WTO Reform Urgently Needed

POSITION | WORLD TRADE ORGANIZATION

WTO Reform Urgently Needed Reinvigorating and Rebalancing the Multilateral Trading System

28. November 2018 Current Crisis at the WTO 23. Oktober 2017

The World Trade Organisation (WTO) is the guardian of global trade. It allows its 164 members to agree upon and enforce transparent and reliable trade rules worldwide. However, the system is under threat by rising protectionism, disagreement on the way forward, and discontent about its effectiveness. To ensure its relevance, reforms are urgently needed. To make progress with that, the G20 must better fulfil to their leadership role.

23%

…of the Fortune Global 500 enterprises are state-owned (in 2005 only 9 percent)

65%

…of the WTO members did submit any notifications in 2017

Quelle: B20 Communiqué, 2018, <https://cs7e6cd119b4008x4ccax818.blob.core.windows.net/documents/20181010_193648 Initiatives to Adapt WTO Rules to the2018, 21st<http://trade.ec.europa.eu/doclib/docs/2018/september/tradoc_157331.pd Century (Agreed Plurilaterally in Dec. 2017) B20%20Communiqu%C3%A9.pdf />; Europ.

Kommission, f >.

E-Commerce: Exploratory work towards future WTO negotiations on trade-related aspects of electronic commerce based on WTO rules, without prejudice to existing agreements and mandates.

Domestic Regulations on Services: Advancing negotiations based on recent proposals to deliver a multilateral outcome.

Investment Facilitation: Seeking to identify and develop the elements of a framework for facilitating foreign direct investments (not covered: market access, investment protection, investor-state dispute settlement).

Micro-, Small-, and Medium-Sized Enterprises: Informal Working Group striving for a multilateral outcome aimed at establishing a formal work program for MSMEs at the next Ministerial Conference.

BDI Recommendations: Rebalancing the Multilateral Trading System Address trade-distortive practices Revitalize the Working Group on Trade and Competition Policy, introduce rules against forced technology transfer, localization requirements, cyber-enabled theft, and joint-venture requirements. The principle of competitive neutrality needs to be emphasized.

Enhance transparency and compliance with notification rules Strengthen the enforcement of notification requirements and the role of the WTO secretariat in addressing WTO-Reformshortcomings dringend geboten by members, e.g. by introducing more effective support programmes, processes and incentives, including reporting on non-compliance and sanctions (naming and shaming, withdrawal of members’ rights, additional budget contributions).

Fight unfair competition caused by subsidies and state-owned enterprises (SOEs) Introduce comprehensive rules against trade-distortive subsidies in the area of industry and services. Clarify definitions of SOEs, public body, and state-controlled enterprises. Introduce new rules capturing market-distorting support for/ provided

by SOEs as well as improving transparency over level of state control and ownership. Pursue a plurilateral agreement to phase out government-driven competitive distortions in international trade.

Introduce a new approach to flexibilities in WTO agreements Members should undertake commitments according to their economic weight, capacities, and competitiveness. The status or level of commitment of members should be regularly updated according to objective criteria. Flexibilities for nonLDCs should be strictly needs-driven. The core provisions of an agreement should finally be applied universally.

Increasing Protectionism Protectionist measures such as import bans, additional quantitative limits, and closed borders discriminate against foreign companies and can impede economic growth and job-creation. Recent trade-monitoring reports display rising protectionism levels since 2008. New restrictive measures continue to add to the stock of trade restrictions. From May through October 2018, the traderestrictive measures were estimated to reach a coverage of 481 billion U.S. dollar. This is the highest volume since the first calculation in 2012.

754

675

629

575

489

424

342

269

163

77

11

Total Number of Trade Restrictive Measures G20-Members Mid-Oct. 2008 to Mid-Oct. 2018

Source: WTO, Trade Monitoring Reports, <https://www.wto.org/english/news_e/archive_e/trdev_arc_e.htm>; BDI analysis.

Dispute Settlement Under Pressure WTO: Total Number of Complaints (2018*: Until September) 37 23

32

27

26

20

19 12

13

19

14

20

17 8

14 13

17 17

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018*

The dispute settlement assures that disputes can be resolved in a peaceful and structured manner and that the WTO obligations are enforced. However, the rising number of trade conflicts has led to a steep increase in dispute settlement cases. As of September, 2018 was the year with the highest number of new complaints at the WTO since 2002. 32 complaints were made, mostly with the United States as respondent. The United States has filed 8 new complaints up to September 2018. At the same time the United States is blocking the nomination of new Appellate Body (AB) members. This could soon paralyse the important second instance of the dispute settlement system. This would harm the credibility of the entire WTO.

Source: WTO, Trade Monitoring Reports, <https://www.wto.org/english/news_e/archive_e/trdev_arc_e.htm>; BDI analysis.

Reforming Dispute Settlement 1st step: Address U.S. concerns by introducing immediate, procedural changes that resolve the blockage of the AB nominations

2nd step: Negotiate and introduce more substantial reforms, e.g. to address the alleged overreach by the AB.

BDI-Position: ▪ ▪ ▪

Take measures to alleviate the gridlock the Appellate Body quickly.

Introduce more efficient procedures and increase the resources of the Dispute Settlement System.

Preserve the judicial independence, the Appellate Body and the binding nature of the rulings.

The BDI supports the modernisation proposals by the EU from September 2018, as well as the additional initiatives regarding transparency and the Dispute Settlement System.