THE TTALK QUOTES 

On Global Trade & Investment
Published By:
The Global Business Dialogue, Inc.
Washington, DC  Tel: 202-463-5074
 
No. 67 of 2019
FRIDAY, OCTOBER 11, 20219

Click HERE for Wednesday's pork quote from Maria Zieba.


A DIAGNOSIS FOR THE WTO

 "[T]he WTO ... is an organization in trouble and of diminishing relevance despite its important role and broad membership."

Terence P. Stewart
October 9, 2019
CONTEXT
It may always be the case but it is especially true of today’s entry that, like Gaul, the context for it has three parts: the speaker, his topic, and the broader flow of events that interact with and shape the meaning of the immediate subject, in this case the World Trade Organization.

Terence P. Stewart is one of Washington’s best-known trade lawyers. Up until this past September, Mr. Stewart was the Managing Partner of Stewart and Stewart, a firm his father, Eugene Stewart , started in the late 1950s. In our mind he and his colleagues are associated primarily with a host of U.S. companies and unions that have sought the protections provided by U.S. trade laws and the related provisions of the General Agreement on Tariffs and Trade. But the firm did much more. Among other things, it produced a wealth of analyses on various trade topics, and of those the activities and evolution of the GATT and the WTO were among the most prominent. 

Looking back, Stewart and Stewart had one hell of a run. As for its continuation, most of the partners and staff are now part of Schagrin Associates. 

But not Terry Stewart. He is retired – retired from Stewart and Stewart but not from trade. This past Wednesday, he published the first entry in a new blog, a blog which is likely to be must reading for us and others in the months and years ahead. Today’s featured quote is from the first paragraph of that entry. Here is that paragraph in full:

The World Trade Organization currently has 164 members (countries and customs territories), with an additional 22 countries in the process of pursuing accession. While the WTO has attracted a lot of interest and greatly increased membership since its start in 1995, it is an organization in trouble and of diminishing relevance despite its important role and broad membership. While the challenges facing the WTO dispute settlement system are an obvious example of an unresolved problem, dispute settlement is by no means the only area of concern.

As for the third context element – the sweep of events that surrounds the work of the WTO – we’ll discuss that in the Comment Section. 

You will want to read Mr. Stewart’s blog for yourself, and when you do you will see that he addresses a number of issues, but the dispute settlement system – specifically the fate of the Appellate Body – is the most prominent, and it is the one we’ll focus on here. It is an institution that is, at best, facing an indefinite suspension. As Mr. Stewart explains:

As no appeal can be heard where there are not at least three members of the Appellate Body, the Appellate Body will cease to operate (at least temporarily) after December 10, 2019, when the number of Appellate Body members declines from three to just one.

This threat to the working of the Appellate Body may be relatively
new, but America’s underlying quarrel with that institution goes back decades. The core complaint is that, in effect, the Appellate Body, has abused it special role as the last word in WTO trade disputes by allowing its own judgments to override the limitations in the underlying agreements. Or, in Mr. Stewart’s words:

[A] system intended to help members resolve disputes has instead turned into a system where rights and obligations are not a reflection of agreements but rather the views of the Appellate Body members.
COMMENT
Our impression is that Mr. Stewart is someone who believes in the fundamental value of the World Trade Organization, who believes that the current U.S. Trade Representative shares that view, and whose criticisms are the opposite of a condemnation. They are a plea for reform. Again, Mr. Stewart:

[I]t is not a correct reading of the actions of the United States to suggest that the U.S. is not supportive of the WTO.

An organization that sovereign states subscribe to and adhere to and that can address a rapidly changing world environment for the benefit of all participants is what the WTO is supposed to be.

Our own view is a little different – not contrary, but different. We have a wry mantra which comes to the fore every now and then when we think about the Global Business Dialogue, which may be the world’s smallest trade-related organization. The mantra is: 

It is what it is. But what is it?

We would suggest that the WTO would do well to ask itself the same question. And there is a sense in which it is doing so. Today is the last day of the WTO 2019 Public Forum in Geneva. As Exhibit A on the issue of change and the WTO, we call your attention Director-General Azevêdo’s remarks at the welcoming ceremony on Monday. The theme for this year’s Forum is “Trading Forward: Adapting to a Changing World.” Mr. Azevêdo picked up on it saying:

This year’s theme … [is] about how we need to change — and by “we” I mean the WTO as well.

He followed that with a list, a valid list of anticipated technological advances and future challenges, but for us, there was something missing. That something is the profound change in the trading world that has occurred over the last few decades. Essentially, the first article of the GATT has lost much of its meaning. Article I enshrines the idea that all of the signatories will be treated alike, that a concession to one is a concession to all.

Consider for a moment the last few entries in these pages. In the last two, representatives from the U.S. wheat and pork sectors expressed relief that, with the new U.S.-Japan agreement, they would be on the same footing, face the same tariffs, in Japan as their competitors from Australia and Canada. Those differentials, of course, arose from the new CP-TPP, one of the hundreds of bilateral and regional preferential agreements of the last few decades. Contrast that with the situation in,say, 1980 when all of those countries would have been on an equal footing in any and all of the markets of the others. The world in which the WTO operates is profoundly different from the one in which it – or at least the GATT – was created. And it has still not explicitly come to grips with that reality.   

The fact that the world around it has changed so dramatically over the years is one reason why the WTO and its members should take a fresh look at the question, What is it? -- which is to say, what is it now?

In the same vein, the time has come for the organization to squarely address the consequences of the creation of the WTO itself. One of these is the tendency to look for guidance beyond the membership. It may be, as the Director General told the Public Forum earlier this week that

[M]embers cannot find the answers by themselves.  Interacting with representatives from civil society, academia, and the private sector this week will help clarify issues, risks and opportunities.

Perhaps, but it is not at all clear how that underlying philosophy affects the commitment of WTO members to the organization. Bear in mind, most of them are nation states which see the brokering of interests more as a task for national politics than for global institutions.
SOURCES & LINKS
First Post is a link to this initial entry in Terry Stewart’s new blog. The blog is called simply “Current Thoughts on Trade.” This first post is “The World Trade Organization in Crisis —The Last Two Months of the Appellate Body Absent Reform Is Just One Example. This was the source for today’s featured quote. 

Opening the WTO Public Form takes you to the text of Director-General Azevêdo’s remarks at the opening plenary session of the WTO’s 2019 Public Forum.

Pork and Japan is a link to Wednesday’s TTALK Quote on this topic and

Wheat and Japan takes you to the parallel entry for wheat, which was published on Monday.

Eugene Stewart is the Wikipedia entry for the attorney who founded what became Stewart and Stewart.

GATT Article I takes you to the text of this first provision of the 1947 General Agreement on Tariffs and Trade.

Schagrin Associates is the website for this firm.
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