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WTO MC12 and the Global South


Delegates at the closing session of the MC12 of WTO in Geneva on June 17 –WTO photo Delegates at the closing session of the MC12 of WTO in Geneva on June 17 –WTO photo

The 12th WTO Ministerial Conference (MC12) finally took place in Geneva from 12-17 June amid low expectations. This scribe used the word finally because these meetings are usually held every two years, but this conference was last held four and half years ago. MC12 was originally scheduled to be held in June 2020 in Nur-Sultan, Kazakhstan. Unfortunately, Covid-19 got in the way, and then did so again last December. But by the third time, it was lucky, and the meeting was held at WTO headquarters in Geneva on 12-17 June, 2022.

Also, the meeting took place under the shadow of rising global inflation, slowing growth momentum, even fear of stagflation, lingering pandemic and its impact on global supply chains, food and fuel crises and backlash against globalisation. Further adding to these problems is the Russia-Ukraine armed conflict, which has for all practical purposes been turned into a US-led NATO proxy war against Russia. This proxy war against Russia has worldwide spillover effects on global trade flows. To further compound the problem, US sanctions on Russia are preventing it from exporting wheat, fertiliser and other commodities leading to rising food and fuel prices.

Since the WTO was established in 1995 as the successor to the GATT, it has produced only one multilateral agreement - the Trade Facilitation Agreement (TFA) in 2015. Still, it failed the much more ambitious Doha Round. The past few years also have witnessed the non-functioning of the Appellate Body. It has ceased functioning since 2019 due to the US blocking its members' appointments.

While the emasculation process of the dispute settlement mechanism started with the Obama administration, Donald Trump just ensured that the mechanism stopped functioning altogether, enabling him to pursue his unilateralism by using trade wars. He threatened both traditional US allies and rivals, but he deployed it against China with the utmost vigour. All of these have raised a question about the WTO's relevance and utility in a global economy increasingly becoming more complicated and fractured.

The Ministerial Conference (MC) is the WTO's top decision-making body, and theoretically, all members of the WTO are involved in the MC, and they can take decisions on all matters covered under any multilateral trade agreements. This prominent feature in the WTO decision-making process involves that a final agreement is based on the consensus of its members.

But the reality is somewhat quite different. Historically, trade negotiations in the WTO and before that under the GATT have proceeded through the creation of "consensus" within a restricted inner circle group meetings, traditionally dominated by the Quad - the US, the EU, Japan and Canada. This is widely known as the "Green Room" process and is always joined by the Quad partners and a select handful of developing countries.

This "Green Room" consultation process effectively shut out the overwhelming majority of developing countries, including Bangladesh, from the decision-making process. The vast majority of WTO members do not even know what is going on. This lack of transparency and exclusivity of these meetings in the green room ( it is said that the name "green room" is derived from the colour of the room  where these meetings are held which is  green). Therefore, the green room process effectively gives its decision as fait accompli to countries from the Global South, leaving them to sign agreements that they have not been party to, as also happened at the conclusion of the Uruguay Round of trade negotiation, which led to the establishment of the WTO itself.

In recent years, however, it has been increasingly becoming difficult for green room meetings to form the basis for a viable consensus for the entire WTO membership. An increasing number of delegates from the Global South show their dissatisfaction with the level of transparency and openness of the decision-making process in the WTO.

Since the demise of the Appellate Body, the last step in the WTO's dispute resolution process, the institution has become somewhat dysfunctional, practically descending into a state of paralysis. Like the Trump administration, the Biden administration also continues to block appointments to the Appellate Body.

Also, the continuing efforts of the US to define China as a threat to the US  because of China's non-capitalist market economic system. Therefore, attempting to diminish China's role in the WTO is another major factor, among others, preventing the resurrection of the WTO from its current state of paralysis. However, the US is not the only obstructionist. India is another obstructionist country which continually deploys its age-old strategy to block everyone else from getting anything until India gets its way on issues that are of India's national interest. The issues are not necessarily safeguarding the national interest of other developing countries. India has a long history of blocking multilateral negotiations.

Suppose multilateral organisations such as the WTO fail to achieve their objectives. In that case, it will render them irrelevant and likely superseded by alternative organisations better suited to deal with contemporary issues. Moreover, the continuing crippling of WTO as an institution has resulted in calls from various quarters in need of reform, particularly to overcome the severe democratic deficit in the decision-making process.

Also, WTO rules, as they exist now, deal with obstacles to trade such as tariffs, subsidies, quantitative restrictions and the like. These obstacles to trade are less and less relevant now. Instead, the WTO needs to adopt new rules to deal with newly emerging and widely used potentially WTO consistent barriers to trade collectively known as temporary trade barriers (TTBs) and others such as bribery and corruption.

