The World Trade Organisation (WTO) has come under attack recently, and these attacks are coming from its traditional allies. Calls for the institution to modernise and be more responsive have been escalated with protectionist sentiments that strike at the core of the WTO’s intent.

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Jonathan Swan at Axios recently reported President Donald Trump wants to withdraw the United States from the WTO. Alongside the escalating trade tensions from “tit-for-tat” tariffs, a United States withdrawal from the WTO could risk undermining global trade and the multilateral institutions that have been a cornerstone of globalisation.

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Australian Treasurer Scott Morrison weighed in on the debate during the recent G20 Finance Ministers meeting in Buenos Aires. Talking to The Australian Financial Review, he stated the WTO has been "unable to resolve the things that have led to these current tensions" and that the WTO system was "built for a different time".

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Mr Morrison went further, asking whether the current contentious trade environment is an opportunity to review “how those rules work and how they're operating" at the WTO.

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So what is the role of the WTO in the current discourse?

The WTO is the foundation of multilateral trade and was pivotal in developing the global rules-based trade system by providing a forum to negotiate global trade rules and a mechanism to adjudicate trade disputes that might otherwise escalate into trade wars.

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Both of these functions have come under stress in recent times. WTO Members failed to achieve consensus on the Doha Development Round of negotiations launched in 2001, with discussions still mired in traditional trade issues such as agricultural subsidies. Additionally, the WTO has been unable to make progress on new generation trade issues such as services and the digital economy.

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In response, many countries have instead turned to regional trade agreements such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership or Regional Comprehensive Economic Partnership. At the same time, the dispute settlement mechanism of the WTO has come under strain with cases taking several years to resolve as well as ongoing disagreements over required reforms and the appointment of new judges.

 

What does this mean for APEC?

While several economies, including Australia, have called for reform of the WTO – the United States has threatened to leave. The impact of a United States departure could have wide-ranging effects on the global rules-based trade system – particularly on the APEC region.

Trade and investment liberalisation and facilitation are the foundations of APEC’s mission and activities. The current trade war has focused on the key APEC economies of the United States and China and an ongoing trade war between APEC’s largest members could have long-term impacts on APEC’s other member economies.

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At the recent APEC Business Advisory Council meeting in Kuala Lumpur, senior business leaders denounced the increase in protectionism in international trade. Chair of the APEC Business Advisory Council David Toua warned of the impacts trade barriers have on communities in the APEC region and cautioned “the destructive forces of protectionism and unilateralism are a real threat” to growth around the world. The Council called on APEC Economic Leaders to pursue remedies and reforms to the system through the WTO system itself.

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Although there is the talk of reforms to the WTO, it is not clear yet what those reforms could look like. What role can APEC, as a non-binding, consensus-based forum, play to support any such reform? And how will the ongoing attacks on international institutions impact multilateralism? 

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