This page shows textual changes in the document between the two versions indicated in the dates above. Textual matter removed in the later version is indicated with red strikethrough and textual matter added in the later version is indicated with blue.
World Trade Organization:
August 21, 2020
Overview and Future Direction
Cathleen D. Cimino-Isaacs,
Historically, the United States'’ leadership of the global trading system has ensured the United
Coordinator
States a seat at the table to shape the international trade agenda in ways that both advance and
Analyst in International
defend U.S. interests. The evolution of U.S. leadership and the global trade agendatrading system remain of
Trade and Finance
remain of interest to Congress, which holds constitutional authority over foreignforeig n commerce and establishes
general and principal U.S. trade negotiating objectives and principles through legislation. Congress has recognized
Rachel F. Fefer
recognized the World Trade Organization (WTO) as the "“foundation of the global trading system"
Analyst in International
trading system” within trade promotion authority (TPA) and plays a direct legislative and
Trade and Finance
oversight role over WTO agreements. The statutory basis for U.S. WTO membership is the
Uruguay Round Agreements Act (P.L. 103-465), ), and U.S. priorities and objectives for the General Agreement on Tariffs and Trade (GATT)/WTO have been reflected in various TPA
Ian F. Fergusson
legislation since 1974. Congress also has oversight of the U.S. Trade Representative and other
Specialist in International
agencies that participate in WTO meetings and enforce WTO commitments.
Trade and Finance The WTO is a 164-member international organization that was created to oversee and administer multilateral trade rules, serve as a forum for trade liberalization negotiations, and resolve trade disputes. The United States was a major force behind the establishment of the WTO in 1995, and the rules and agreements resulting from multilateral trade negotiations since 1947. The WTO encompassed and succeeded the GATT, established in 1947 among the United States and 22 other countries. Through the GATT and WTO, the United States, with other countries, sought to establish a more open, rules -based trading system in the postwar era, with the goal of fostering international economic cooperation and raising economic prosperity worldwide. Today, 98% of global trade is among WTO members.
The WTO is a consensus and member-driven organization. Its core principles include nondiscrimination (most -favored nation treatment and national treatment), freer trade, fair competition, transparency, and encouraging development. These are enshrined in a series of WTO trade WTO agreements covering goods, agriculture, services, intellectual property rights, and trade facilitation, among other issues. SomeMany countries, including China, have been motivated to join the WTO not just to expand access to foreign markets but also to spur domestic economic reforms, help transition to market economies, and promote the rule of law.
The WTO Dispute Settlement Understanding (DSU)
The WTO dispute settlement (DS) mechanism provides an enforceable means for members to resolve disputes over WTO commitments and obligations. The WTO has processed nearly 600 disputes, and the United States has been an active user of the the dispute settlement (DS) system. Supporters of the multilateral trading system consider the DS mechanism an important success of the system. At the same time, some members, including, and an enforceable DS process was a priority negotiating objective for the United States in the Uruguay Round negotiations during 1986-1994. More recently, some members, most notably the United States, contend it has procedural shortcomings and has exceeded its mandate in deciding certain cases. Because of this, since 2016 the United States has vetoed the appointment of panelists to
the WTO'’s Appellate Body (AB; the seven-member body that reviews appeals by WTO members of a panel'’s findings in a dispute case). In Decemberdispute case), as their terms expired. This has left the AB with three panelists, the minimum number to hear an appeal. On December 10, 2019, the terms of two of the remaining jurists expireexpired, leaving the AB unable to hear new cases, and possibly unable to finish existingfunction and hear new cases. This action could potentially render the DS system ineffective.
, as members struggle to agree to solutions that sufficiently address U.S. concerns.
More broadly, many observers are concerned that the effectiveness of the WTOWTO’s effectiveness has diminished since the collapse of the Doha Round of multilateral trade negotiations, which began in 2001, and believe the WTO needs to negotiate new rules and adopt reforms to continue its role as the foundation of the global trading system. To date, WTO members have been unable to reach consensus for a new comprehensive multilateral agreement on trade liberalization and rules. While global supply chains and technology have transformed internationalglobal trade and investment, global tradeWTO rules have not kept up with the pace of change. Many countries have turned to negotiating free trade agreements (FTAs) outside the WTO as well asand plurilateral agreements involving subsets of WTO members rather than all members.
