CONTENTS I Introduction II The Changing Tide III Today's Challenges IV Conclusion
The past year has been a tumultuous one. Stock prices have tumbled, the financial system has nearly collapsed, oil and other commodities have declined sharply from record highs and inflationary pressures in the first part of the year have turned into deflationary concerns. More surprisingly, the United States, United Kingdom and other staunch defenders of the 'free market' have nationalised banks and other industries while their central banks have repeatedly injected capital into the system in an attempt to stimulate credit markets and restore economic order. The prospects for the remainder of 2009 look grim, as the world is in an economic recession, unemployment is rising, trade volumes are declining (for the first time since 1982) and no one is certain when the financial turmoil will subside,l Global manufacturing is slowing as fast as demand is diminishing and foreign direct investment continues to sharply decline. Despite several joint statements from world leaders warning against the dangers of protectionism, it is in fact on the rise in a number of countries, (2 while public support for liberalised trade is low among others, most notably the US. (3) In such a climate, the question must be asked whether the liberalisation of trade policy is still important. The financial crisis certainly seems to be the more pressing issue, and trade has steadily grown since the process of reducing tariffs and other barriers to trade began with the creation of the General Agreement on Tariffs and Trade ('GATT 1947') (4) following World War II. Since its creation in 1995, the World Trade Organization ('WTO') has continued the trade liberalisation process, and expanded the mandate of the prior GATT regime to cover other trade-related topics, such as services and intellectual property. But with the world in economic crisis, and the WTO's Doha Round of trade negotiations floundering, is it now the time to consolidate the gains and shift the negotiating focus to other issues? (5) Is trade liberalisation even the correct course of action during this 'once in a century' economic crisis? (6)
Abandoning the work of the WTO would be a mistake. Trade policy remains important, and it can play an important role in aiding the world's economic recovery. The WTO as presently constituted, however, is ill-equipped to manage contemporary challenges, and must transform its processes in order to remain relevant in the changing political and economic landscape. This reflection illustrates some of the challenges that the WTO faces and provides suggestions for how it can effectively manage the challenges so as to remain relevant and even thrive in the coming years.
II THE CHANGING TIDE
In 1995, the WTO looked as if it would be the dominant international economic institution long into the future. After years of negotiating, the US and the European Union finally agreed on both the framework for the institution and the details of the various agreements. This, in and of itself, was a triumph. The creation of the WTO corrected many of the 'birth defects' of the GATT and provided a solid institutional basis from which the global trade regime could grow. (7) Notably, the WTO essentially ended the practice of plurilateral agreements, instead requiring that WTO Members agree to all obligations in a 'single undertaking'. There would be no free-riding, and all Members would now have a say in the direction of the organisation. Equally importantly, the WTO's legally-based, binding and enforceable dispute settlement mechanism ensured that Members could no longer evade their obligations by simply refusing to adopt a panel report. A more controversial achievement was the expansion of the agreement beyond goods. The inclusion of services and intellectual property into the WTO recognised the growing importance of these areas to traders, but perhaps should have served as a warning for the contentious years ahead. …