Spirit of Marrakech can help reform WTO

The WTO dispute settlement mechanism was made dysfunctional by the refusal of the US to appoint judges

Last Monday, the World Trade Organization (WTO) commemorated the conclusion of Uruguay Round of trade negotiations 30 years back, when 123 countries entered into an agreement at Marrakech, Morocco to establish the WTO from January 1, 1995. ‘They created a new global public good: one committed to using trade to raise people’s living standards, create jobs, and promote sustainable development’, said the WTO Director-General Ngozi Okonjo-Iweala, in a brief statement to mark the anniversary. Of course, in 30 years, a lot has changed - the role of multilateral institutions, the way businesses operate and the way people and governments respond to the challenges of climate change and socio-economic inclusion. 

Since its establishment in 1995, the WTO is the principal forum for negotiations to liberalise international trade and remove trade distorting measures such as subsidies, for overseeing the implementation of agreements that give the producers and traders unprecedented transparency and reasonable certainty about the trade policies of the WTO member countries and for settling trade disputes between the WTO member countries in a predictable manner. In the late nineties, the East European countries were transitioning towards market oriented policies, China was emerging as a major manufacturer and information technology was transforming lives and improving productivity everywhere. Taken together, these developments resulted in extraordinary growth in global trade, transferring incomes to workers in the developing countries and lifting over a billion people out of poverty in the next two decades.

However, the negative perceptions about globalisation in the developed countries following the global financial crisis in 2008 intensified as China and some other developing countries emerged as major low cost manufacturers.  The United States reacted to the domestic backlash against globalisation by raising tariffs on a number of items.  Some other countries retaliated against the move.  The Covid-19 pandemic and the Russia-Ukraine war led to restructuring of the global supply chains and fragmentation of global trade. More countries became protectionist, started giving subsidies for setting up industries in their shores and entered into regional and plurilateral trading arrangements. The decision making at the WTO, which requires all members to agree on anything, became more difficult.

The WTO dispute settlement mechanism was made dysfunctional by the refusal of the United States to appoint judges to hear and decide the appeals against the rulings of panels that hear the disputes at the earlier stage. In the 30 years since the Marrakech agreement, perhaps the only major achievement of the WTO is an agreement on trade facilitation, based essentially on the disciplines for border controls developed by the Word Customs Organisation.

Despite the setbacks, the  WTO membership has grown to 164 with 2 more countries set to join soon and 22 more countries willing to reform their policies and qualify for the WTO membership. It remains the only multilateral forum for negotiating trade concessions. Its consultations and panel hearings for dispute resolution are working alright. It may soon get an agreement on limiting subsidies for fishing. Its global rules for trading agreed 30 years back still govern most of international trade in goods as well as services. Its members still abide by the moratorium on taxes on digitally traded goods and services. So, the WTO is worth supporting. Hopefully, the global leaders will recapture the Marrakech spirit to resolve their differences and reform the WTO. 

Email: tncrajagopalan@gmail.com