| TWENTY YEARS OF THE WORLD TRADE ORGANIZATION:
What do they teach us about how to harness the multilateral trading system?
by Félix Peña
English translation: Isabel Romero Carranza
After the twenty years that have elapsed since the
creation of the WTO we can point out, among others, three relevant changes
in the international scenario in relation to the multilateral trading
In the first place, the redistribution of global power and the growing
importance of the so-called emerging nations -several of them actually
"re-emerging" ones- . Secondly, the greater connectivity between
markets. And thirdly, the fragmentation of production in multiple modalities
of transnational value chains -it was the WTO that installed the concept
of "made in the world" without which it is now increasingly
difficult to understand trade and investment between countries-.
What are some of the main positive contributions that the WTO has
made for the development of international trade in its twenty years of
existence? One of them is the body of collective international trade disciplines.
The other relates to transparency in the policies and instruments applied
by countries in international trade. The third contribution is to ensure
a system to help address and resolve disputes arising between member countries
as a result of possible and apparent breaches in the agreed obligations.
On another level, however, the contributions of the WTO have not yet
materialized, sometimes affecting its image with the public opinion. We
are referring to the multilateral trade negotiations, namely those that
over the past years have developed in the so-called "Doha Round".
What do these past twenty years teach on the utility that the WTO system
can have for a member country, as is the case of Argentina? Three lessons
can be considered as the most relevant.
The first lesson is that the WTO as a system of rules and mechanisms
that affect world trade can only be harnessed to the extent that a country,
not just its government, has a clear idea of what it wants and what it
can achieve in its trade relations with other countries and regions of
the world. The second is that, in order to do this, the country needs
to have specialists who are knowledgeable of the rules and mechanisms
of the WTO. And the third lesson is that dealing in the WTO implies that
a member country has a strong vocation and ability to forge alliances
with other countries, at the level of government, business and civil society.
Much has changed in the world since 1st January 1995 when the World
Trade Organization came into existence. It was built upon the General
Agreement on Tariffs and Trade (GATT) and absorbed its contractual text
into its legal system (on the process of creation of the WTO and its link
to the GATT system originated in 1948, see the book by Craig VanGrasstek
History and Future of the World Trade Organization", WTO, Geneva
On a critical view of the current state of the WTO and how the author
considers the future of the international multilateral trading system
should be addressed, see the recent book by Rorden Wilskinson listed in
the Recommended Reading section of this Newsletter).
Therefore it would be advisable to view the contributions that the WTO
has made and can continue to make, in the perspective of an increasingly
dynamic and complex international reality (this work includes the input
of the author to the article published by Florencia Carbone in the Foreign
Trade Supplement of La Nación on Tuesday January 27, 2015. See
the text on http://www.lanacion.com.ar/1763286-multilateralismo-versus-ley-de-la-selva).
Among other relevant changes that can be observed in the international
scenario in relation to the multilateral trading system embodied in the
WTO, we can highlight the following: first, the redistribution of world
power and the growing role of the so-called emerging economies -several
of them actually "re-emerging" ones-. Second, the increased
connectivity of markets at all levels and not just physical. And thirdly,
the fragmentation of production in multiple modalities of transnational
value chains and production linkages - it was the WTO that installed the
concept of "made in the world", which is now essential to understanding
the trade of goods and services as well as investment and technology flows
between the different countries-.
What are some of the main positive contributions that the WTO has made
to the development of international trade in its twenty years of existence?
One of its contributions is the body of collective international trade
disciplines. Far from complete or perfect -it would be difficult to pretend
this in a world that is and will continue to be characterized by the unequal
distribution of power between nations that, at least formally, are sovereign-,
the rules and mechanisms of the WTO, coming largely from the GATT period,
provide certain order in the implementation of national policies and instruments
that can affect the global trade of goods and services. And this is something
that is convenient both for large countries with highly diversified business
interests and investments at global scale and for countries with less
capacity to impose their principles and rules on world trade.
The second contribution relates to transparency in the policies and instruments
applied by countries in their international trade, which largely has been
achieved through their periodic review with the participation of the group
of WTO member countries and an active role of the Secretariat.
