The European Commission has put forward its first set of ideas to modernise the World Trade Organisation (WTO) as part of its effort to improve international trade rules and place them in a position to better deal with the challenges of the global economy.
The EU’s Commissioner for Trade, Cecilia Malmstrom, said strengthening the WTO’s rules would help counter trade-distorting subsidies, a less-than-veiled reference to US President Donald J. Trump‘s decision to impose a new round of tariffs on Chinese imports to the tune of $200 billion. Trump’s decision came only a month after he announced that he would withdraw from the WTO.
“The world has changed, the WTO has not. It’s high time to act to make the system able to address the challenges of today’s global economy and work for everyone again. The EU must take a leadership role to achieve that,” said Malmstrom, who added that the EU’s set of proposed changes would, in addition to updating global trade rules, strengthen the power of the WTO to monitor trade and create a mechanism to overcome the current ongoing deadlock in the WTO over the organisation’s dispute settlement system.
EU leaders have been discussing with the Commission since June ways to produce proposals with “like-minded partners” that would tackle some of the more difficult disputes in the WTO, including in crucial areas such as subsidies, enforcement, and negotiations.
French President Emmanuel Macron has proposed an overhaul of global trading rules by urging the EU, the US, China, and Japan to draw up a blueprint for WTO reform by the end of the year.
Malmstrom said that talks remain ongoing with the US and Japan as part of a trilateral ministerial level. The trio has already met on three occasions where they jointly reiterated that fundamental reforms of the WTO would only be possible through a collective effort of its 164 veto-wielding members.
“The WTO is a member-based organisation, therefore it can’t reform itself. Ultimately, it is up to its members”.
Each of the EU Member States was consulted while drawing up the framework for the overhauled WTO’s new set of rules. The overall consensus appears to place the emphasis on a modernisation drive that would better equip the WTO with the tools to meet current global challenges and to address issues that are critical to the strength of the organisation by improving transparency and subsidy notifications.
The rulemaking in this area should focus on creating incentives for WTO members to fully comply with their notification obligations. The EU has already identified ways to improve transparency and subsidy notifications.
The proposals would determine whether state-owned enterprises (SOEs), and companies through which the state decisively governs and influences the economy, perform a government function or further government policy, while also assessing whether a WTO member exercises significant control over the enterprise in question. The WTO would then be able to identify market-distorting support provided by SOEs who are pursuing government economic policies rather than focusing on their own economic performance.
The hopes to have created a framework whereby the WTO can effectively identify the sort of subsidies that significantly distort global trade, while also allowing for new rules to address any possible barriers to services and investments and to address market access barrier issues, including discriminatory treatment of foreign investors.
The EU believes addressing the issue of digital trade barriers and the sustainability objectives of the global community will be critical to the success of any sort of overhaul of the WTO. This, according to Brussels, will empower the WTO to resolve trade disputes without blocking the nominations of new WTO Appellate Body Members.