Author: Ken Heydon, LSE

World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala said measures agreed at the 12th WTO Ministerial Conference (MC12) on June 12 “will make a difference in people’s lives of the whole world “. She may be right on some of the details, but turning the MC12 into a game-changer for the trade order will require a level of political resolve from G20 leaders that has so far been lacking.

World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala and MC12 Chair Timur Suleimenov attend the opening ceremony of the 12th Ministerial Conference (MC12), at the headquarters of the World Trade Organization, in Geneva, Switzerland, June 12, 2022 (Photo: Reuters/Martial Trezzini).

Five outcomes of the WTO Ministerial meeting stand out. After 20 years of negotiations, an agreement to end harmful fisheries subsidies has been reached. This included an absolute ban on deep sea fishing subsidies. In its 27-year history, this is only the second multilateral agreement on new trade rules agreed by the WTO.

A waiver has also been agreed under the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). It allows the manufacture and export of COVID-19 vaccines without the consent of the patent holder.

Despite fears in the business sector that the moratorium on e-commerce tariffs will end, an agreement has been reached to extend the moratorium until the next ministerial conference.

In response to the current food situation, members agreed to exercise restraint in implementing export restrictions and to exempt World Food Program humanitarian purchases from these restrictions.

Members also pledged to work towards reform of the WTO, including the goal of creating a fully operational dispute settlement mechanism no later than 2024.

One could quibble that even if there is full implementation, fisheries subsidies are only part of the environmental challenge. The WTO still needs to liberalize trade in environmental goods and services and impose discipline on fossil fuel subsidies.

As for the COVID-19 vaccine initiative, it will not provide developing countries with the technical capacity to actually produce vaccines. In e-commerce, crucial questions remain about the right balance between data access and data protection. And “showing restraint” on food export restrictions leaves room for abuse.

Despite their shortcomings, these measures all go in the right direction. And they go hand in hand with other ongoing work in the WTO that offers opportunities for cooperation.

One of them is the negotiation between participating members of the WTO on electronic commerce and issues such as data protection. This brings together key players, including the United States and China, in a plurilateral agreement that does not require the elusive goal of compliance from all WTO members. It can provide a welcome, albeit small, space for cooperation between Washington and Beijing.

The positive measures described here cannot hide the fact that there is a systemic challenge to the liberal order of which the WTO is a part, while the trading system is increasingly exposed to the double temptation of autarky and unbridled national sovereignty. Whether the achievements of MC12 and these other cooperative efforts represent a new beginning for the WTO remains to be seen.

Long before the COVID-19 pandemic, global value chains were losing their strength as engines of global growth in the face of rising protectionism. COVID-19 transformed and accelerated this trend as factories closed and transportation was restricted. Today, disruptions resulting from the war in Ukraine and related sanctions heighten concerns about supply chain vulnerability. These concerns have led to calls from two world leaders from very different constituencies, French President Emmanuel Macron and Chinese President Xi Jinping, for their countries to become more self-sufficient.

This flirtation with autarky is accompanied by a growing tendency to exercise national sovereignty through so-called trade defense measures. We saw it under the former Trump administration. Angered by the WTO’s perceived bias in settling disputes, the United States has imposed punitive and unilateral tariffs under US law against China for breaking the rules. These measures — and their underlying grievances — have persisted under the Biden administration. Now they will be joined by no less than five unilateral and punitive trade defense weapons that are on the European Union’s drawing board.

Perhaps the most important of the MC12 measures is the re-establishment of a fully operational dispute settlement mechanism. Unless faith in the liberal trading order can be revived, the chances of restoring the dispute settlement system — and the essential synergies between the judicial and legislative functions of the WTO — remain slim. The balance between acceptance of the rules of the liberal world order, enshrined in the WTO, and the exercise of national sovereignty by WTO members must be restored.

There is a vital role for the G20 in meetings later this year. The G20 must give a coordinated push to the rules-based order by emphasizing that autarky and unilateralism are just a recipe for protectionist capture, retaliation and trade friction.

A liberal awakening in Washington and Beijing would be the most gratifying legacy of the G20. Although it seems distant, the foundations of the G20 engagement were laid by the 12th WTO Ministerial Conference.

Ken Heydon is a visiting scholar at the London School of Economics and Political Science. He is a former Australian trade official and senior member of the OECD Secretariat.