The third contribution is to ensure a system that helps address and resolve
disputes arising between member countries as a result of possible and
apparent breaches of obligations. Precisely, one of the latest cases involved
Argentina as the defendant country in relation to measures affecting the
import of goods. (See the information on the ruling of the Appellate
Body and its approval by the Dispute Settlement Body on http://www.wto.org;
These three contributions are mutually reinforcing and this helps achieve
a reasonable degree of efficiency, effectiveness and legitimacy of the
multilateral trading system. It would be easy to imagine the situation
that would prevail if this system were nonexistent. It would be a situation
that could be readily characterized by the prevalence of the "law
of the jungle" or, what is the same, by the predominance of the country
or countries with greater relative power.
On another level, however, the contributions of the WTO have not yet materialized,
sometimes affecting its image with the public opinion. We are referring
to the multilateral trade negotiations, namely those that over the past
years have developed in the so-called "Doha Round".
A plausible hypothesis could be that the difficulties in moving forward
with these negotiations are due largely to the fact that some of the main
WTO member countries have lately favored the possibility of reaching inter-regional
mega agreements, particularly in the Trans-Atlantic and Trans-Pacific
our newsletter from March 2014)
These negotiations are especially driven by the more developed countries,
which throughout the period of the GATT and the founding moments of the
WTO were in fact the ones who set the rules. We could even consider their
interest in "mega preferential agreements" as a new way to continue
generating rules that later the rest of the member countries would have
no choice but to accept.
What do these past twenty years teach on the utility that the WTO system
can have for a member country such as Argentina?
Three lessons can be considered as the most relevant.
The first is that the WTO as a system of rules and mechanisms that have
an impact on world trade can only be properly harnessed in the measure
that a country, not just its government, has a clear vision of what it
wants and what it can achieve in its trade relations with other countries
and regions of the world. This is what is commonly called "country
strategy" in trade and international investment.
This implies defining the offensive and defensive interests as well as
the necessary balance between them. And it also implies making a correct
assessment -even taking into account different aspects that can transcend
the commercial- of the value that the country has for other countries,
especially for those with greater economic impact and particularly in
the country's own region, such as Latin America in our case. This helps
appraise the margin for maneuver available to fulfill the agreed obligations
and it allows, above all, to gauge what margin a country has for not fulfilling
its obligations thoroughly. If the latter were the case, of course it
should be done without proclaiming it and in an inconspicuous manner.
The second lesson is that it is necessary for a country to have very
good trade specialists knowledgeable of the rules and mechanisms of the
WTO. A good specialist is someone who, due to their training and experience,
masters the subtleties inherent to a legal system of clear Anglo-Saxon
roots, given the influence that the U.S. and the U.K. had since the founding
moments of the GATT. This is even more important when the circumstances
of a country may indicate at some point that it is impossible to comply
with the rules by interpreting them to the letter, i.e. without taking
advantage of the implied flexibilities that always exist and that a good
expert is supposed to know.
Brazil is a partner country that realizes the importance of having a
good knowledge of the rules of the WTO and its nuances to better apply
them according to its national interests. That Brazil values the WTO was
made evident in the election process of the current Director General.
In addition, at least three of the Ministers of Foreign Affairs of recent
years (Luiz Felipe Lampreia, Celso Lafer and Celso Amorim) previously
served as representatives of their country in Geneva. Of its last Secretaries
of Foreign Trade, at least three are known specialists in international
trade law and even in the WTO (Welber Barral, Mario Marconini and Tatiana
Prazeres). Moreover, several of its highest level diplomats, as well as
those who were responsible for foreign trade policy and of the most relevant
experts in international trade, are today working in business institutions
or are advisors on issues related to foreign trade and the WTO (among
others are Sergio Amaral, who was Minister of Development, the aforementioned
Mario Marconini, Welber Barral and Rubens Barboza, who was Ambassador
of Brazil in London, Washington, and before the LAIA, as well as being
responsible for the negotiations in the Mercosur). This country also has
some of the most prestigious centers of the region for monitoring the
global trading system with an interdisciplinary approach and a perspective
in accordance with its national interests (among others we should mention
the case of Professor Vera Thorstensen who, aside from working today in
the Getulio Vargas Foundation, worked for several years in the Brazilian
Mission to the WTO).