At the latest WTO Ministerial conference.
In early 2020, the WTO’s 12th Ministerial Conference (MC12) was rescheduled to 2021 due to the Coronavirus Disease 2019 (COVID-19) pandemic. The biennial meeting, which usually involves active U.S. participation, was widely anticipated as an action-forcing event for the WTO. At the previous ministerial in December 2017, no major deliverables were announced, leaving the stakes high for MC12. Several members committed to make progress on issues related to ongoing talks, such as fisheries subsidies and e-commerce, while other areas remain stalled. While many were disappointed by the limited progress, in the U.S. view, the outcome signaled that "the impasse at the WTO was broken," paving the way for groups of like-minded countries to pursue new work in other key areas.
Certain WTO members have begun amid disagreements.
Congressional Research Service
World Trade Organization: Overview and Future Direction
In its June 2020 forecast, the WTO estimated a plunge in global trade growth for 2020, with recovery depending on the duration of the pandemic and countries’ policy choices. The WTO has committed to work with other international organizations to minimize disruptions to trade and global supply chains, and encouraged WTO members to notify trade measures taken in response to COVID-19, which have surged since the beginning of 2020, causing concern for many. Some members have called on the WTO to address the trade policy challenges emerging from COVID-19 through new rules.
Meanwhile, WTO members continue to explore aspects of reform and future negotiations. Potential reforms concern the administration of the organization, its procedures and practices, and attempts to address the inability of WTO members to conclude new agreements. Proposed reforms to dispute settlement also attempt to improve the working of the DS system, particularly the Appellate Body.
Some U.S. AB, which U.S. trade officials to date have not supported.
Some U.S. government frustrations with the WTO are not new and many are shared by other trading partners, such as the European Union. At the same time, the Administration'Trump Administration’s overall approach has spurred new questions regarding the future ofquestions among stakeholders and some Members of Congress regarding future U.S. leadership and U.S. priorities for improving the multilateral trading system. ConcernsSome concerns have emphasized that the Administration's recent ’s actions to unilaterally raise tariffs under U.S. trade laws and to possibly impede the functioning of the DS system might undermine the WTO’s credibility.
The growing debate over the role and future direction of the WTO are of interest to Congress. Some Members have expressed support for WTO reform efforts and U.S. leadership; while others introduced joint resolutions in May 2020 to withdraw congressional approval of WTO agreements. Issues Congress may address include the effects ofsystem might undermine the credibility of the WTO system. A growing question of some observers is whether the WTO would flounder for lack of U.S. leadership, or whether other WTO members like the EU and China taking on larger roles would continue to make it a meaningful actor in the global trade environment.
The growing debate over the role and future direction of the WTO may be of interest to Congress. Important issues it may address include how current and future WTO agreements affecton the U.S. economy, the value of U.S. membership and leadership in the WTO, whether the possibility of establishing new U.S. negotiating objectives or oversight hearings are needed to addresson the prospects for newfuture WTO reforms and rulemaking, and the relevant U.S. trade authorities and impact of potential U.S. withdrawal from the WTO on U.S. economic and foreign policy interests. The upcomingpending WTO Ministerial Conference in June 20202021 presents the United States and WTO members with an opportunity to address pressing concerns over reform efforts, ongoing and new negotiations, a nonfunctioning DS system, and the future of the multilateral trading system more broadly.
, as members grapple with economic recovery from COVID-19 and other challenges.
