European Commission Proposes Changes to Modernize WTO

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The World Trade Organization (WTO) came to be in January 1995, and has since served as a global body for mediation of trade disputes between nations.

But much has changed since 1995.

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Now, nearly a quarter of a century later, some are asking how the WTO can be modernized for the 21st century while also addressing challenging currently facing the system.

The European Commission published an outline of its proposals to modernize the WTO, which will be presented Wednesday, Sept. 20, during a meeting of E.U. members in Geneva.

“The multilateral trading system has for the past decades provided a stable, predictable and effective framework for companies across the world, helping many economies to grow rapidly,” E.U. Trade Commissioner Cecilia Malmström said in a release. “Also today, the WTO is indispensable in ensuring open, fair and rules-based trade. But despite its success, the World Trade Organisation has not been able to adapt sufficiently to the rapidly changing global economy. The world has changed, the WTO has not. It’s high time to act to make the system able to address challenges of the today’s global economy and work for everyone again. And the EU must take a lead role in that.”

According to the European Commission release, the concept paper outlining the proposals focuses on three main areas:

  • updating the rule book on international trade to capture today’s global economy
  • strengthening the monitoring role of the WTO
  • overcoming the imminent deadlock on the WTO dispute settlement system

Rising trade tensions have put pressure on the WTO in the last year, particularly vis-a-vis the escalating tariffs levied between the U.S. and China (earlier this week the Trump administration announced it would impose an additional $200 billion worth in tariffs on Chinese goods). President Trump has been a vocal critic of the WTO, even threatening to withdraw from the global trade body during an interview with Bloomberg News last month.

The E.U. concept paper argues the WTO is up against the “deepest crisis” it’s faced since its inception, but remains committed to its purpose.

“The EU remains a staunch supporter of the multilateral trading system and firmly believes that the WTO is indispensable in ensuring free and fair trade,” the paper states. “The multilateral system has provided the basis for the rapid growth of economies around the world and for the lifting of hundreds of millions of people out of poverty. It has been the guarantor of trade at times of growing tensions and the backbone of the international system of economic governance.

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“Even at a time of the harshest economic conditions during the great recession, it has helped avert recourse to the trade wars that have fuelled economic decline in the past. As such the health and centrality of the multilateral system needs to be preserved. Its marginalisation, weakening and decline have to be prevented at all costs.”

In the paper, the E.U. warns the crisis could get worse.

“The crisis is set to deepen further in the coming months, as more unilateral measures are threatened and imposed, leading, in some cases, to countermeasures, or to mercantilist deals,” the paper states. “In parallel, as more Appellate Body members leave office while the new appointments are being blocked, the dispute settlement system will soon fall into paralysis, rendering enforcement of the rules impossible.

“That would equate to a 20-year step backward in global economic governance. It would mean going back to a trading environment where rules are only enforced where convenient and where strength replaces rules as the basis for trade relations.”

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