MC12 briefing note
WTO reform — an overview
The issue of WTO reform is a broad one, encompassing many facets of the WTO's work. The debate over WTO reform is nothing new. Almost from the organization's inception, members have been thinking about how the WTO could be improved and respond more effectively to the challenges facing the multilateral trading system. However, the push for WTO reform has gained momentum in recent years, reflecting the four general concerns outlined below.
- The challenges WTO members face in initiating, negotiating and concluding trade agreements, both for outstanding issues as well as for new issues
- The need to strengthen the work of the WTO's regular bodies and committees as well as strengthen notification and transparency disciplines under existing agreements
- The question of whether, and to what extent, the WTO's more advanced emerging economies should take on greater obligations under the WTO agreements, and whether existing special and differential treatment provisions for developing and least developed countries are sufficient or effective
- Improvements in the functioning of the WTO's dispute settlement system and overcoming the four-year impasse on the appointment of new Appellate Body members.
More than 30 submissions have been made by WTO members or, in many cases, groups of WTO members addressing the issue of WTO reform, either horizontally or on specific topics. One of the early proponents for WTO reform was the Group of 20 leading economies. At their Buenos Aires summit in late 2018, G20 leaders issued a statement acknowledging that the system “is currently falling short of its objectives and there is room for improvement”. In subsequent summits, G20 leaders reaffirmed their support for reform of the WTO to improve its functions and pledged to work constructively with other WTO members on the matter, including in the lead-up to the 12th Ministerial Conference (MC12).
To date, the submissions on WTO reform have been discussed in the regular meetings of the General Council as well as within the various councils and committees where issue-specific proposals have been presented. In a draft MC12 outcome document circulated on 9 June, the WTO's General Council would be charged with overseeing the work on WTO reform post-MC12, reviewing progress, and considering decisions for submission to the 13th Ministerial Conference.
In remarks made at a General Council meeting in July 2021, General Council chair Ambassador Dacio Castillo (Honduras) noted that in his consultations with members on the issue, several delegations said the question of WTO reform needed to be addressed at MC12 and reflected in an outcome document. He also noted that some delegations noted the suggestion of establishing a working group on WTO reform to discuss issues of relevance including, but not limited to, the WTO negotiating function, notifications and monitoring and a number of institutional improvements.
WTO Director-General Ngozi Okonjo-Iweala told the General Council the following October that discussions among key WTO members and groups of members showed a willingness to work on these reforms but that differences remain on what reform is and what it should be. Members need to address what reform of the basic functions of the WTO entails and what process needs to be put into place, she noted.
At an informal TNC/Heads of Delegation meeting on 4 May, General Council chair Ambassador Didier Chambovey (Switzerland) said delegations acknowledged the need to further advance and close remaining outstanding areas in a draft MC12 outcome document from the previous year, including on the issue of WTO reform. The Director-General also urged members to focus on a process going forward to achieve WTO reform and that, at a minimum, members should agree on such a process at MC12, with the aim of delivering results by the 13th Ministerial Conference.
Dispute settlement/Appellate Body
The main focus of the WTO reform push to date has been dispute settlement, prompted by the crisis over the future of the Appellate Body. In August 2017, the United States said it would not agree to the launch of selection processes to fill vacancies on the Appellate Body until its systemic concerns regarding the WTO's dispute settlement system were addressed (1).
While some WTO members have echoed the concerns of the US, and many WTO members have voiced their readiness to discuss these concerns, there is near universal agreement that addressing these concerns and proceeding with the selection of new Appellate Body members should not be linked.
At meetings of the WTO's Dispute Settlement Body, more than 120 members have issued a joint call for the selection process to be started forthwith; many of these members have warned that the continued impasse on the appointment of new Appellate Body members not only undermines the WTO's dispute settlement system as a whole and the credibility of the WTO itself, but also denies all WTO members their legal right to a binding, two-stage dispute settlement process which is a fundamental pillar of the WTO system.
To overcome the impasse, the General Council chair Junichi Ihara of Japan appointed Ambassador David Walker of New Zealand in January 2019 to assist him in working with WTO members to resolve their differences. Following a year of informal consultations with members, Amb. Walker presented members in December 2019 with a draft decision on the functioning of the Appellate Body, based on inputs received during the informal process. The decision however failed to secure consensus support, with the US voicing its objection.
As a result of the US hold on Appellate Body appointment and reappointment procedures and the expiry of the terms of the Appellate Body members, the Appellate Body is, since December 2019, no longer able to review new or pending appeals. To date, more than 20 panel rulings have been appealed “into the void”, meaning that a resolution of these dispute proceedings is not possible until new Appellate Body members are appointed. All future panel rulings also face the risk of being appealed “into the void” unless a solution is found to the impasse.
To overcome the Appellate Body impasse, a group of 24 members plus the European Union have established a “multi-party interim appeal arrangement” (MPIA) whereby any panel ruling in a dispute where both parties are MPIA participants can be reviewed by independent arbitrators operating in line with dispute arbitration provisions under Article 25 of the WTO’s Dispute Settlement Understanding (DSU), To date, no decisions have been issued by MPIA arbitrators, although parties in several disputes have agreed to resort to these procedures if and when the dispute approaches the appeals phase In one dispute, the two parties have agreed to separate appeals procedures under the arbitration provisions of Article 25 of the DSU.
Strengthening disciplines and procedures
Transparency and notification
WTO members are subject to notification requirements under many of the WTO agreements with regards to new laws, regulations and measures affecting trade. Some members have been raising concerns in the various WTO councils and committees about what they describe as the “chronic” low level of compliance with existing notification requirements, which impedes the ability of WTO members to review and assess the policies of members and negotiate new rules. The concerns are particularly acute in regard to notifications on agricultural and industrial subsidies.