Congressional Research Service
link to page 6 link to page 8 link to page 8 link to page 11 link to page 11 link to page 14 link to page 15 link to page 16 link to page 17 link to page 17 link to page 17 link to page 18 link to page 19 link to page 20 link to page 21 link to page 21 link to page 22 link to page 23 link to page 27 link to page 28 link to page 28 link to page 29 link to page 29 link to page 30 link to page 31 link to page 32 link to page 36 link to page 36 link to page 38 link to page 38 link to page 38 link to page 39 link to page 40 link to page 41 link to page 42 link to page 44 link to page 46 link to page 46 link to page 47 link to page 49 link to page 50 link to page 50 link to page 51 link to page 52 link to page 53 link to page 54 World Trade Organization: Overview and Future Direction
Contents
Introduction ................................................................................................................... 1 Background.................................................................................................................... 3
General Agreement on Tariffs and Trade (GATT) ........................................................... 3 World Trade Organization ........................................................................................... 6
Administering Trade Rules .................................................................................... 6 Establishing New Rules and Trade Liberalization through Negotiations ........................ 9 Resolving Disputes ............................................................................................. 10
The United States and the WTO ................................................................................. 11
WTO Agreements ......................................................................................................... 12
Marrakesh Agreement Establishing the World Trade Organization................................... 12
Multilateral Agreement on Trade in Goods (Annex 1A) ................................................. 12
Agreement on Agriculture (AoA) .......................................................................... 13 Trade-Related Investment Measures (TRIMS) ........................................................ 14
General Agreement on Trade in Services (GATS) (Annex 1B) ........................................ 15 Agreement on Trade-Related Aspects of Intel ectual Property Rights (TRIPS) (Annex
1C) ..................................................................................................................... 16
Trade Remedies....................................................................................................... 17 Dispute Settlement Understanding (DSU) (Annex 2)..................................................... 18 Trade Policy Review Mechanism (Annex 3) ................................................................ 22 Plurilateral Agreements (Annex 4) ............................................................................. 23
Government Procurement Agreement .................................................................... 23
Information Technology Agreement ...................................................................... 24
Trade Facilitation Agreement..................................................................................... 24 Key Exceptions under GATT/WTO ............................................................................ 25
Joining the WTO: The Accession Process ......................................................................... 26
China’s Accession and Membership ........................................................................... 27
Current Status and Ongoing Negotiations ......................................................................... 31
Buenos Aires Ministerial MC11, 2017 ........................................................................ 31 Outlook for MC12, 2021 .......................................................................................... 33 Selected Ongoing WTO Negotiations ......................................................................... 33
Agriculture ........................................................................................................ 33 Fisheries Subsidies ............................................................................................. 34
Electronic Commerce/Digital Trade ...................................................................... 35 Environmental Goods Agreement (EGA) ............................................................... 36
Policy Issues and Future Direction ................................................................................... 37
COVID-19 and WTO Reactions................................................................................. 39
Negotiating Approaches............................................................................................ 41
Plurilateral Agreements ....................................................................................... 41 Preferential Free Trade Agreements....................................................................... 42
Future Negotiations on Selected Issues ....................................................................... 44
Services ............................................................................................................ 45
Competition with SOEs and Non-Market Practices .................................................. 45 Investment ........................................................................................................ 46 Labor and Environment ....................................................................................... 47
Proposed Institutional Reforms .................................................................................. 48
Institutional Issues.............................................................................................. 49
Congressional Research Service
link to page 58 link to page 64 link to page 64 link to page 65 link to page 66 link to page 67 link to page 68 link to page 69 link to page 13 link to page 13 link to page 14 link to page 21 link to page 24 link to page 25 link to page 32 link to page 48 link to page 9 link to page 18 link to page 26 link to page 26 link to page 44 link to page 69 World Trade Organization: Overview and Future Direction
