple dozen cabinet-level trade ministers attended, with the majority of attendees represented by vice ministers or lower-ranked delegates. As WTO staff bopped to the beat, I grew concerned about how productive the next three days would be.

I arrived a skeptic of the WTO and left even more so. The organization was established in 1995 with the aspiration to create certainty for trade based on common market-based rules. It has been on a path to irrelevance for some time and has even undermined US interests. The WTO system helped create a world in which China dominates global manufacturing and our trading partners maintain high trade barriers with impunity. Because of their self-declared status as“developing” economies, about three-fourths of members aren't obligated to follow some of the agreed-on trade rules, and they constantly seek carve-outs from new ones. Multilateral negotiations have been lackluster for years. The WTO dispute-settlement system devolved into a forum for endless litigation, which prevented countries from combating unfair trade practices, rarely led to compliance, and served as a disincentive to settle disagreements.

The WTO is ineffective and dysfunctional. Take one example: WTO members since 1998 have refrained from imposing tariffs on electronic products-like software and music-that can be transmitted digitally. Even though this approach has become the default practice globally, the WTO still goes through a performative renewal of this“e-commerce moratorium” on digital tariffs every two years. Doing so consumes enormous time and energy, and many members hold the renewal hostage to trade away for unrelated objectives.

The US and 24 co-sponsoring countries this year proposed a common-sense reform: Instead of settling for another two-year renewal, members should agree to a permanent e-commerce moratorium. That would prevent future ministerial conferences from wasting time on a non-issue while demonstrating that the WTO could have a role in future trade negotiations. But even this proposal-the lowest-hanging fruit-wasn't picked up.

Despite broad support, the need for consensus among all WTO member countries prevented passage. Some insisted on a time-limited extension, and some tried to tie their support to the creation of a multimillion-dollar WTO slush fund for“development.” The US and other e-commerce moratorium supporters showed significant flexibility, and 164 members agreed to a compromise-extending the moratorium for about four years rather than permanently. But even this modest outcome wasn't to be, as delegations from Brazil and Turkey insisted on maintaining the two-year renewal cycle. These members' intransigence halted attempts at much-needed reform. These matters have been referred for further discussion at the WTO's headquarters in Geneva in a last-ditch effort to find consensus. Unless members pull a rabbit out of a hat, the outcome from Yaoundé is less certainty on e-commerce and worse prospects for a broader reform agenda.

Why is the WTO like this? Because all 166 members must agree to adopt new rules, and members hold divergent views on a range of issues, down to the purpose of the organisation. Under these conditions, consensus is nearly impossible.

It wasn't always this way. The WTO's predecessor organisation, the General Agreement on Tariffs and Trade, originated in 1947 as a group of 23 countries. Its focus on market-based trade meant that it largely excluded communist states. Regardless of whether one agrees with the outcomes of various negotiating rounds, it's clear that the leaner GATT system functioned reasonably well.

The US isn't going to spend 30 years waiting for the WTO to respond to the needs of American workers and businesses. The WTO was of no use during the first“China shock,” which crushed American manufacturing, and it's no help amid today's huge trade imbalances.

So the US is charting its own course on trade policy-working regionally, bilaterally and, where necessary, unilaterally. The Trump administration's recent wave of reciprocal trade agreements has been the most successful effort in years to open foreign markets while protecting domestic production and disciplining out-of-control imports. The US is driving reform on trade globally, tackling tariffs and nontariff barriers, addressing structural imbalances in trade, and diversifying and securing supply chains. The WTO is nowhere to be seen on these issues. Instead, it's spending time on silly fish songs.

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