Five things happening at the WTO this week

The World Trade Organization (WTO) wraps its biennial (every two years 🤓) ministerial meeting in Abu Dhabi today. It’s the top decision-making body for the 164 countries in the WTO, which sets the rules for most trade across borders.

Trade negotiators are a unique sub-species of diplomat, speaking an almost impenetrable technical dialect. So here’s a quick translation of the five key issues they’re debating at the WTO this week.

1) The internet

WTO members agreed back in 1998 not to impose taxes on digital products, and they’ve extended this deal every two years since. But a quarter century later, our world now looks very different – we get our Tom Hanks via Netflix, our Harry Potter via Kindle, our Taylor Swift via Spotify, and our work stress via Slack.

So these days, governments like Indonesia say this tax exemption should be axed because it’s costing them much-needed tax revenue. And of course, those making the digital products (like the US) want the exemption to continue, arguing it keeps prices low, bridges the digital divide, and any lost tax is trivial.

The thing is, the WTO works on consensus – so it only takes a single holdout for this tax exemption to soon expire. It’s possible Indonesia and others (like India) are just bluffing to extract better deals on other issues, but they seem serious, so we might be about to witness a real change in the way the internet works.

2) Farmers

For years, India and others have used government programs to buy, stockpile, and distribute food as a way to combat hunger. The thing is, India buys the food off its farmers above market prices, which supports farmer livelihoods. But this can distort global prices, make it harder for farmers elsewhere to survive, and it presumably breaches WTO rules.

Of course, India points out that wealthier places (like the EU) also subsidise their farmers. So India has been pushing for years to change WTO rules to protect its own program. But it’s a touchy topic, with farmers around the world showing they’re willing to hit the streets in protest, just as dozens of countries go to the polls this year. The stakes are high, and it’s hard to see a deal emerging.

3) Fishing

The last time WTO trade ministers gathered in 2022, they made history with a ban on government financing for illegal fishing. This year, there are hopes to extend that further with a ban on government financing for vast fishing fleets (like China’s) that engage in overfishing around the world, putting species at risk.

A deal looks close, though India wants to phase out its own support for fishing communities over several years; critics say our oceans just don’t have that long.

4) Disputes

When countries disagree over trade (it happens all the time), there’s traditionally been a WTO process to hash things out. Not anymore. The US became increasingly frustrated with the WTO appeals process, saying it favoured China, and had become too activist and powerful. So the US effectively froze the WTO disputes process in 2019, opening up a debate around what should come next.

The US wants an ‘opt-out’ clause for WTO disputes, while India says this just allows the US to shrug off court decisions it doesn’t like. Countries have agreed to come up with something this year, but an agreement still looks pretty far off.

5) Going green

Meanwhile, Paraguay is looking to shine a critical light on the US and the EU for the way they’re supporting their own industries while going green. In particular, the EU is moving to tax goods from countries with lax climate policies, while the US is dishing out huge subsidies for green tech (think EVs, batteries, clean fuels).

Critics like Paraguay say this all gives US and EU firms an unfair advantage, while the EU and US say they’re necessary – both as a response to China’s own vast government support for its companies, and to be able to hit net-zero.

INTRIGUE’S TAKE

The evidence is that trade helps lift people out of poverty, raise salaries, and create jobs. But that doesn’t mean everyone’s a winner all the time, and it certainly doesn’t mean everyone plays fair. So from our perspective, the WTO is looking like an early casualty from a broader crisis of trust.

We’re seeing more jittery governments look at a plan B to improve their position: more one-on-one trade deals, ‘plurilaterals’, friend-shoring, de-risking, subsidies, control over critical minerals, stockpiling, plus export limits to keep chicken or rice or gas prices low back home. You get the picture.

So where does all this lead?

There’s a lot of talk about our world breaking down into, say, regional hubs and spokes. But it’s more complicated than that. China’s state-backed economic model, turbocharged by two decades of WTO membership, has enabled (if not necessitated) the hub to start eating its spokes – for example, it’s making more of its own machines rather than buying them from Germany.

So while it’s far from perfect, the WTO – and the predictability and stability it provides – is one of those things we’d probably notice (and miss) if it faded away.

Also worth noting:

• The WTO this week agreed to welcome two new members – Timor Leste and Comoros – bringing the total number of members to 166.
• The lead US trade agency just submitted its annual report on China’s compliance with WTO rules. It includes some spicy lines, like this one: “China’s so-called ‘socialist market economy’ hasturned decidedly predatory.”