Most Favoured Nation: Hey! Ho! WTO
What should we be focusing on at the World Trade Organisation’s Thirteenth Ministerial Conference?
Welcome to the 127th edition of Most Favoured Nation. This week’s edition is free for all to read. If you enjoy reading Most Favoured Nation, please consider becoming a paid subscriber.
Hi folks,
This week, I, George Riddell (an occasional contributor to Most Favoured Nation), am taking the reigns while Sam … actually I have no idea what Sam’s doing. Anyway, let’s talk about the WTO and what the thirteenth ministerial conference means for business:
In under ten days, from 29-29 February, the world’s trade community will descend on Abu Dhabi for the World Trade Organisation’s (WTO) Thirteenth Ministerial Conference (MC13). While the newspaper headlines will grab for tales of grand success or miserable failures, harking back to the good ol’days of the third WTO conference and the so-called Battle of Seattle, reality will be slightly more balanced (and dull).1
At a meeting held on 14 February, WTO DG Dr Ngozi said to WTO Members, “We never say never and we are going to get it done.” But what does “it” mean? What should businesses be looking out for ahead of MC13? What are the likely outcomes? On that note, here are some predictions:
WTO Outcome Document
What’s a big international organisation’s biennial meeting without a big outcome document which has taken up far too much time, effort and resources to negotiate? MC13 will most certainly (try to) deliver one of those. Essentially this document takes stock of progress since the last ministerial and sets out a programme of action that WTO delegates are meant to use to guide the work of the WTO until the next one.
Negotiations on the outcome document have been rumbling on for the last couple of months. Loads of WTO Members have submitted their own trade priorities to the point the current text looks like a forest of brackets.2 Recent mood music seems to show that divergences are narrowing and that there will be an outcome document which can be adopted by all WTO members. While these documents are useful to businesses as a signal of what will be a priority for negotiations over the coming years, it will make zero difference for day-to-day commercial operations.
Even if negotiations collapse – what has happened at past ministerials is that the Chair of the conference issues a Chair’s Statement (in this case it would be HE Dr Thani bin Ahmed Al Zeyoudi, UAE’s Minister of State for Foreign Trade) setting out some next steps.
Likelihood – 4/5
Accessions
The WTO Members have decided to welcome two new members to join the current 164 states and territories which make up the organisation – Comoros and Timor Leste. Welcome! This will bring those two countries into line with obligations to abide by the WTO rulebook and grant new market access for companies originating from those countries and vice versa. The last members to join the organisation were Afghanistan and Liberia in 2016.
Likelihood – 5/5
TRIPS Wavier on Diagnostics and Therapeutics
At the last WTO ministerial in 2022, WTO Members adopted a decision (lasting for 5 years) to take direct action to diversify the production of COVID-19 vaccines and certain intellectual property obligations related to them. As part of this decision, Members also agreed to consider whether to extend this TRIPS Waiver on IP protection for COVID-19 vaccines to cover diagnostics and therapeutics as well.
At a preparatory meeting on 13 February, the Chair of the TRIPS Council noted that there was no consensus to move this forward at MC13. This wouldn’t prevent a WTO Member’s Minister raising it again at the Ministerial meeting, but significantly lowers the chances of the Waiver being extended. Which is either really bad or really good depending on your perspective.
Likelihood – 1/5
E-commerce Work Programme
As currently drafted, the WTO’s e-commerce decision consists of two main elements. The first lets WTO Members continue to discuss and debate ongoing issues relating to e-commerce and international trade. Great. The second concerns the question of whether the the Moratorium on Customs Duties for Electronic Transmissions will be extended or not.
I’ve written about the Moratorium (if you’re interested, read about it here) but essentially it is a commitment by WTO Members not to impose customs duties on the bits and bytes crossing their borders. The idea that Members might decide not to extend the Moratorium is something that global industry has been quite excised about – a good example is this statement. Over the past year, there’s been quite a lot of work by IMF and OECD among others to analyse potential revenue gains from imposing the duties (TL;DR: not effective and quite low).
In the end, whether it will be extended or not comes down to politics and has very little to do with the economic merits of the decision. India, South Africa and Indonesia will threaten not to extend it in order to extract concessions, and the question is whether the rest of the WTO Membership will be willing to pay their price? Given the current draft decision includes both the EU and China, and it sounds like South Africa has dropped its opposition, my money is on the Moratorium being extended. Although this is getting harder and harder every time its extended, this might be one of the last times it is.
Likelihood – 4/5
Dispute Settlement Reform
Since June 2022, WTO Members have been mandated to “having a fully and well-functioning dispute settlement system accessible to all members by 2024.” There have been intensive series of meetings at the WTO both formal and informal which has resulted in a fifty-page report detailing the issues and proposing possible solutions.
Unfortunately, 2024 is an election year for lots of the world, and, unfortunately (in respect of this issue), the United States of America, the largest critic of the WTO’s Appellate Body and dispute settlement system. The Biden Administration and the US Trade Representative have little incentive to resolve the issue prior to the USA election and therefore won’t. The best case we can hope for is a positive statement which allows the conversation to continue.