However, the WTO, to resurrect itself, must demonstrate that its 164 member countries can still address global trade issues through multilateral negotiations and must not reward obstructionists. Therefore, MC12  has become a test case for the WTO's ability to rise to the contemporary trade issues and effectively deal with the obstructionists. Many saw a successful WTO 12th Ministerial Conference as a significant opportunity to advance WTO reform and revitalise the organisation. 

After experiencing setbacks like a breakdown in negotiations, and the suspension of the Doha Round, the WTO decision-making process ( i.e. the green room process) has become the object of debate. However, despite the process that has never been officially mandated by WTO's General Council nor attempts at discontinuing the process, the process still seems alive and active. Negotiations were very intense in the "Green Room" to produce a package of deals after the MC12.

Despite the history of successive ministerial conferences' inability to take collective action and keep the obstructionists at bay since the WTO's inception in 1995,  during the meeting, WTO officials maintained that deals could be reached, despite talks often looking hopeless until a final bargain was reached. More importantly, recent global trade developments, including the pandemic's effects and the US-led NATO proxy war against Russia, have increased pressure on member countries to deliver concrete results.

Finally, after five days of negotiations, representatives of 164 member countries of the WTO on Friday (17 June) approved a package of trade deals, including pledges on health, reform and food security. The deal will breathe new life into the paralytic institution, which is the second multilateral agreement encompassing all 164 member states in its history of 27 years. The deal is referred to as the "Geneva Package".

The Geneva package adopted by the members includes:

1. Food security where the UN's World Food Program (WFP) can source food from countries despite any export bans and restrictions. However, governments would be allowed to restrict food exports to ensure food security needs;

2. A partial deal to curb harmful fishing subsidies, falling short of a fuller agreement that has been under negotiation for more than 20 years. The deal in operation will put in place rules to prohibit subsidies for illegal, unreported and unregulated fishing, while action on subsidies for fuel, ship construction and other areas was left unresolved;

3. To broaden Covid-19 vaccine production, a temporary waiver to intellectual property protection (TRIPS) on Covid-19 vaccines was agreed upon for 5 years. It will enable developing countries to spur domestic production of the vaccine without the patent holder's permission. However, the waiver does not cover diagnostic materials and therapeutics, and it does not cover all countries;

4. It was agreed to continue a long-standing moratorium on imposing customs duties on digitally-traded goods and services and other forms of e-commerce until the subsequent ministerial conference;

5. The WTO also agreed to embark on a process of reform the organisation, which is now beset with problems on many fronts that have impeded to negotiate new trade deals and to resolve trade disputes; and

6. The EU, Ecuador, Kenya and New Zealand agreed to forge an inclusive Coalition of Trade Ministers on Climate to launch a dialogue on enhancing international cooperation on trade and climate nexus and its contribution to sustainable development and environmental sustainability.

Given the stakes were high, the success of MC12 is an important opportunity to revitalise the organisation. (Success needs to be weighed in terms of the past 27 years of failures, with only one success in 2015). A successful outcome on trade and health (TRIPS waiver for Covid 19 vaccine) will facilitate reviving the global economy in times of global public health crises despite being narrow in scope and not applying to all countries. Given that this is a classic global commons issue, the successful conclusion of the deal will provide further momentum for pursuing other efforts to address other problems in the global commons.

However, it has been alleged that the WTO secretariat has done everything in its power to bully countries into accepting a deal, even if it is half-baked, which would count as a "win" for the Director-General.

The successful outcomes of MC12 indicate that the Global South is partially regaining the policy space they yielded to the Global North during the Uruguay Round, which will enable these countries to respond effectively to the emerging new global order. Such success is likely to drive the US, the EU, and other developed countries in the Global North to move away from a strategy of multilateral trade liberalisation via the WTO.

Former US Trade Representative (USTR) Robert Zoellick threatened back in 2003 "As WTO members ponder the future, the US will not wait; we will move towards free trade with can-do countries". His threat meant that if the US could not get things done in its way, it would pursue bilateral or plurilateral trade arrangements with like-minded countries such as the EU and its allies in the Asia-Pacific region. Such initiatives will have systemic implications that would be detrimental to the functioning of the rule-based multilateral trading system.

While the MC12 has set the stage for institutional reforms of the WTO,  USTR Katherine Tai has already foreshadowed what the US wants to see "candid and productive long-term conversations on reforming the WTO". The message is clear - the US wants to see new methods of WTO negotiations which are of vital interest to the US and its multinational corporations without having to negotiate around the Global South's economic development concerns. Therefore, there is also a hint to dilute WTO's fundamental principle of multilateralism to enable the US to pursue its unilateralism, if necessary, or plurilateral trade initiatives with like-minded countries. Any such initiative will obviously exclude Global South countries in such deals. Therefore, countries in the Global South must remain steadfast in their efforts to pursue the agenda of multilateralism under the auspices of the WTO.

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