By Vaibhav Tandon

Free trade has been a force for good over the past few decades, but international commerce without rules will be an unmitigated disaster.  Members of the World Trade Organization (WTO) recognize this.  Yet, they are unable to agree on reforms that would enable the WTO to deal with modern-day challenges.

Attempts to revive the body met a dead end again at the 13th ministerial conference of the WTO this month. Serious divisions remain among the 166-member body.  Brinksmanship over aid for farmers and fishing subsidies remained the biggest hurdles in progress on a broader agenda.  Subsidy disputes and countervailing duty investigations at the WTO have increased steadily over the past decade and a half.  Yet, the main functions of the world trade body—negotiation and dispute settlement—have been paralyzed since 2019.  Appeals cannot be heard and disputes are left in limbo as the WTO’s appellate body lacks adequate members to adjudicate trade grievances.  China, which benefitted the most from the WTO, also stands to gain from its decline as Beijing seeks to reshape trade terms with developing nations through its own trade deals.

Last week’s conference, however, delivered an extension of the moratorium on customs duty on e-commerce by two years.  The development is significant, considering that about 25% of all global trade is now conducted digitally and is expected to continue rising. 

Getting major achievements was going to be tough, given elections in major economies from America to Asia.  Washington remains the biggest roadblock in the restoration of the appellate body, as both political parties have moved toward domestic production and protectionism.  India — where two-thirds of the population lives in rural areas — is also set to go to polls this spring.  While the WTO is questioning India’s agriculture subsidies, a large number of farmers (a significant voting bloc) are demanding legal guarantees for minimum support prices for their crops.

Protectionism and fragmentation are on the rise due to varying interpretations of trade laws and enforcement, thanks to the dysfunctional dispute settlement body and increasing prevalence of bilateral free trade agreements. 

At a time of when geopolitical tensions are dictating the terms of trade, multilateral co-operation and rules that govern global trade are the best guardrail against further economic fragmentation