Thu Feb 22

Privilege or poisoned chalice? As deputy chair at next week’s WTO meeting, NZ confronts an organisation in crisis

Written by: Jane Kelsey, Emeritus Professor of Law, University of Auckland, Waipapa Taumata Rau

New Zealand Trade Minister Todd McClay will be one of three deputy chairs (alongside ministers from Panama and Cameroon) at the 13th ministerial conference ^[1] of the World Trade Organization (WTO) in Abu Dhabi next week.

Whether this proves to be an honour or a poison chalice for McClay will depend on who defines “success” and how.

The bar for the conference – known as MC13 – will be set very low. It may be judged simply by whether the ministers reach an agreed declaration, and what fallout there might be, given the power politics at play.

Nearly half the WTO ministerial conferences since its creation in 1995 have not produced a substantive outcome document. But despite the low expectations, the stakes are very high.

A body in crisis

The WTO faces an ongoing existential crisis, with all three of its core functions in various states of collapse.

Trade Minister Todd McClay. Getty Images

The dispute and enforcement mechanism has been paralysed since late 2019, because both US Republican and Democrat administrations have vetoed new appointments to the WTO’s Appellate Body ^[2].

The Doha Development Round ^[3] of multilateral trade negotiations, launched in 2001, has never concluded. Instead, smaller groups of mainly developed countries, including New Zealand, are conducting unmandated plurilateral negotiations.

These centre on topics such as electronic commerce and how all kinds of services are regulated domestically. These are priorities for developed countries, but leave the different priorities of developing countries behind.

And the notification mechanism to monitor compliance with trade agreements is breached more often than honoured, as developing countries struggle to cope with their obligations.

Deferred decisions

The previous ministerial conference in Geneva in 2022 was proclaimed a “success” because it produced a partial agreement on unsustainable fisheries subsidies.

But the hard question of restricting harmful subsidies paid to large international fishing fleets was deferred to this year’s meeting and remains unresolved.

Solving the impasse over the Appellate Body was given until 2024, which the US now insists means the end of the year. Whichever party wins the presidential election, the US will continue its veto. Donald Trump may go further ^[5] if he returns to the White House and revive threats to quit the WTO entirely.

Several member countries that want to protect their pharmaceutical industries ^[7] continue to block a proposal ^[8] by South Africa and India to waive patent rights ^[9] for coronavirus therapeutics and tests.

These patent rights are guaranteed under the Intellectual Property Rights Agreement (TRIPS ^[10]) and there is still no agreement on a “TRIPS waiver”. Its opponents want the issue declared dead.

Also dating back to 2001 is a permanent resolution on the public stockpiling of food grains, which India insists is essential for food security. This is something the Cairns Group ^[11] of agricultural exporters, including New Zealand, vehemently opposes as distorting free trade.

With an election pending, and protests from Indian farmers ^[12] demanding the country withdraw from the WTO, Prime Minister Narendra Modi’s government continues to demand an outcome.

Ngozi Okonjo-Iweala seated on stage at conference

WTO Director-General Ngozi Okonjo-Iweala at the World Economic Forum meeting in Davos this year. Getty Images

‘Reform by doing’

Agreement on these big issues seems a long way off, just days out from the Abu Dhabi conference. And a prolonged WTO General Council meeting last week failed to resolve almost anything.

Big power politics is driving the process, and not just by the US and EU. China is exerting enormous pressure on developing country governments to endorse an unmandated agreement on “investment facilitation”.

This would create rules to streamline foreign investment, but would be onerous for developing countries ^[13] to implement. It needs consensus to become a WTO agreement.

South Africa and India have resolutely challenged the systemic consequences of these plurilateral negotiations as undermining the multilateral system and sidelining developing countries’ priorities.

They were stridently attacked for this by China at last week’s General Council, as well as by ^[15] WTO Director-General Ngozi Okonjo-Iweala.

But the plurilateral approach continues an agenda dubbed “reform by doing” by Okonjo-Iweala, a former managing director of the World Bank who holds dual Nigerian and US citizenship.

Essentially, it means bypassing the WTO’s constitutional rules ^[16] and formal bodies to redesign the WTO along the lines demanded by its powerful members and approved by the director-general.

Claims of bias were reinforced by the WTO’s (now deleted) pro-patent Valentine’s Day tweet this year, just days after the TRIPS waiver talks had broken down ^[17]: “Your love is like a patent, so rare and true / A work of art that only I can view / And just like some IP rights, it can never expire / Our love is like a never-ending fire.”

Exclusionary and manipulative

Developing countries have heavily criticised Okonjo-Iweala for what they see as the exclusionary and manipulative practices ^[19] used to secure an outcome at MC12. She reportedly pushed back ^[20] against such complaints.

MC13 is shaping up to repeat these patterns, with negotiations on crucial issues scheduled simultaneously for small rooms that can accommodate only a subset of members, whom the director-general will choose.

New Zealand can use its privileged position as deputy chair to ensure the conference is conducted ethically, according to the WTO’s mandate: multilateral, member-driven, rules-based, non-discriminatory, transparent, with meaningful participation in consensus-based decisions.

If not, it will share the responsibility for enabling power politics to further destabilise the WTO.