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WTO MC12: the best result is not what has been achieved, but what has been avoided

Written by Maximiliano Mendez-Parra

Expert comment

After a long week, members of the World Trade Organization (WTO) reached an agreement on a series of trade issues in the Ministerial Conference 12 (MC12) held in Geneva. It is an important outcome compared to the failure to conclude significant agreements in past Ministerial Conferences, but more importantly because it has reaffirmed the relevance of the WTO in delivering on one of its main pillars: liberalisation of trade among its members.

MC12 has led to significant decisions on a range of issues. The most significant outcome has been the extension of the moratorium on duties on e-commerce and data trade. This simple and unaspiring decision extends the status quo for another two years in relation to the imposition of duties on digital transactions. This is good news for consumers who will continue enjoying affordable digital broadcasting and for many companies that rely on access to foreign software, platforms and other tools to remain globally competitive. Many countries such as India, South Africa and Pakistan were requesting an end to the moratorium with the aim of further raising their fiscal revenues against the interest of their consumers and their development objectives.

The fact that protectionist forces have been defeated temporarily, for example through the extension of the moratorium, is the most positive outcome of MC12. If the moratorium would not have been extended, it would have implied the possibility that duties and trade barriers to trade would have increased. This is contrary to the spirit of the WTO, which aims to work to eliminate or reduce the legal and institutional impediments to trade amongst its members.

That would have been a lethal blow to the WTO and the trade rules base system, particularly as the institution is already failing to deliver in its other significant constituent pillar: upholding trade rules. The US’s blockage to appointments to the Appellate Body (another example of how trade policy in the Trump Administration has been extended to the Biden Administration) meant that the WTO is currently not fulfilling its significant role in relation to the resolution of trade disputes amongst members.

A second significant outcome of the ministerial conference has been the agreement on fisheries. This agreement has been under discussion over the past two decades. It aims to reduce and eliminate subsidies and other practices that led to overfishing. In particular, the agreement bans subsidies to vessels engaged in illegal, unreported, or unregulated fishing and it also bans subsidies to unmanaged stocks in the high seas. The agreement includes a provision under special and differential treatment for WTO developing countries. In addition to the positive impact on the sustainable use of the resources, the agreement also leads to the reduction of measures that have distorted these markets for decades.

The third outcome is related to the exception from export restrictions on the World Food Programme purchases. Whilst there is a general prohibition of quantitative restrictions to trade under the GATT, Art XI:2(a) allows restrictions that are applied temporarily to prevent or relieve critical shortages of foodstuff or other products essential to the exporting member. India and other members have been restricting exports of food products as a response to the rise in international prices generated by the Russian invasion to Ukraine that disrupted supply in two of the largest exporters.

Finally, the “waiver” on the TRIPS agreement implies that members will be able to issue licenses without the agreement of the patent holder and use any legal domestic instrument available (e.g., an executive order) that would allow the production and the export of COVID-19 vaccines. The waiver is limited to the COVID-19 vaccines and does not apply to diagnostics and therapeutics. Moreover, the remuneration to the patent holder may consider the humanitarian and not-for-profit purpose of the specific vaccine licenses. This decision will last for five years.

Those that expected that the waiver would also apply to therapeutics and diagnostics tools are certainly disappointed. But the biggest disappointment is perhaps that this or a wider waiver may not lead to a significant change in the availability of vaccines. These are constrained more acutely by production capabilities in most of the WTO members. So, this decision and any other that simultaneously fails to address the fundamental issue of production is certainly ineffective, although it scores well in terms of its popularity amongst the public.

Even when the outcome of MC12 could be, in an adequate context, considered a success, the WTO and rules-based system remains in crisis. The global economic crisis and geopolitical situation are leading to the formation of “similarly minded” bloc of countries and a consolidation of the protectionism that is increasingly occupying the minds of the political leadership across the world. These forces are likely to continue undermining the WTO and similar institutions, unless a strong commitment supported by actions is adopted by all members.