Dispute Settlement ............................................................................................. 53
Selected Chal enges and Issues for Congress ............................................................... 59
Value of the Multilateral System and U.S. Leadership and Membership ...................... 59 Respect for the Rules and Credibility of the WTO ................................................... 60 U.S. Sovereignty and the WTO............................................................................. 61 Role of Emerging Markets ................................................................................... 62
Priorities for WTO Reforms and Future Negotiations ............................................... 63
Outlook.................................................................................................................. 64
Figures Figure 1. WTO Structure .................................................................................................. 8 Figure 2. Uruguay Round Impact on Tariff Bindings............................................................. 8 Figure 3. Average Applied Most-Favored Nation (MFN) Tariffs ............................................. 9 Figure 4. Four Modes of Service Delivery and Hypothetical Examples .................................. 16 Figure 5. WTO Dispute Settlement Procedure ................................................................... 19 Figure 6. WTO Disputes Involving the United States .......................................................... 20 Figure 7. WTO Accession Process ................................................................................... 27 Figure 8. U.S. Trade in the WTO ..................................................................................... 43
Tables Table 1. Summary of GATT Negotiating Rounds ................................................................. 4 Table 2. Marrakesh Protocol to the GATT 1994 ................................................................. 13 Table 3. WTO Chal enges to Tariff Measures Imposed by Trump Administration Under
U.S. Trade Laws......................................................................................................... 21
Table 4. WTO DG Candidates ......................................................................................... 39
Contacts
Author Information ....................................................................................................... 64
Congressional Research Service
World Trade Organization: Overview and Future Direction
Introduction The World Trade Organization (WTO) is an international organization that administers the trade rules and agreements negotiated by its 164 members to eliminate trade barriers and create transparent and nondiscriminatory rules to govern trade. It also serves as an important forum for resolving trade disputes. The United States was a major force behind the establishment of the WTO in 1995 and the rules and agreements that resulted from the Uruguay Round of multilateral
trade negotiations (1986-1994). The WTO encompassed and expanded on the commitments and institutional functions of the General Agreement on Tariffs and Trade (GATT), which was established in 1947 by the United States and 22 other nationscountries. Through the GATT and the WTO, the United States and other countriesothers sought to establish a more open, rules-based trading system in the postwar era, with the goal of fostering international economic cooperation, stability, and prosperity worldwide.
Today, the vast majority of world trade, approximately 98%, takes place among WTO members.
The evolution of U.S. leadership in the WTO and the institution'’s future agenda have been of interest to Congress. The terms set by the WTO agreements govern the majority of U.S. trading
relationships. Some 65% of U.S. global trade is with countries that do not have free trade agreements (FTAs) with the United States, including China, the European Union (EU), India, and Japan, and thus rely , the majority of U.S. trade relies primarily on the terms of WTO agreements. Congress has recognized the WTO as the "“foundation of the global trading system" system” within U.S. trade legislation and plays a direct legislative and oversight role over WTO agreements.11 U.S.
FTAs also build on core WTO agreements. While the U.S. Trade Representative (USTR) represents the United States at the WTO, Congress holds constitutional authority over foreign commerce and establishes U.S. trade negotiating objectives and principlespriorities and implements major U.S. trade liberalization agreements through legislation. U.S. priorities and objectives for the GATT/WTO are reflected in trade promotion authority (TPA) legislation since 1974. Congress also has oversight of the USTR and other executive branch agencies that participate in WTO
meetings and enforce WTO commitments.
The WTO'’s effectiveness as a negotiating body for broad-based trade liberalization has come
under intensified scrutiny, as has its role in resolving trade disputes. The WTO has often WTO members have struggled to reach consensus over issues that can place developed country members against developing country members (such as agricultural subsidies, industrial goods tariffs, and intellectual intel ectual property rights protection). ItThe institution has also struggled to address newer trade barriers, such as digital trade restrictions and the role of state-owned enterprises (SOEs) in international
commerce, which have become more prominent in the years since the WTO was established. Global supply chains and advances in technology have transformed global commerce, but trade rules have failed to keep up with the pace of change; since 1995, WTO members have been unable to reach consensus for a new comprehensive multilateral agreement. As a result, many countries have turned to negotiating FTAs with one another outside the WTO to build on core WTO agreements and advance trade liberalization and new rules and rules; in some of these bilateral and regional
agreements, including those pursued by the United States and EU, certain newer rules may vary significantly. Plurilateral negotiations, involving subsets of WTO members rather than all al
members, are also becoming a more popular forum for tackling newer issues on the global trade agenda.
