According to WTO Chief Economist Ralph Ossa, China stands as a prime example of how trade can significantly boost the global economy. Ossa highlighted that China's transformation through trade-led development demonstrates that developing countries worldwide can break free from economic stagnation and achieve substantial growth.
"China offers the prime example of the success of the World Trade Organization (WTO) as a global trade driver," Ossa stated, emphasizing the country's remarkable economic ascent facilitated by its active engagement in international trade.
The WTO's Current State: Dysfunction and Challenges
Despite the success stories like China, the WTO itself is facing significant challenges. The organization's dysfunction, particularly in its dispute settlement mechanism, has been a major concern. For the 75th consecutive time, the United States has obstructed the appointment of new members to the WTO's Appellate Body, rendering the body inoperative for nearly five years. This has led to unresolved disputes and unchecked infractions, as appeals languish without a functioning panel to adjudicate them.
The WTO's inability to resolve disputes effectively is symptomatic of a broader issue where institutions and rules designed to promote international trade and investment are losing their relevance. Recent actions such as the European Union's consideration of tariffs on Chinese electric vehicles and the U.S. imposition of sanctions on entities supporting Russia's military forces further underscore the fragility of the global trade environment.
Need for Reform and Revitalization
In the face of these challenges, there is a growing consensus on the need for reform within the WTO. Ossa, in an interview with Geneva Solutions, emphasized the importance of reforming the dispute settlement system, among other key issues. The upcoming 13th Ministerial Conference in Abu Dhabi is expected to address these reforms, including the fisheries subsidies agreement, agricultural subsidies, and the extension of intellectual property rights waivers for Covid-19 vaccines and treatments.
Ossa defended the WTO's crucial role in fostering a rules-based, multilateral trading system and cautioned against the detrimental effects of a power-based alternative, which would disproportionately affect weaker members, particularly developing countries. He praised the WTO's consensus-based decision-making process, which gives every member an equal voice and the power to veto decisions.
Trade as a Tool for Development
Despite the current challenges, Ossa and the WTO continue to advocate for international trade as a powerful tool for development. The WTO's latest World Trade Report highlights that between 1981 and 2019, lower and middle-income economies increased their share of global exports from 19% to 29%, and reduced the share of people living on less than $2.15 per day from 55% to 10%.
However, Ossa also acknowledged that some of the weakest countries and individuals have not benefited as much as they could from international trade. He emphasized the need to address these disparities and find solutions to the problems that either come with trade or that trade is not addressing effectively.
Conclusion
As the WTO navigates through its current challenges, the example set by China serves as a reminder of the potential benefits of trade-led development. While the organization faces significant hurdles, including its dysfunctional dispute settlement mechanism and the need for comprehensive reforms, its role in promoting a rules-based global trading system remains critical. The upcoming ministerial conference will be a pivotal moment in shaping the future of global trade policies, and it is imperative that members work towards consensus and meaningful reforms to ensure the WTO continues to serve its purpose effectively.
