The World Trade Organisation must reform, or risk becoming obsolete

Lettice Bromovsky

March 24, 2021

Reform of the World Trade Organisation (WTO) is long overdue. Established in 1995 as a continuance of the General Agreement on Tariffs and Trade (GATT), its purpose was to become of forum to negotiate and liberalise trade. However, in recent years it has faced growing challenges, including an inability to engage with digital trade, a lack of environmental standards, and abuse of power by the wealthiest countries. These have all been exacerbated by the coronavirus pandemic.

Donald Trump, in characteristically dogmatic manner, called the WTO “the single worst trade deal ever made”. While this statement reflected deepening trade tensions between the US and China the WTO has inherent flaws.

The first is the ability for members to self-identify as ‘developing countries’ in order to acquire better treatment and leniency with procedure. India and China benefit from this status. While it is true that millions are still living in poverty in both countries, one can reasonably question whether China and India – the second and fifth largest economies in the world – can really be considered ‘developing countries’.

Second, there are well-documented concerns over the Appellate Body – the highest authority designed to hear appeals from the Dispute Settlement Committee. After two judges’ terms ended in 2019, President Trump was able to block the appointment of any replacements. This left the WTO unable to hear new cases, effectively paralysing the system. To maintain the agency’s credibility and the security of its members, this must get back up and running.

Third, the WTO is often criticised for failing to uphold any semblance of environmental standards. The Doha Development Agenda were trade talks launched in 2001 to liberalise agricultural trade and boost economic growth for developing countries. They had the participation of every WTO member, effectively nearly every country in the world, yet no agreement was reached. In 2014, negotiations were launched again for the free trade for environmental goods, but discussions stalled in 2016 after negotiators failed to agree on the definition of an ‘environmental good’. Then in 2019, the then Director-General of the WTO, Roberto Azevêdo said he did not believe trade had any impact on the environment, despite the fact that the WTO wrote a report in 2010 explicitly making the link between trade and deforestation.

But the organisation is not beyond redemption. The upcoming WTO ministerial conference this June in Kazakhstan is the perfect opportunity to reform, revive and reignite support behind free trade, e-commerce as well as bolster new foreign investment.

We know that free trade is a cornerstone of economic growth. It has lifted millions out of poverty, created new job opportunities and opened access to new international markets. If the WTO were to reaffirm its commitment to promoting free trade, the free flow of international commerce would fortify a global economic boom in a post-pandemic world.

The Cato Institute recently released a report arguing for the free trade of medical goods, in particular how it can mitigate the impact of Covid-19 on developing countries. At the start of the pandemic, 75 WTO countries, fearing for the safety of their own citizens, restricted medical exports. This impacted not only developing countries, who import most of their medical supplies but also hindered any chance of a coordinated global response to the virus. If the WTO enforces the removal of these trade barriers, it can become an essential component in the battle against the virus for both developed and developing countries.

Coronavirus has undoubtedly accelerated technological innovations. The digital economy represents 22.5 percent of global GDP in 2020 with the e-commerce global market growing from $1,808.5 billion in 2019 to about $2,405.3 billion in 2020. Yet, the WTO has no rules specifically for digital trade. Instead, they use an amalgamation of non-digital trading rules from the old GATT policy created in 1947 and updates from 1994, when the idea of digital trading globally would have been nothing but a pipe dream. In order to remain fit for purpose in the 21st century, the WTO should implement specific digital trading rules to allow for safe and fair e-commerce.

The WTO has to find the momentum for reform while pursuing a long-term goal of further liberalisation of trade. Not only to support developing countries but to promote economic growth post-pandemic, innovate new markets and create lasting trade agreements.


Written by Lettice Bromovsky

Lettice is Editorial Intern at the Institute of Economic Affairs

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