The most recent round of WTO negotiations, the Doha Round, began in November 2001, but concluded with no clear path forward, leaving multipleseveral unresolved issues after the 10th10th Ministerial conferenceConference in 2015. Efforts to build on current WTO agreements outside of the Doha agenda continue. While WTO members have made some progress toward determining future work plans, no major deliverables or negotiated outcomes were announced at the 11th Ministerial conference in December 2017 and no consensus Ministerial Declaration was released.
Many have concerns that the growing use of protectionist trade policies by developed and developing countries,
1 Section 102(b)(13) of the Bipartisan Congressional T rade Priorities and Accountability Act of 2015 (T itle I, P.L. 114-26), which reauthorized trade promotion authority (TPA).
Congressional Research Service
1
World Trade Organization: Overview and Future Direction
continue. While WTO members have made some progress, no major deliverables were announced at the last Ministerial in 2017. The stakes appear high for the next meeting, which members were forced to reschedule from 2020 to 2021 due to the Coronavirus Disease 2019 (COVID-19) pandemic. COVID-19 has tested cooperation and coordination in global trade policies, disrupted global supply chains, and resulted in widespread trade protectionism. At the same time, several countries have reaffirmed the trading system, lifted restrictions, and view the WTO as playing an
important role in tackling trade policy chal enges that have emerged from the pandemic.
Concerns about growing protectionist trade policies predate COVID-19. Observers remain
concerned that recent U.S. tariff actions and counterretaliation, and escalating trade disputes between major economies, most notably the United States and China, may further strain the multilateral trading system. The WTO is faced with resolving several significant pending disputes, which involve the
United States, as wel as debate about the role of its Appel ate Body.
In a break from the approaches of past Administrations, the Trump Administration hasUnited States, and resolving debates about the role and procedures of its Appellate Body, which reviews appeals of dispute cases.
In a break from past Administrations' approaches, U.S. officials have expressed doubt over the value of the WTO institution to the U.S. economy and questioned whether leadership in the organization is a benefit or cost tobenefits the United States. While USTR Robert Lighthizer acknowledged at the 2017 Ministerialmaintains that the WTO is an "“important institution"” that does an "“enormous amount of good," the Trump Administration has”
U.S. officials have expressed skepticism toward multilateral trade deals, including those negotiated within the WTO.2 President Trump has negotiated within the WTO. In remarks to the Asia-Pacific Economic Cooperation (APEC) forum in November 2017, President Trump stated the following: "Simply put, we have not been treated fairly by the World Trade Organization.... What we will no longer do is enter into large agreements that tie our hands, surrender our sovereignty, and make meaningful enforcement practically impossible."2 President Trump has also at times threatened to withdraw the United States from the WTO.3 He claims that the WTO “needs drastic change,” and criticizesStates from the WTO. During his United Nations General Assembly remarks in September 2019, President Trump claimed that the WTO "needs drastic change," and criticized China as declining to adopt promised reforms following WTO accession.34 In addition, amid concerns about "judicial overreach"“judicial overreach” in WTO dispute findings, the Administration is currently withholdinghas withheld approval for judge appointments to the WTO AppellateAppel ate Body—a practice that beganoccurred under the Obama Administration, and a concern shared by
Administration and concerns some Members of Congress.
At the same time, "reform of the multilateral trading system" is a stated trade policy objective of the
Trump Administration, and the United States remains engaged in certain WTO initiatives and plurilateral efforts at the WTO.4 While many of the U.S.'splurilateral efforts.5 In testimony before Congress in June 2020, USTR Lighthizer emphasized primary U.S. concerns include that other WTO members resort more often to litigation, rather than negotiations to craft new rules, maintain “outdated” high tariffs, and skirt WTO obligations through flexibilities.6 The United States seeks a “broad reset” at the WTO, with across-the-board reforms.7 While many of U.S. fundamental concerns predate the Trump Administration and are
shared by other trading partners, questions remain about U.S. priorities for improving the system.