As a result, several members have submitted proposals to improve compliance with notification requirements. Nineteen WTO members plus the European Union have endorsed a proposal calling for improving members' compliance with notification obligations and assisting developing members having problems meeting their notification obligations. A revised proposal backed by 23 members plus the EU was circulated on 28 April 2022.
A number of developing countries and least developed countries have voiced opposition to the initiative, arguing that capacity constraints rather than political will are preventing poorer members from fulfilling their full notification obligations and that the proponents' proposal would lead to new reporting obligations not set out under the WTO agreements. The African Group, Cuba, India and Oman have put forward a submission noting their own concerns regarding transparency obligations on issues of concern to developing countries, such as measures promoting and encouraging transfer of technology to least developed countries (LDCs).
Developing country status and special and differential treatment
Several WTO members have questioned the WTO practice of “self-designation” whereby a member can declare whether or not it is a developing country. Developing countries benefit from special and differential treatment (S&DT) provisions, such as longer implementation periods to comply with WTO commitments, flexibility of commitments, of action and use of policy instruments, and access to technical assistance. More than two-thirds of WTO members have self-designated themselves as developing countries or are classified as least developed countries in line with United Nations criteria.
In January 2019, the United States put forward a paper criticizing the practice of self-designation. The US put forward a subsequent proposal which calls for excluding all OECD members, all G20 members and all members classified as “high income” by the World Bank from self-declaring as a developing country.
While several developed members have voiced support for revisiting self-declared developing country status, a number of developing countries have sharply criticized the initiative. China, India and others issued a joint paper stating that the gap between developed and developing members appears to have widened over time, thus justifying the continued need for S&DT. These members also argue that any attempt to dilute S&DT by denying self-declaration would conflict with the WTO's fundamental premises of equality and fairness.
In a subsequent statement issued in October 2019, the African Group of WTO members, China, India and several others reaffirmed the principles of developing countries' continued unconditional right to S&DT in WTO rules and negotiations, the right to self-designation, upholding existing S&DT provisions; and the provision of S&DT in both current and future negotiations.
A smaller group of developed and developing members issued a middle ground paper in April 2019, arguing for a “creative and effective approach” to S&DT flexibilities that respond to the development needs of members and enable their fuller participation and at the same time contribute to an appropriate balance of rights and obligations among WTO members.
In February 2022, the African Group, India and Cuba circulated a communication on strengthening the WTO to promote development and inclusivity. The proponents said the priorities for WTO reform must include, among other things, strengthening the multilateral character of the WTO, reaffirming the principles of S&DT and keeping development at the organization's core.
Reinvigorating the negotiating function and deliberative capacity of the WTO
A group of 13 WTO members have issued a joint statement calling for the WTO's negotiating function to be reinvigorated in order to ensure the continued relevance of the organization. These “Ottawa Group” members in particular cited the need to safeguard and strengthen the WTO's dispute settlement mechanism as a central pillar of the WTO, updating WTO rules to reflect 21st century realities, addressing modern economic and trade issues and tackling pending and unfinished business. The group said this may require flexible and open negotiating approaches towards multilateral outcomes, and they welcomed the work undertaken through the Joint Statement Initiatives from MC11 in Buenos Aires.
The Ottawa Group issued a subsequent joint statement announcing their intention to begin consultations with all interested members to develop collective proposals on a cross-cutting and committee-by-committee basis in order to improve the WTO's deliberative and monitoring functions and solve trade concerns without litigation.
Twenty WTO members have separately proposed strengthening the ability of regular WTO councils and committees to facilitate the effective consideration of such trade concerns by equipping them with horizontal procedural guidelines and streamlined meeting arrangements.
The LDC Group of WTO members outlined its views on WTO reform discussions and proposals in a December 2019 submission. The LDC Group said WTO reform should take full account of the widespread capacity constraints of LDC members and ensure inclusive negotiating processes and consensus-based decision-making. A revised version of the proposal was circulated on 28 April 2022 with updated observations due to new developments and the COVID-19 pandemic. The African Group has also circulated a Declaration on WTO Issues adopted by African Union trade ministers in December 2018.
China and Canada have also circulated individual position papers on WTO reform. China cited the need for specific actions to resolve crucial and urgent issues threatening the existence of the WTO, increasing its relevance in global economic governance and improving the operational efficiency of the WTO. Canada has called for strengthening the deliberative function of the WTO councils and committees, with a focus on improved information sharing about domestic measures and their impacts, improving the capacity and opportunity for deliberation, and improved opportunities and mechanisms for addressing specific trade concerns.
For the first time, WTO members have agreed to undertake a comprehensive review of the WTO's functions in order to ensure the organization is capable of responding more effectively to the challenges facing the multilateral trading system. Ministers at the 12th Ministerial Conference adopted an MC12 Outcome Document on 17 June which addresses the way forward on WTO reform and the commitment to having a fully and well-functioning dispute settlement system in place by 2024.
In regard to WTO reform, ministers agreed to address the challenges that the WTO is facing and to ensure the WTO's proper functioning. They committed to work towards necessary reform of the WTO with the aim of improving all its functions. The work will be carried out through the WTO's General Council and its subsidiary bodies, with decisions to be submitted to the next Ministerial Conference.
On dispute settlement, ministers recognized the importance and urgency of addressing challenges and concerns regarding the dispute settlement system, including those related to the Appellate Body, and to carrying forward discussions with the aim of having a fully and well-functioning dispute settlement system accessible to all members by 2024.
- The systemic concerns of the US are detailed in the February 2020 Report on the Appellate Body of the World Trade Organization issued by the Office of the United States Trade Representative. back to text
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