Geneva The year 2022 was not a good year for world trade. The US and China started a new trade dispute over chips. And even between the alliance partners USA and Europe it cracked. The Europeans regard the US inflation adjustment program as green-colored protectionism, with which US President Joe Biden aims to lure European industrial companies to the US by means of huge subsidies.
In view of the increasing trade conflicts, a strong World Trade Organization (WTO) would never have been as important as it is today. The WTO should be a kind of arbiter of the world economy: ensure free and fair trade, curb protectionism and thus increase prosperity in the world. But for many years the WTO has been caught in the permanent crisis of an ongoing self-blockade. Politicians and experts have already dismissed the WTO as an obsolete model.
But at least there is some hope after this year. Because at its 12th ministerial conference in June, the organization delivered a surprising result: the often quarreling members agreed to suspend intellectual property rights to corona vaccines, cancel harmful fisheries subsidies and promised a reform process for the cumbersome organization.
The so-called “Geneva Package”, which the members put together in day and night meetings, contains further resolutions, for example on the fight against hunger. “It has been a long time since the WTO has achieved so many multilateral outcomes,” said Director-General Ngozi Okonjo-Iweala.
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The head of the German delegation, Secretary of State for Economic Affairs Udo Philipp, was also satisfied: “This ministerial conference is a first sign of hope.” . Right?
Doubts about the will to reform
Optimists hope that the WTO will finally be reformed and that the organization will finally fully fulfill its founding mandate: liberalization of the exchange of goods, adoption of new multilateral trade rules, monitoring of the treaties and arbitration of conflicts among the members.
>> Read also: WTO decision: Vaccine manufacturers should waive corona patents
But now that the initial euphoria about the “Geneva Package” has evaporated, soberly analyzing experts have come forward. “The result of the WTO ministerial conference is better than nothing,” says the President of the Kiel Institute for the World Economy, Holger Görg, the Handelsblatt. “At the moment, however, everything is still on paper.” The WTO members face the challenge of implementing the resolutions quickly.
According to the Kiel economist, rapid implementation could fail due to the lack of constructive leadership within the WTO. Under President Donald Trump, the USA had said goodbye to its leadership role. “Under the current President Joe Biden, the Americans have not lived up to their role as supreme power again,” says Görg. “At the same time, the US is not leaving any other member to play a decisive role.”
US blocks commercial court
Apart from the US, only the EU has the strength to set the tone in the WTO. “The EU is the only one of the three big players in trade, alongside the USA and China, that is continuously and specifically committed to reforming the World Trade Organization,” says Claudia Schmucker, program manager at the German Society for Foreign Relations. “With her reform paper from 2018 and again in 2021 she gave concrete reform answers to the criticism of the WTO.”
Under the current President Joe Biden, the Americans have not lived up to their role as supreme power again. Holger Görg, President of the Kiel Institute for the World Economy
The idiosyncrasy of the USA can be observed impressively in the paralyzed WTO dispute settlement system, which was once the “heart” of the WTO. For more than 20 years, the two-tier WTO trade court has dealt with hundreds of large and small cases: from the banana dispute to the rivalry between the aircraft manufacturers Boeing and Airbus to frozen food.
In December 2019, however, the Appellate Body of the WTO Commercial Court had to stop its work – and the blockade continues to this day. Because the United States continues to resist new judge appointments.
This policy of confrontation was initiated by former US President Barack Obama, his successor Trump tightened it and the current incumbent Biden is continuing it.
>> Read also: EU sues China at World Trade Organization over Taiwan dispute
Washington accuses the appellate body of systematically violating its powers and wanting to create new law. At the ministerial conference, members agreed to reform the dispute settlement system and get it back on track. This should happen by 2024.
The USA blocked the dispute settlement mechanism, but made no concrete offers for reform. Claudia Schmucker, German Society for Foreign Policy
“The USA blocked the dispute settlement mechanism, but made no concrete offers for reform,” says expert Schmucker. If a reform is to be in place by 2024, “this will require a significantly increased commitment from the USA,” said Schmucker.
problem of unanimity
The blocking of the appeals body highlights another problem of the WTO, which was founded in 1995: the members decide everything by consensus. Virtually any member can veto. This applies to the big three – the USA, the EU and China – as well as to small countries such as the Dominican Republic.
The consensus principle also contributed to the failure of the Doha world trade round. In 2001 in Doha, the WTO members decided to start negotiations to open up the markets and involve poor countries.
The WTO took a decision on fisheries subsidies this year.
(Photo: dpa)
But the blocking power of each member and the overflowing agenda let the Doha talks peter out. “The big players in the WTO will not want to give up their veto,” says expert Görg. “But it has to be considered whether one should always insist on consensus.”
As an example, Görg cites the agreement reached by 67 WTO members last year on measures to simplify trade in services: “A two-speed WTO could be a model for the future,” suggests the President of the IfW Kiel.
But in this year’s vaccine deal, a two-speed model or a plurilateral deal just for a specific group of members would not have worked. “South Africa and above all India have repeatedly shown themselves to be the spanner in the works of the WTO, neither of which accept any plurilateral agreements as a matter of principle,” says WTO expert Schmucker.
Ambiguity about vaccine patents
For the first time in 2020, India and South Africa called for the temporary release of intellectual property rights to vaccines, medicines and diagnostics in the fight against Corona. The pact for all WTO members is intended to boost mass production in poor countries.
At the ministerial conference, the WTO members reached a compromise: companies from certain developing countries should be allowed to use patents for vaccines for up to five years. At the same time, the WTO members agreed on further negotiations until the end of this year. They want to decide whether the “waiver” should be extended to the production of corona diagnostics and therapeutics. Shortly before Christmas, the decision to exempt Covid drugs from patents was postponed for the time being.
However, industry and experts warn the WTO against this second step: “It would simply force companies like Gilead, Merck and Pfizer to give up their intellectual property without receiving royalties for it,” says the US health specialist Kenneth Thorpe. “That would set a dangerous precedent that could have disastrous long-term consequences for future innovation.”
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