With growing debate over the role and future direction of the WTO, a number of issues may be of interest to Congress, includingCongress may maintain
interest in several issues, including: the value of U.S. membership and leadership in the WTO, whetherthe possibility of establishing new U.S. negotiating objectives or holding oversight hearings are needed to address prospects forof new WTO reforms and rulemaking, and the relevant authorities and theU.S. trade authorities
and impact of potential WTO withdrawal on U.S. economic and foreign policy interests.
This report provides background history of the WTO, its organization, and current status of negotiations. The report also explores concerns some have regarding the WTO'
2 UST R, “ Opening Plenary Statement of UST R Robert Lighthizer at the WT O Ministerial Conference,” Press Release, December 11, 2017.
3 John Micklethwait, Margaret T alev, and Jennifer Jacobs, “T rump T hreatens to Pull U.S. Out of WT O If It Doesn’t ‘Shape Up’,” Bloomberg News, August 30, 2018. 4 White House, “Remarks by President T rump to the 74th Session of the United Nations General Assembly,” September 25, 2019, https://www.whitehouse.gov/briefings-statements/remarks-president -trump-74th-session-united-nations-general-assembly/.
5 UST R, 2018 Trade Policy Agenda, March 2018. 6 House Ways and Means Committee, Hearing on the President’s 2020 Trade Policy Agenda, written testimony by Ambassador Robert E. Lighthizer, June 17, 2020. 7 Also, see Robert E. Lighthizer, “ How to Set World T rade Straight ,” Wall Street Journal op-ed, August 20, 2020.
Congressional Research Service
2
World Trade Organization: Overview and Future Direction
This report provides background history of the WTO, its organization, and current status of negotiations and reform efforts. The report also explores concerns some have regarding the
WTO’s future direction and key policy issues for Congress.
Background s future direction and key policy issues for Congress.
Following World War II, nationscountries throughout the world, led by the United States and several other developed countries, sought to establish a more opentransparent and nondiscriminatory trading
system with the goal of raising the economic wellwel -being of all al countries. Aware of the role of tit-for-tat trade barriers resulting from the U.S. Smoot-Hawley tariffs in exacerbating the economic depression in the 1930s, including severe drops in world trade, global production, and employment, the countries that met to discuss the new trading system considered more open trade
as essential for peace and economic stability.5
8
The intent of these negotiators was to establish an International Trade Organization (ITO) to address not only trade barriers but other issues indirectly related to trade, including employment, investment, restrictive business practices, and commodity agreements. Unable to secure approval
for such a comprehensive agreement, however, they reached a provisional agreement on tariffs and trade rules, known as the GATT, which went into effect in 1948.69 This provisional agreement, subject to several rounds of trade liberalization negotiations, became the principal set of rules
governing international trade for the next 47 years, until the establishment of the WTO.
The GATT was neither a formal treaty nor an international organization, but an agreement between governments, to which they were contracting parties. The GATT parties established a
secretariat based in Geneva, but it remained relatively small, especially smal , especial y compared to the staffs of international economic institutions created by the postwar Bretton Woods conference—the International Monetary Fund and World Bank. Based on a mission to promote trade liberalization,
the GATT became the principal set of rules and disciplines governing international trade.
|
The core principles and articles of the GATT (which were carried over to the WTO) committed the original 23 members, including the United States, to lower tariffs on a range of industrial goods and to apply tariffs in a nondiscriminatory manner—the so-called most-favored nation or MFN principle (see text box). By having to extend the same benefits and concessions to members, the economic gains from trade liberalization were magnified. Exceptions to the MFN principle are allowed, however, including for preferential trade agreements outside the GATT/WTO covering "substantially" all trade among members and for nonreciprocal preferences for developing countries.7nonreciprocal preferences for developing countries.10 GATT members also agreed to provide "“national treatment"” for imports from other members. For example, countries could not establish one set of health and safety regulations on domestic products while imposing more stringent
regulations on imports.
