HAS THE WTO GROWN OLD?
The upcoming G20 Summit could provide the necessary political boost for
a convenient renewal.
by Félix Peña
English translation: Isabel Romero Carranza
The issue of the "aging" of the WTO, already
raised at other times by senior officials of President Trump´s administration,
may have very different but complementary approaches. Two of these approaches
deserve our attention, among many others.
A first approach refers to the fact that, since the creation of the
GATT and later of the WTO, many changes have taken place in terms of the
distribution of global economic power- and therefore in the relative power
of member countries-and in the composition of the global exchange of goods,
services and investments. These changes in realities are influencing the
perspective of those who consider that some of the mechanisms and rules
of the multilateral system are becoming obsolete.
The other possible approach refers to the qualities of efficiency
and effectiveness expected from the institutions and rules that affect
global trade governance, understood as an essential aspect for the sustainability
of a reasonable world order.
In this last perspective, it becomes especially relevant that the
issue is included in the agenda of the next G20 Summit, to be held at
the end of November in Buenos Aires. More than a detailed approach on
the contents of a negotiation aimed at strengthening and eventually reforming
the WTO, what can be expected from the G20 Summit is a clear political
boost to address the issue.
In any case, if the G20 failed to promote the reforms of the current
system, what would be the future of the WTO? and which would be the alternatives
in order to have a multilateral international trading system that is efficient
Another question now becomes relevant for Latin American countries.
In the light of President Trump's recent statement about the eventual
withdrawal of his country from the WTO, it can be formulated as follows:
what would be the reaction of the countries of the Latin American region
to a substantial change in the multilateral trading system such as the
one that would result from the withdrawal of the US, a key protagonist
of world trade and also founder of the GATT-WTO system?
In our previous newsletter we addressed the issue of the possible reforms
to the WTO (see the August
edition on www.felixpena.com.ar) in view of the upcoming G20 Summit,
to be held in Buenos Aires at the end of November. However, this is not
the specific forum where to advance the negotiation of the reforms that
may be considered necessary. The most appropriate forum is that of the
WTO itself. But given the political significance that a growing deterioration
of the WTO may have on global governance -and not just on trade governance-
it is logical to expect an explicit political boost from the G20 Summit,
to what is already perceived as a necessary process of renewal of the
global multilateral system of international trade.
This need has become more evident after President Trump's statement in
the interview published by Bloomberg News on August 30: "If they
don´t shape up, I would withdraw from the WTO" (see Bloomberg
News, www.bloomberg.com). In the perspective of the current American government,
behind this threat lies their point of view on issues such as those considered
unfair trade practices contrary to WTO rules, or the effectiveness of
the mechanism for the settlement of disputes, In addition, these statements
are made simultaneously with the news about the "bi-lateralization"
of the NAFTA, evinced by the agreement with Mexico and the difficulties
still underlying the talks with Canada. As the Financial Times has pointed
out, the President's statements imply a new attack on one of the pillars
of global economic governance (see www.ft.com). In any case, they can't
The question of the "aging" of the WTO, already raised at other
times by senior officials of President Trump's administration, may have
very different but complementary approaches. Among these, two deserve
A first approach refers to the fact that, since its inception and, even
more so, since the founding of the GATT, many changes have taken place
in terms of the distribution of global economic power -and therefore of
the relative power of the member countries-and in the composition of the
global exchange of goods, services and investments. Such changes in realities
would be affecting the views of those who consider that some of the mechanisms
and rules of the multilateral system are becoming obsolete. Or, at least,
they perceive it to be so in relation to their current national interests,
which are not necessarily the same they had at the founding moments.
The other approach refers to the qualities of effectiveness and efficiency
expected from institutions and rules that affect global trade governance,
understood as an essential aspect of the sustainability of a reasonable
It is especially in this last perspective that it becomes relevant for
the issue to be included as part of the agenda of the next G20 Summit,
to be held at the end of November in Buenos Aires. In other words, it
would draw attention if the political leaders, gathered in a forum intended
since its creation to address problems that impact the world order and,
therefore, require collective responses, met without discussing the issue
of how to revamp a global forum such as the WTO when it is losing its
effectiveness and efficiency. Moreover, this omission would draw attention
since the public opinion would not understand how a matter of such relevance
to current international relations -reflected, for example, in the so-called
"commercial wars"- might not merit the attention of its political
Therefore, more than a detailed approach on the content of a negotiation
aimed at strengthening and eventually reforming the WTO, what can be expected
from the G20 Summit in Buenos Aires is a clear political boost for the
issue to be addressed. The negotiation as such should be defined and undertaken
by the organs of the WTO itself. But after the experience of the Doha
Round, it is hard to imagine that this could happen without a strong political
impulse originating in a G20 Summit.