Likelihood – 0/5
Fisheries Subsidies Agreement Ratification
In 2022, the Member agreed on the WTO Agreement on Fisheries Subsidies which is designed to eliminate certain harmful fisheries subsidies in line with a commitment as part of the UN’s Sustainable Development Goals. However, the work doesn’t stop once you’ve agreed on a WTO agreement – next comes ratification. To date, only approximately 60 of the 164 WTO Members have ratified the agreement which is well below the 110 Member threshold needed for it to enter into force. While we’ll likely see a spate of ratifications in the margins of MC13, it is unlikely to hit the necessary number.
Likelihood – 2/5
Fisheries Subsidies Agreement Extension
Also since 2022, negotiations have been underway to extend the disciplines concerning subsidies which contribute to overcapacity and overfishing to sub-sectors which were not included as part of the original Fisheries Subsidies Agreement. Negotiators have been working since 15 January 2024 throughout what the WTO has termed “Fish Month” to conclude negotiations and submit a clean negotiating text to Ministers ahead of MC13. This is unlikely and negotiations will continue in Abu Dhabi. The outcome of the negotiations largely depends on the vibes of the ministerial – if things are going well then the necessary trade-offs will be made, if not then Ministers will keep their powder dry for another day.
Likelihood – 3/5
Agriculture
Agricultural negotiations at the WTO are always difficult (as in all trade agreements) but the pace of negotiations has picked up considerably in the past year with more proposals and activity. Topics under discussion include export restrictions on food, agricultural production and trade in net food importing developing countries (NFIDCs) and least developed countries (LDCs), and, domestic support to the agricultural sector.
A full negotiated outcome is unlikely – most WTO Members see the next ministerial, MC14, as the more likely landing zone to achieve agreement. However, MC13 could serve as an important stepping-stone. But stepping-stones are slippery and the historic disagreements between the agriculture libaralisers and those preferring to protect their markets (particularly in light of increased protests from farmers around the world) will be challenging.
On Public Stockholding for Food Security, India continues to push for a permanent solution based on the interim Bali decision in 2013 – although some have floated another partial solution – but this has not been particularly well received.
Given the turbulence in global agricultural markets due to a combination of ongoing conflicts, disruption to trade routes and natural disasters, progress among countries to address export restrictions and other pressing agricultural issues would be a welcome, if unlikely development, at this stage.
Likelihood – 2/5
Trade and Development
WTO Members have been debating the G90 group of developing countries’ 10 agreement-specific proposals which seek to strengthen the so-called “Special and Differential Treatment” which allows developing countries additional flexibilities under the WTO rules. While this is down for 80+ proposals in the Doha Development Round negotiations, the likelihood of any substantive progress is low as there is little appetite to give some developing countries (which is self-designating in the WTO and many countries do so including China) additional flexibility to bend WTO rules.
Likelihood – 1/5
Other MC13 outcomes
While not formally part of the multilateral negotiations which include all WTO Members, we’ll also see groupings of WTO Members seek to take forward other initiatives in the margins of the ministerial. These include:
Joint Initiative on E-Commerce: The JI on e-commerce is a plurilateral negotiation between 90 WTO Members to agree new trade rules for e-commerce. While the US has thrown a spanner in the works regarding some of the more ambitious proposals regarding data flows and source code, good progress is being made by the group. The next negotiating round is planned for March 2024. While we’ll likely see positive statements for the initiative around MC13, it will not be concluded.
Joint Initiative on Investment Facilitation for Development: The 120 WTO Members have recently concluded negotiations on the agreement. They will issue a Joint Ministerial Declaration in the margins of MC13. They will also request a consensus decision to include the IFD Agreement under Annex 4 of the WTO Agreement, formally incorporating it into the WTO legal framework. This move has been opposed by India and South Africa who argue that plurilateral deals undermine the functioning of the WTO.
Trade and Environmental Sustainability Structured Discussions: Will likely launch a package of outcomes reflecting the progress made since MC12 and setting out a way forward for the 76 Members towards identifying concrete actions to integrate trade and sustainability measures. While these actions will identify best practice, they have yet to move into negotiations on new rules impacting businesses.
Dialogue on Plastics Pollution and Environmentally Sustainable Plastics Trade: Will issue a joint statement on behalf of the 76 Members will issue the revised ministerial statement and the factual compilation documentdetailing current actions being taken by WTO Members to tackle plastic pollution.
Trade and Gender: The participants in the WTO’s Trade and Gender Group has proposed several outcomes for MC13 including the official launch of the Compendium of Financial Inclusion Initiatives which they have been working on.
Medium, Small and Micro Enterprises Working Group: Has been working on the preparation of several documents concerning the integration of MSMEs into Authorized Economic Operator (AEO) programmes.
Businesses looking to understand the implications of MC13 for their operations and the future shape of multilateral trade rules will need to look beyond the headlines to understand which of the many initiatives currently underway at the WTO (whether multilateral or plurilateral) to understand what it means for them.
If there’s anything I’ve missed – the blame lays squarely on me and not Sam (although feel free to blame him for other things).
George is Director of Trade Policy and Strategy at EY, he can be contacted at george.riddell@uk.ey.com.
Editor’s note: Did you know that former UK Prime Minister Boris Johnson’s father claims to have been water cannoned at the Battle of Seattle while dressed as a turtle? You do now. SL
For those of you lucky enough to have never encountered a live negotiation document, bracketed text includes suggested words that have not yet been agreed to by everyone.
Excellent read.