Although the GATT mechanism for the enforcement of these rules or principles was generally general y viewed as largely ineffective, the agreement nonetheless brought about a substantial reduction of tariffs and other trade barriers.811 The eight "“negotiating rounds"” of the GATT succeeded in reducing average tariffs on industrial products from between 20%-30% to just below 4%, and
later establishing agreements to address certain non-tariff barriers, facilitating a 14-fold increase in world trade over its 47-year history (seesee Table 1).912 When the first round concluded in 1947, 23 nationscountries had participated, which accounted for a majority of global trade at the time. When the Uruguay Round establishing the WTO concluded in 1994, 123 countries had participated and the amount of trade affected was nearly $3.7 trilliontril ion. As of the end of 2018, there are 164 WTO
members, and trade flows totaled $22.6 trilliontril ion in 2017.13
in 2017.10
|
|
|
Round
Negotiating
Major
(Year: Location)
Countries (#)
Accomplishments
1947: Geneva |
23 |
|
1949: Annecy, France |
13 |
|
1950-51: Torquay, UK |
38 |
|
1955-56: Geneva |
26 |
|
1960-61: Geneva (Dillon) |
26 |
|
Community 1964-67: Geneva (Kennedy) |
62 |
|
1973-79: Geneva (Tokyo) |
102 |
|
|
123 |
|
Sources and intel ectual property
Sources: Douglas A. Irwin, Free Trade Under Fire, p. 225, and Stephen D. Cohen et al., Fundamentals of U.S. Foreign Trade Policy, p. 185.
10 GAT T Article XXIV. For more information see CRS Report R45198, U.S. and Global Trade Agreements: Issues for Congress, by Brock R. Williams. 11 For more detail on perceived shortcomings of GAT T dispute settlement, see “Historic development of the WT O dispute settlement system,” https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c2s1p1_e.htm. 12 WT O, World Trade Report 2007, pp. 201-209. 13 WT O, World Trade Statistical Review 2018, https://www.wto.org/english/res_e/statis_e/wts2018_e/wts2018_e.pdf.
Congressional Research Service
4
World Trade Organization: Overview and Future Direction
p. 185.
During the first trade round held in Geneva in 1947, members negotiated a 20% reciprocal tariff reduction on industrial products, and made further cuts in subsequent rounds. The Tokyo Round represented the first attempt to reform the trade rules that had existed unchanged since 1947, by including issues and policies that could distort international trade. As a result, Tokyo Round negotiators established several plurilateral codes dealing with nontariff issues such as antidumping, subsidies, standards or technical barriers to trade, import licensing, customs
valuation, and government procurement.1114 Countries could choose which, if any, of these codes they wished to adopt. While the United States agreed to all al of the codes, the majority of GATT
signatories, including most developing countries, chose not to sign the codes.12
15
The Uruguay Round, which took eight years to negotiate (1986-1994), proved to be the most comprehensive GATT trade round. This round further lowered tariffs in industrial goods and liberalized trade in areas that had eluded previous negotiators, notably agriculture and textiles and apparel. Several codes were amended and turned into multilateral commitments accepted by al members.16 It also extended rules to new areas such as services, trade-related investment measures, and intellectualintel ectual property
rights. It created a trade policy review mechanism, which periodicallyperiodical y examines each member's ’s trade policies and practices. Significantly, the Uruguay Round created the WTO as a legal international organization charged with administering a revised and stronger dispute settlement (DS) mechanism—a principal U.S. negotiating objective (see text box)—as well wel as many new trade agreements adopted during the long negotiation. For the most part, the Uruguay Round
agreements were accepted as a single package or single undertaking, meaning that all participants al participants
and future WTO members were required to subscribe to all of the agreements.13
al the multilateral agreements. U.S. Trade Negotiating Objectives for Uruguay Round
U.S. trade negotiating objectives
|
rights.
14 WT O, “Pre-WTO legal texts,” https://www.wto.org/english/docs_e/legal_e/prewto_legal_e.htm. 15 Douglas A. Irwin, Free Trade Under Fire, Princeton University Press, 2009, p. 226. 16 Four agreements remained “plurilateral,” including on government procurement, bovine meat, civil aircraft and dairy products. See https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact4_e.htm.