The abovementioned statement by Donald Trump does not necessarily have
to be interpreted as the expression of a real intention to carry out the
implied threat. The experience of the Brexit illustrates how difficult
it can be for any country, but especially for a great economic power,
to realize its withdrawal from a system of rules that affect its commercial
insertion in the world and, even more so, to replace it with an alternative
that is both reasonable and credible. Most likely, time will show that
we are before the expression of a negotiating tactic aimed at achieving
the reformulation of some of the rules and mechanisms of the multilateral
As noted in our previous newsletter, at their July 25 meeting, the Presidents
of the United States and the European Commission pointed out some of the
issues to be addressed in the analysis that they entrusted to the working
group composed of "close advisors". These issues were those
related to unfair trade practices, theft of intellectual property, forced
transfer of technology, industrial subsidies, distortions created by state-owned
companies and overcapacity.
It is obvious that, from the point of view of other countries, there
are other relevant issues on which to focus in a negotiation. The experience
of the Doha Round indicates how difficult it will be to reach an agreement
on the possible agenda for negotiations between the 164 WTO member countries.
This would limit the scope of the political thrust that results from the
G20 Summit in Buenos Aires. It may also account for the relative caution
that is being observed with regard to the future of the WTO, especially
in the days leading up to the Trade Ministers meeting, to be held in Mar
del Plata on September 12 and 13. This caution is aggravated by President
Trump's statements, which makes the question of whether the G20 will succeed
in promoting the reforms of the current system more pressing. If the G20
were to fail in this endeavor, what would the future hold for the WTO?
and what would be the alternatives in order to have an international multilateral
trading system that is both efficient and effective?
Another question that now becomes important for Latin American countries
is: what would be the reaction of the countries of the region to the substantial
change in the multilateral trading system that would result from the withdrawal
of the US, a key protagonist in world trade and also founder of the GATT-WTO
In any case, answering these questions would imply not only having a
correct diagnosis of the reasons that lead to consider that the WTO has
aged and needs to be renewed but, above all, keeping in mind the reasons
that led to the creation of the GATT and later the WTO. It is particularly
important to understand the reasons that led to some of the principles,
mechanisms and institutions that are now being questioned, such as, among
others, the principle of non-discrimination, the treatment of developing
countries and the dispute settlement mechanism. The history of those founding
moments and especially of the period that led to the genesis of the multilateral
system of world trade -that is, the periods that preceded both World Wars-
is very illustrative and deserves to be reviewed today. It is relevant
to help us understand the factors and deep forces that affect the tension
between international order and chaos, that is, between peace and war
among nations. (As reference on the factors that led to the creation of
the multilateral system of world trade see, among others, the following
books: Craig Van Grasstex, "The History and Future of the World Trade
Organization", World Trade Organization, Geneva 2013; Robert E. Hudec,
"Essays on the Nature of International Trade Law", Cameron May,
London 1999; Richard N. Gadner, "Sterling-Dollar Diplomacy in Current
Perspective. The Origins and the Prospects of Our International Order",
Columbia University Press, New York 1980; Gerard Curzon, "The Diplomacy
of Multilateral Trade", Fondo de Cultura Económica, Mexico
1960; Elimma C.Etzeani, "The WTO and its Development Obligation.
Prospects for Global Trade", Anthem Press, London-New York 2010;
John H. Barton; Judith L.Goldstein; Timothy E.Josling; Richard H. Steinberg,
"The Evolution of the Trade Regime. Politics, Law, and Economics
of the GATT and the WTO", Princeton University Press, Princeton and
Oxford 2006; Andrew G. Brown, "Reluctant Partners, A History of Multilateral
Trade Cooperation 1850-2000", The University of Michigan Press, Ann
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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