Using the WTO to kick-start international trade

Posted by on 27 January 2009

The real threat before the WTO is not the lack of progress in the Doha Round itself but that it may cause governments, producers, traders and subsequently people to lose faith in the WTO. The doubt expressed by the Russia on its accession to the organization illustrates this threat.

On this background, WTO member-states should use the current Doha impasse to focus on finding ways to restore the credibility of the WTO. This requires three elements: a pause for thought, a look inside and a step forward. The followings are intended as viable and applicable suggestions in this regard.

Pause for thought

The first element requires governments to resist adoption of policies, which may have negative and lasting impact on international trade:

-                  Most importantly, governments - at least G20 - should initiate a stand-still on signing new – and long term - preferential trade agreements (PTAs). Although these agreements may provide a basis for their signatory states´ interaction, they cannot be regarded as alternatives to multilateral rules. The main reasons for this are that they complicate international trade, e.g. through introducing complex and contradictory Rules of Origin, and they cement the problems international trade is currently facing, most important the weak engagement of developing countries in international trade.

-                  Furthermore, all governments - at least the G20 – should promise that they will remove any trade protective measure they may have adopted during the current crisis.

Look inside

A new start requires a sound and solid foundation and the WTO should provide the predictable and workable tools which can be used by all its member-states regardless of their economic might. In fact, the WTO is intended to be a rule based system. In this regard, the WTO´s Dispute Settlement Mechanism (DSM) is the corner stone. But it needs an update:

-                  Many disputing parties regard the current ad hoc panel system merely as a phase they have to pass in order to enter the real world of dispute settlement. A standing panel organ will neutralize this trend. This will especially be an advantage for developing countries which lack the necessary resources to follow a case all the way through the DSM.  

-                  Furthermore, currently in many cases due to lack of sufficient facts, the Appellate Body is unable to issue a ruling. This problem can be solved by introducing remanding authority to the DSM.

Step forward

Acknowledging that the Doha Round was meant to be a development round - and it is still a valid goal – and it is rather impossible to please all (developing) countries, next steps could include the following.

-                  It can be argued that one of the reasons for the lack of progress in the Doha Round has been that traders have lost interest in the rather out-dated and politicized Doha agenda and as a result there has not been enough pressure from them on governments to conclude the round. A legally binding Trade Facilitation agreement with the necessary assistance for a rapid implementation of the agreement by all (signatory) countries will ease international trade and hereby re-engage traders in the Doha.

-                  All countries, developed and developing, should provide tariff-free and quota free access to products from LDCs, Land-locked countries, small island economies, and countries in similar situation (if needed WTO General Council or the Director General, can propose a list of countries, and again if needed countries can be voted off the list through negative consensus or added to the list by simple majority. The DSM can be used as the monitor.) Although an old story, it will hopefully be a start of a South-South trade move and take the heat off the most needed countries.

-                  A plurilateral agreement on Rules of Origin, which all PTAs are built upon. Hopefully, this will make PTAs more transparent.

Amin Alavi, Ph.D. ([email protected])

Assistant Professor, Aarhus School of Business, University of Aarhus, Denmark