“America is back” and it’s ominously reviving the crisis-riddled WTO

By: Mary Louise Malig*

US President Biden has stated on a few occasions that, “America is back” reinforcing the message that the US is going to repair relationships with allies and institutions. Biden immediately re-entered the US into the Paris Climate Accord. He also reassured the World Health Organization (WHO) that the US was back on board. Biden and the new administration were and are moving fast on different levels, nationally and internationally, to roll back and prevent any further damage done by former President Trump.  

The multilateral organization that probably celebrated Biden’s victory, albeit in private, is the World Trade Organization (WTO). Although the WTO was having problems of their own, the bully capitalism strategy that then President Trump was employing was adding even more problems. The refusal to cooperate at the least minimum pushed the WTO in deep crisis as its famed Dispute Settlement Mechanism (DSM) was accused of bias and its Appellate body rendered useless.

Trump’s justification for his antics and tirades against the WTO were allegedly because the WTO is biased against the US and has therefore judges decide against the US in dispute cases. “In fact, trade experts say, the United States has a similar, if not better, lose-win rate than other countries that have taken complaints to the WTO, and it has a rare privilege in that the judges on the WTO’s Appellate Body have always included one American.”[1]

Fact or fiction from their head of state, the US team did as ordered and actively blocked all candidates put forward to fill the vacated seats of the Appellate Body which is crucial in keeping the WTO Dispute Settlement Mechanism functioning. There were only three Appellate Body members left, two of whom whose terms were finishing. However, the US absolutely refused to approve anyone, using their power to say no to all the candidates put forward. The US succeeded and in 2018, the Appellate Body only had one member left, which according to rules means there would not be enough to let alone have a quorum, much more hold hearings and decisions. 

This was a major blow to the multilateral trading system. The Dispute Settlement Mechanism was and still is, one of the core pillars of the WTO. The WTO prides itself for being a rules-based organization and they had the all powerful DSM to ensure all Members followed the rules. Such is the power of the DSM that countries found in violation of WTO rules may suffer economic sanctions, be ordered to pay retaliatory tariffs and at its most extreme, order Members to remove laws that run counter to the WTO rules. This power makes the WTO unique and significant.

Social movements, trade justice and activists all around the world who had been campaigning for years, for either reforms or for the WTO just be shut down because of its unfair rules. Analysts were forecasting that the WTO would not survive the loss of the Appellate body. Hence, many began saying, good riddance to the WTO, with several others celebrating.

The Trump administration orchestrated this breaking down of the Appellate body, however, the trade justice and anti-corporate globalization activists and movements saw Trump for what he was and were not going to go near him with a ten foot pole. Trump did that to show how powerful a bully he was.

Eventually, the WTO pulled itself together and said the DSM process would continue. In a message to the WTO General Council last December 2019, then Director-General Roberto Azevêdo stated, ““Members will continue to resolve WTO disputes through consultations, panels, and other means envisaged in the WTO agreements such as arbitration or good offices of the DG … but we cannot abandon what must be our priority, namely finding a permanent solution for the Appellate Body.”[2]

The paralysis of the Appellate body though, was chipping away at the credibility, legitimacy and ability of the WTO to lead. Add to that the fact that the only concrete achievement of the WTO in its 25 years, is that of the Trade Facilitation Agreement, the first agreement the WTO passed, as part of the Bali Package which included a peace clause on Agriculture.   

Then the pandemic hit. “The COVID-19 pandemic represents an unprecedented disruption to the global economy and world trade, as production and consumption are scaled back across the globe.”[3] The WTO claimed it was working with the World Health Organization (WHO) to find solutions. WTO Director General Azevêdo and WHO Director-General Tedros Adhanom Ghebreyesus issued a joint statement on the 20th of April 2020. The statement in part states, “WHO and WTO are working together to support efforts to ensure the normal cross-border flow of vital medical supplies and other goods and services, promoting them where possible, and to resolve unnecessary disruptions to global supply chains, in furtherance of the International Health Regulations (2005) and WTO rules.”[4] Even in a global crisis, the WTO expects that WTO rules should still apply.

