Elizabeth Morgan | Is the WTO still relevant?

AS TRADE takes centre stage with unilateral imposition of tariffs and retaliation by trade partners triggering trade wars, the question is thus, what role is there for the World Trade Organization (WTO)? Is it still relevant?

The WTO, with 166 member states and customs territories, since its establishment 30 years ago, sets the rules and regulations governing international trade in goods and services. In 2024, global trade in goods and services was valued at about US$33 trillion. Regardless of the current tensions arising from US trade policy changes since January 20, world trade in goods and services is still occurring under WTO rules. The functions of the WTO are continuing as scheduled. It should also be recalled that the WTO is a member-driven organisation and its successes and failures are determined by the members in their negotiations.

The WTO is now looking towards its 14th Ministerial Conference (MC14) to be held in Cameroon, from March 26-29.

The USA remains a member of the organisation, and President Donald Trump has already announced the appointment of Joseph Barloon, a trade lawyer and former general counsel at the Office of the US Trade Representative (USTR), as the administration’s Permanent Representative to the WTO in Geneva. He is also a deputy to Jamieson Greer, President Trump’s USTR.

US TARIFFS

The USA has signalled that it will be following a more protectionist trade policy imposing higher tariffs on goods from trade partners. The Trump administration has already imposed higher tariffs on goods from China, Canada, Mexico, and the European Union (EU), its main trading partners. In fact, these unilateral tariffs violate WTO rules and the bilateral US-Mexico-Canada trade agreement concluded and signed in 2020 by President Trump.

The US has also threatened to unilaterally impose reciprocal tariffs on goods from other WTO members as of April 2.

In the 18th and 19th centuries, tariffs were important to the USA for revenue and promoting its development and industrialisation. With the introduction of income tax in 1913, tariffs for revenue became less important. From about 1942, the US policy shifted to promoting free trade, negotiating bilateral free trade agreements, believing that liberalising trade led to greater prosperity for the country. Thus, the USA, although not agreeing to the establishment of an international trade organisation in 1947, agreed to the adoption of the General Agreement on Tariffs and Trade (GATT) and participated in its eight rounds of multilateral negotiations (1947-1994) to reduce tariffs globally. The 1994 end of the GATT Uruguay Round saw the establishment of the WTO, outside the UN system. US tariffs (import duties) moved over this 47 years from an average of about 50 per cent to five per cent. So, currently, US tariffs are bound quite low in the WTO, and do not contribute much to US revenues.

The only round of trade negotiations commenced under the WTO, the 2001 Doha ‘Development’ Round, encouraged by the USA and others with the claim that it would focus on the needs of developing countries, has stalled. This round became about market access, further reducing tariffs in developing countries, and the developing country status and planned economy of China. Some would argue that the Doha Round became more about market access for the developed countries, such as the USA, than the development needs of most developing countries.

The US Trump administration is now endeavouring to unilaterally reverse the US situation of low tariffs and trade deficits resulting from its own trade policies over 83 years. It is now aiming to focus more on import substitution to rebuild its manufacturing sector and to increase government revenues.

DISPUTE SETTLEMENT

Dispute settlement procedures, which the US has successfully used, are continuing in the WTO, although limited by a non-functioning Appellate Body. The paralysis of this body dates to the Barack Obama presidency. In the current situation, China and Canada are using the WTO’s dispute settlement mechanism as a means of addressing their tariff disputes with the USA.

China, on February 5, requested WTO dispute consultations with the US stating that the additional 10 per cent customs duty (tariff) and other measures applying to all goods originating from China are in breach of specific provisions of Articles I and II of the GATT 1994.

On March 13, Canada also requested WTO dispute consultations with the USA concerning the imposition of import duties on certain steel and aluminum products from Canada. These measures terminate Canada’s exemption from additional duties on certain steel and aluminum products and increase duties on aluminum articles, which are inconsistent with US obligations under the GATT 1994.

The EU has also previously raised its concerns about US tariffs in the WTO. These members, Canada, China and the EU, are demonstrating their respect for WTO rules and mechanisms.

These disputes will enable some discussion of current US actions in the WTO, and open the door for wider discussions which could lead to permanent solutions, should the US wish to engage.

AGRICULTURE

Trade in agricultural products has been an area of contention both in the GATT and WTO. In the earlier GATT years, it was exempt from rules. Though addressed in the Uruguay Round, agriculture is still subject to high tariffs and non-tariff barriers. Agricultural production in developed countries is heavily subsidised by governments. Intransigence in negotiations has resulted in limited progress in further liberalising agriculture trade. Thus, this sector, also important to developing countries, requires understanding and compromise in negotiations to arrive at solutions beneficial to all. Trade has to be beneficial to all.

RELEVANCE OF WTO

The WTO Director General, Ngozi Okonjo-Iweala, is of the view that this is not a time to panic, but to remain engaged, to listen, and make every effort to have dialogue. WTO members are continuing to trade, import and export of goods and services, and are engaging in the work of the organisation in Geneva. Trade is important to the economies of all WTO members.

For small countries, such as those in CARICOM, though it might seem that we do not gain much from this organisation, some will point to the EU bananas case and to the Antigua and Barbuda gambling case, both involving the USA, the WTO, as a rules-based multilateral body, is important to our ability to trade. CARICOM countries are highly trade dependent. So, the WTO, and indeed the other multilateral organisations, remain relevant to this region.

Elizabeth Morgan is a specialist in international trade policy and international politics. Send feedback to columns@gleanerjm.com