A modernized WTO is far better than no WTO at all

Last month, on the sidelines of the World Economic Forum in Davos, leading members of the World Trade Organization (WTO) met to discuss how to improve the organization. At the same time, more than 70 governments agreed to commence WTO negotiations on trade-related aspects of electronic commerce. 

Taken together, these developments will have an important impact on the operation of the WTO and on how large and small companies do business around the world.

The views of the private sector, which has a direct stake in the rules that result from such government-to-government discussions, should be actively solicited and given careful consideration by WTO member states.

What does business want out of the WTO? For starters, we need the organization to play its rightful role in global commerce and governance.

For decades, the WTO has served as a cornerstone of the global rules-based trading system, one that has helped spur growth and development around the world, helping to lift hundreds of millions out of poverty. How can we ensure that it can build on past successes while adapting to the challenges of the 21-century?

A four-pronged modernization

The WTO’s many existing agreements, such as those on intellectual property rights, sanitary and phytosanitary measures and technical barriers to trade, provide practical commercial benefits because they establish global frameworks of rules designed to facilitate international trade.

The members of my organization, the U.S. Council for International Business (USCIB), believe that WTO members should anchor their efforts to strengthen the organization in four key areas (as outlined in a white paper we issued in January). 

First, tackle subsidies and the role of state-owned enterprises, as well as state-championed firms. We need to improve transparency and compliance by member states with existing WTO rules on subsidies that distort international trade.

{mosads}A number of creative suggestions have been put forward to do this via various types of incentives. Furthermore, we need to establish new rules to more effectively address subsidies and other market-distorting support provided to and through state-owned enterprises, including government waivers of permits impacting the environment, as well as for construction and labor. 

Second, develop new rules for cutting-edge trade issues. The e-commerce talks agreed to in Davos should aim to establish new rules covering digital trade, including data flows and data localization policies, as well as a permanent ban on applying customs duties and other customs processes on electronic transmissions.

We also urgently need to better promote further integration of services and investment, which are increasingly eclipsing trade in goods, into the international trading system and work toward more effective regulatory cooperation across borders.

Third, modernize the WTO’s rules and procedures. We should increase negotiating flexibility at the WTO by making it easier for members to pursue plurilateral agreements with full support from the WTO secretariat.

We can improve transparency and notification by creating incentives for members to provide required notifications and applying sanctions for willful and repeated noncompliance with notification rules. 

Fourth, improve the WTO’s dispute settlement mechanisms and the operation of the appellate body, starting with ensuring it has the financial and staff resources to deal with the growing number of cases being brought to the WTO.  

WTO members should review and agree on rules dealing with the scope of what can be decided by the appellate body, the timing of cases and the limits of actions by judges after their term has expired.

The American business community believes strongly in the WTO, whose continued existence and modernization, including through a robust and effective dispute settlement system, is necessary for global stability and prosperity.

There are valid concerns about the adequacy of WTO rules to deal with 21st-century issues and about the need for improvements to the WTO’s dispute settlement system.

But if governments work with business, we are confident that the WTO can be reformed and modernized to continue effectively advancing a rules-based global trading system. We strongly believe that a modernized WTO is far better than no WTO at all. 

Peter M. Robinson is president and chief executive of the United States Council for International Business, an independent business advocacy group that was founded in 1945 to promote free trade and help represent U.S. business in the United Nations.