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By Bill Burke-White
Inaugural Director, Perry World House
The World Trade Organization (WTO) met this week in Buenos Aires, Argentina for its 11th biannual Ministerial Conference (MC11) in the shadow of a growing populist backlash against the norms and institutions of free trade. While the meetings were intended to make progress on issues ranging from e-commence to the engagement of small and medium enterprises in the global trading order, little progress seemed likely as the meetings drew to a close. The political divides between developed and developing countries resurfaced and background populist and protectionist trends shaped the discussions.
Under the auspices of our Future of the Global Order: Technology, Power and Governance research theme, Perry World House directly engaged in the WTO Ministerial process both to observe the politics of trade negotiation and to bring academic research to bear on the policy discussions, particularly with respect to regulatory cooperation and the integration of trade and investment regimes.
Perhaps the greatest tension of the week’s discussions emerged in the plenary remarks of United States Trade Representative Robert Lighthizer, who criticized countries that claim developing country status under WTO rules, saying “there is something wrong, in our view, when five of the six richest countries in the world presently claim developing country status.” India and China were quick to push back, with Indian Minister of Commerce & Industry Shri Suresh Prabhu noting that, “while in India we are proud of our GDP and growth rates of recent years, propelled by innovative economic policies of my government, we cannot ignore that India is home to more than 600 million poor people. Therefore, we are legitimate demandeurs for special and differential treatment for developing countries.” The schisms between the developed and developing world in the trade architecture are perhaps exacerbating this tension as they are being reshaped, making new progress difficult.
So too, trends of populism and retrenchment by the countries that traditionally drive the trade regime hindered progress. As observed at the Perry World House Fall 2017 Colloquium on the Future of the Global Order in an Era of Populism, Nationalism and Retrenchment, new trade agreements are becoming increasingly difficult to achieve in light of national politics. The two-level games that allowed the expansion of free trade are no longer working, particularly at the domestic level, as seen with the US withdrawal from the Trans-Pacific Partnership.
Despite challenges in the formal negotiations, new engagement by the private sector offered some prospect for progress, particularly on the engagement of small and medium enterprises in the global trade order. Addressing the MC11 Business Forum, Jack Ma, founder and executive chairman of Alibaba, proposed a number of ways to expand access for small businesses to the trade order. Similarly, the World Economic Forum launched a new initiative to create direct linkages for such businesses to the international trade system.
While observing the formal negotiations, I personally spoke at two events linked to the MC11 process. At the Trade and Sustainable Development Symposium organized by the International Center for Trade and Sustainable Development, I argued that while regulatory coherence and harmonization is the next frontier of international trade law, the sovereignty costs of achieving regulatory harmonization are extremely high and are exacerbated by growing populism, particularly in the United States. Regulatory coherence requires states both to develop similar regulatory objectives and to recognize the regulatory processes of other states, which treads deeply on a states’ regulatory sovereignty. International imposition of regulatory standards or even compromise in regulatory standards often exacerbates populist backlash.
While like-minded states, such as the Canada and the EU may be able to achieve some regulatory coherence, it is far harder at the multilateral level, as illustrated by the US withdrawal from the Trans-Pacific Partnership. To avoid stagnation or fragmentation of regulatory regimes, more informal, less politically charged efforts may be needed. For example, the use of non-binding standards, informal agreements, and transnational regulatory networks may be less likely to trigger negative political responses. To ensure that differential regulatory regimes don’t lead to a fragmentation of the international economic order or exclude developing states, particular efforts will be needed to include less-like-minded states in these processes.
At the MC11 “Think Conference”, organized by the Government of Argentina, a group of the world’s leading academic experts on trade and investment came together to discuss key questions being raised in the formal political negotiations. I chaired a panel and offered commentary on new opportunities for trade facilitation. Trade facilitation is one of the more promising areas for agreement as it involves mechanisms to enhance and promote trade flows without the need for new concessions by national governments. Trade facilitation can, for example, reduce the barriers to entry for cross-border e-commerce. The WTO’s Trade Facilitation Agreement can help promote trade flows within existing international legal commitments.
Ultimately, the Argentina WTO Ministerial highlights the challenges of trade cooperation today and the dangers of both populism and national retrenchment for continued trade openness. Ironically, it was the Chinese Minister of Commerce, Zhong Shan, who offered the most full-throated defense of the current trade regime: “Let us join hands and take real actions to uphold the authority and efficacy of the WTO.”