The third lesson is that dealing in the WTO implies that a member country
has a strong vocation and ability to forge alliances with other countries
at the level of government, business and civil society. This also entails
an intensive use of human resources with practical experience in global
trade competition and in the multilateral trading system.
Looking forward at least three current thematic fronts acquire increasing
relevance for WTO member countries. One is the environmental issue and
its effects on international trade. Another is how to achieve a reasonable
degree of articulation among multiple preferential trade agreements and
the multilateral trading system. The third relates to the incidence of
different types of regulatory frameworks on the trade of goods and services,
and on investments and transnational value chains.
All three fronts may require new approaches and also new rules and mechanisms.
Negotiating them will take time and will require that each country or
group of countries has a clear idea of what they need and how to achieve
But it will be still more important to establish an open and comprehensive
debate on how to adapt the multilateral trading system to the requirements
of equal opportunities for the economic development of all member countries
and on how it can make a useful contribution to the growing challenges
of global governance. Are the proposals that have been raised enough to
move towards a WTO 2.0? Or, on the contrary, what is required is a profound
change in an institutional structure that transcends trade and penetrates
deep into the complex and multidimensional agenda of development and governance
at global scale? (In reference to this, see the book by Rormer Wilkinson,
listed in the recommended reading section of this Newsletter).
- Boletín Informativo Techint, "Los mega acuerdos de comercio
y el futuro del Mercosur", Boletín Techint, n° 35, Buenos
Aires, Noviembre 2014, http://www.boletintechint.com/.
- Bridges, "WTO Appellate Body Rules Against Argentina in Import
Restrictions Dispute", ICTSD, Bridges, volume 19, number 2, Geneva
22 January 2015, http://www.ictsd.org/.
- Bruszt, László; McDermott, Gerald (eds), "Leveling
the playing field. Transnational Regulatory Integration and Development",
Oxford University Press, Oxford 2014.
- Friedmann, George, "Flash Points. The Emerging Crisis in Europe".
Doubleday, New York 2015.
- Gat, Hazar, "War in Human Civilization", Oxford University
Press, New York 2006.
- Gat, Hazar; Jacobson, Alexander, "Nations. The Long History and
Deep Roots of Political Ethnicity and Nationalism", Cambridge University
Press, New York 2013.
- Groppo, Valeria; Piermartini, Roberta, "Trade Policy Uncertainty
and the WTO", WTO, Economic Research and Statistics Division, Working
Paper, ERSD - 2014 - 23, Geneva, 19 December 2014, http://wto.org/.
- Hernández, René A.; Martínez-Piva, Mario; Mulder,
Nanno, "Global value chains and world trade. Prospects and challenges
for Latin America", ECLAC -German Cooperation, Santiago de Chile,
August 2014, http://repositorio.cepal.org/.
- Horn, Henryk; Mavroidis, Petros C., "Legal and Economic Principles
of World Trade Law", The American Law Institute, Cambridge University
Press, New York 2013.
- Puentes, "Órgano de Apelación confirma fallo contra
Argentina", ICTSD, Puentes, Geneva 21 January 2015, http://www.ictsd.org/.
- Turner, Henry Ashby, "A treinta días del poder",
Prólogo de Antonio Muñoz Molina, Edhasa, Barcelona 2002.
- UNCTAD, "13th Investment Policy Monitor", A periodic report
by the UNCTAD Secretariat, N° 13, Geneva, January 2015, http://investmentpolicyhub.unctad.org/.
- United Nations, "World Economic Situation and Prospects 2015",
United Nations, New York 2015, http://www.un.org/.
- Van Creveld, Martín, "The Transformation of War",
The Free Press, New York 1991.
- Wilkinson, Rorden, "What's Wrong with the WTO - and how to fix
it", Polity, Cambridge - Malden MA., 2014.
Félix Peña Director
of the Institute of International Trade at the ICBC Foundation. Director
of the Masters Degree in International Trade Relations at Tres de Febrero
National University (UNTREF). Member of the Executive Committee of the
Argentine Council for International Relations (CARI). Member of the Evian
Group Brains Trust. More