EU policy on the World Trade Organization in the wake of the March Ministerial

The World Trade Organization’s 14th Ministerial Conference, held in Yaoundé, Cameroon, from 26-29 March, continued a stalemate in multilateral negotiations that will feed into the narrative that the WTO is no longer relevant. There was no consensus on the three main agenda items: 1) WTO reform; 2) extension of the moratorium on the application of customs duties to e-commerce; and 3) the incorporation into the WTO of an agreement on Investment Facilitation for Development (IFD), despite it already being approved by 129 WTO members.

The only significant outcome was the agreement by 66 WTO members to ratify the e-commerce agreement nationally, to enable its provisional implementation, pending integration into the WTO framework. The agreement is intended to boost digital trade through common measures on, for example, electronic invoicing and cybersecurity. It also includes a commitment not to apply customs duties on e-commerce.

The conference failed primarily because of disagreement between the United States and Brazil on how long the e-commerce duties moratorium should last. The US said it could only agree on a WTO reform work plan if the longstanding moratorium was extended for longer than two years. Brazil’s position is probably best explained by its frustration at the lack of progress on agriculture negotiations. India, meanwhile, appeared ready to compromise on a four-year extension of the e-commerce moratorium but continued to be the only opponent of the integration of the IFD into the WTO framework, arguing that legal guardrails should be developed to protect the interests of non-participants in plurilateral agreements.

Compromise on the e-commerce moratorium and the linked WTO reform work plan will now be sought by ambassadors in Geneva, in the context of the WTO General Council. This is however unlikely. US Trade Representative Jamieson Greer was quick to point out that Yaoundé confirmed his scepticism about the WTO, which “will only play a limited role in future global trade policy efforts”.

For the European Union, the main question is to what extent it should focus on pursuit of its network of free-trade agreements, or whether it should continue to prioritise WTO reform. Unquestionably, the EU should do the former while reflecting on how to link its FTAs to provide stability in a turbulent trading environment. But all these agreements are built on the premise of a functioning rules-based multilateral system. It is naive to expect that FTAs will not be impacted by a collapse of respect for the WTO rules. The EU should therefore seek to build mutual reinforcement between its network of FTAs and alliances in support of WTO reform.

EU strategy in the wake of Yaoundé should focus on three strands:

1. Fully support the embedding into the WTO of the e-commerce and investment facilitation agreements, both of which respond to EU interests in supporting digital trade and investment in developing countries. The EU should lead in the domestic ratification of both agreements to give an example to others. The agreements should be provisionally implemented in Geneva with the support of the WTO Secretariat. Provisional implementation will ensure the agreements enter into force, pending formal incorporation into the WTO agreement.

2. Discuss with a broad group of countries how to reinforce international disciplines on industrial and agricultural subsidies. Even if there is little prospect of reaching a multilateral agreement on these issues in the short term, it is essential to work towards rules-based responses to the main challenges facing the global trading system. Such discussions should also identify how to respond to immediate trade disturbances, pending the adoption of updated rules. In addition to Comprehensive and Progressive Agreement for Trans-Pacific Partnership countries, major emerging economies including Brazil, Indonesia and South Africa – all of which have concluded FTAs with the EU – should be included in discussions.

3. Now the EU and India have concluded an FTA, both economies should prioritise bilateral dialogue on WTO reform. This should help to overcome lack of trust and enable exploration of areas of common interest. In particular, the EU and India should build on the suggestion that India is ready to explore integration of open plurilateral agreements into the WTO provided there are legal guardrails. The EU and India should also explore the scope for greater convergence on the level playing field and on the development agenda, and should work towards the inclusion of India in the broader WTO reform alliance.

In the most optimistic scenario, ambassadors to the WTO in Geneva could agree a compromise on the e-commerce moratorium and start on a reform work plan. But even without a multilateral breakthrough, the EU should do what it can to keep the WTO relevant.