WTO's woes
- By Wei Liang
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E-mail Beijing Review, June 4, 2013
The way forward
The necessity and authority of the WTO and its director general are on the decline, which will force Azevedo to make a sober judgment in terms of what the WTO should do.
Generally speaking, there are two ways ahead: The first is to follow the conservative road that continues to promote the Doha Round, trying to solve the conflicts gradually and reach a timely agreement. However, the experience of the last decade shows that it would be a thankless job and the remaining influence of the WTO would fade away, too.
The second way is to make a fresh start and deepen reform, removing those structural defects that hinder multilateral negotiations. To lower the transaction cost of international trade, the transaction cost of negotiations should be reduced first.
However, it should be noted that the established rules blocking negotiations are, to an extent, a line of defense to protect the vested interests of developed countries in the WTO. The reform would essentially hurt their core economic and even political interests, so it will require huge courage and wisdom. Worse still, it may spark systemic risks.
The once-in-a-century international financial crisis and sovereign debt crisis have severely hit developed economies, spurring various kinds of protectionism. Opposing protectionism is clearly the correct way to promote the fast and stable recovery of the world economy. But protectionism always accompanies economic crises as an instinctive reaction of a country. While protectionism is the norm in global trade, free trade is needed, which demands great efforts as well as economic compromises.
With the rise and maturity of emerging markets and developing countries in international trade, the traditional institutional advantages of developed countries are declining. The situation has given rise to a variety of trans-regional economic and financial cooperation efforts since the outbreak of the 2008 international financial crisis, which not only show the demand of developed countries for new international rules but also reflect the defects of the current set of WTO standards.
Currently, the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP) are the two main cooperation systems in the fields of investment, trade and finance that the United States participates in and tries to lead. The two systems, together with the U.S.-South Korean Free Trade Area, reflect the non-geopolitical characteristics of financial and business cooperation in the post-financial crisis era. What's more, the TPP and the TTIP have eliminated the WTO's longstanding practice of seeking a package deal of agreements, which could enable them to grow by leaps and bounds. However, the rapid development of the two systems could also pose a threat to the survival and development of the WTO.
Therefore, Azevedo has to make his judgment on the WTO's position after he takes office, specifically in terms of what the relationship between the WTO and new economic organizations should be. Evidently, functions of the TTP, the TTIP and the WTO overlap somewhat. Given the vigor of the former two systems, the WTO is hard pressed to catch up with them.
It is clear that the TPP and the TTIP supplement each other well with the aim to cover the whole world. As such, the WTO's space for maneuvering is much smaller, and it must compete with them. If Azevedo could position the WTO as the rule maker of global trade, arbitrator of trade conflicts and supervisor of all economic, trade and financial cooperation activities, the WTO could gain more of an edge in the larger picture. This demands that the WTO regain vitality and rise out of difficulties, which will be a big test of the wisdom and international communication skills of the new director general.
The author is an assistant research fellow with the China Institutes of Contemporary International Relations.