Amidst all the global turmoil, in a surprise move, the WTO Director General Azevêdo announced his resignation and would leave office on August 31, 2020, a full year ahead of his mandate. His second four-year term was not scheduled to end until September 2021. Even though the letter of DG Azevêdo made no mention of it, some in the media have interpreted this as frustration over the inability of the Appellate body to function. While others speculated that it was frustration over Trump’s strategy of bullying and playing power politics. DG Azevêdo stated he wanted the process to begin for finding a new Director General. Azevêdo has reportedly been hired by Pepsi co.

This move, left a vacuum of power, in an already damaged WTO, in the middle of a pandemic. In a bid to keep things running, and to kick off the DG selection process, the consultations and negotiations began.

The four-month long process then came down to the last two candidates by October 2020. The WTO nominations committee then recommended to the 164 Members to appoint Ngozi Okonjo-Iweala of Nigeria to replace former DG Roberto Azevêdo. All of the Members approved except for one. The US Trump team said it would not back down and wanted their candidate, Yoo Myung-hee of South Korea, to be the next DG.    

That was in October. It took Biden getting elected into office for the US to end the deadlock. Yoo Myung-hee of South Korea has withdrawn her candidacy. The new Director General Ngozi Okonjo-Iweala, started working last March 1, 2021.

The Biden administration is widely expected to repair alliances and one of those would most likely be to work with the new Director-General and Members in the WTO in reviving the Appellate body and getting that and the DSM functioning.

And happening at the same time as all of this was the pandemic. Now that there are vaccines, the discussions about patents and how to ensure the intellectual property rights of the big pharmaceutical corporations. In the WTO talks, the waiver, details how there should be a waiver of the rules under the Trade Related Aspects of Intellectual Property Rights (TRIPS). This was again put forward by South Africa, India and now co-sponsored by several other developing countries including Bolivia, Mozambique, Kenya, Eswatini, and Pakistan. In total, it is now co-sponsored by 57 countries, as well as the entire Africa Group and Least-Developed Country Group at the WTO.

If there was ever any doubt that about the how indestructible the WTO seems to be, here it is. Even with all the crises the WTO had to deal with from finding alternative ways to hear disputes even without the Appellate body, to finding a new Director-General and containing any possible problems from having a vacuum in power, as the US under then Trump administration, refused to agree even though all 164 Members, except the US, supported her. The rules-based organization also still found a way to ensure that the rules of TRIPS be followed even in the time of a pandemic.

To “be back” though for the WTO requires not only to go back to its previous stage before the crisis of the appellate body and DSM, but rather to advance in its neoliberal agenda in this new phase where global trade is stuck in goods and is very fragile to certain health emergencies, climate hazards and human errors like what happened in the Suez Canal. Times have changed, the combination of several crisis (health, economic, environmental, political and geopolitical) demand a proactive neoliberal WTO. How is the WTO going to advance its agenda in the middle of the of the dispute between China and the US is not clear? The WTO is back, but is it really prepared for the new normal of growing uncertainty.

President Biden may have done quick fixes such as unblocking the approval of the new Director-General Ngozi Okonjo-Iweala, and as widely expected, will get the Appellate body back up.

There is however, a warning that comes with all this support and rolling back of any damages. The warning is that a reinvigorated WTO, with the first woman and first African to be Director General and enjoys the support of the Membership, could mean that the WTO will slowly regain its power and move past their crises. And for all those campaigning for trade justice around the world together with many other social movements; this is not great news. The campaign is not over yet, and the WTO has to be on people’s radar again. America is back and with its backing, maybe the WTO, too.  

*Mary Louise Malig is a researcher, policy analyst, and activist currently based in Bolivia. She has followed and written on the issues of trade for almost twenty years now and also follows other issues such as climate and agriculture. 

[1] https://www.reuters.com/article/us-usa-trade-wto/u-s-blocks-wto-judge-reappointment-as-dispute-settlement-crisis-looms-idUSKCN1LC19O

[2] https://www.wto.org/english/news_e/news19_e/gc_09dec19_e.htm

[3] https://www.wto.org/english/tratop_e/covid19_e/covid19_e.htm

[4] https://www.wto.org/english/news_e/news20_e/igo_14apr20_e.htm