Congressional Research Service
5
link to page 13 World Trade Organization: Overview and Future Direction
World Trade Organization The WTO succeeded the GATT in 1995. In contrast to the GATT, the WTO was created as a
permanent organization. But as with the GATT, the WTO secretariatSecretariat and support staff is small smal by international standards and lacks independent power. The power to write rules and negotiate future trade liberalization resides specifically resides specifical y with the member countries, and not the WTO director-general (DG) or staff. Thus, the WTO is referred to as a member-driven organization.14
17 The Secretariat’s primary role is to provide technical and professional support to members on
WTO activities and negotiations, monitor and analyze global trade developments, and organize
Ministerial Conferences.
Decisions within the WTO are made by consensus, although majority voting can be used in
limited circumstances. The highest-level body in the WTO is the Ministerial Conference, which is the body of political representatives (trade ministers) from each member country (Figure 1). The body that oversees the day-to-day operations of the WTO is the General Council, which consists of a representative from each member country. Many other councils and committees deal with
particular issues, and members of these bodies are also national representatives.
In general, the WTO has three broad functions: administering the rules and disciplines of the trading system; establishing new rules through negotiations; and resolving disputes between member states.
The WTO administers the global rules and principles negotiated and signed by its members. The main purpose of the rules is "“to ensure that trade flows as smoothly, predictably, and freely as possible."15”18 WTO rules and agreements are essentiallyessential y contracts that bind governments to keep
their trade policies within agreed limits. A number of fundamental principles guide WTO rules.
In general, as with the GATT, these key principles are nondiscrimination and the notion that freer trade through the gradual reduction of trade barriers strengthens the world economy and increases prosperityprosperity for each member. The WTO agreements apply the GATT principles of
nondiscrimination as discussed above: MFN treatment and national treatment. The trade barriers concerned include tariffs, quotas, and a growing range of nontariff measures, such as product standards, food safety measures, subsidies, and discriminatory domestic regulations. The fundamental principle of reciprocity is also behind members'’ aim of "“entering into reciprocal and mutuallymutual y advantageous arrangements directed to the substantial reduction of tariffs and other
barriers to trade and to the elimination of discriminatory treatment in international trade relations."16
relations.”19
Transparency is another key principle of the WTO, which aims to reduce information asymmetry in markets, ensure trust, and, therefore, foster greater stability in the global trading system. Transparency commitments are incorporated into individual WTO agreements. Active participation in various WTO committees also aims to ensure that agreements are monitored and that members are held accountable for their actions. For example, members are required to publish their trade practices and policies and notify new or amended regulations to WTO
17 Ibid, p. 239. 18 “T he WT O,” https://www.wto.org/english/thewto_e/thewto_e.htm. 19 Preamble to the Marrakesh Agreement Establishing the World T rade Organization, https://www.wto.org/english/docs_e/legal_e/04-wto_e.htm.
Congressional Research Service
6
link to page 27 link to page 27 link to page 13 link to page 14 World Trade Organization: Overview and Future Direction
committees. Regular trade policy reviews of each member’committees. Regular trade policy reviews of each member's trade policies and practices provide a deeper dive into an economy'’s implementation of its commitments—see " “Trade Policy Review Mechanism (Annex 3)."17.”20 In addition, the WTO'’s annual trade monitoring report takes stock of
trade-restrictive and trade-facilitating measures of the collective body of WTO members.
![]() |
|
While opening markets can encourage competition, innovation, and growth, it can also entail adjustments for workers and firms. Trade liberalization can also be more difficult for the least-developed countries (LDCs) and countries transitioning to market economies. WTO agreements thus allowal ow countries to lower trade barriers graduallygradual y. Developing countries and sensitive sectors
in particular are usuallyusual y given longer transition periods to fulfill fulfil their obligations; developing countries make up about two-thirds of the WTO membership—WTO members self-designate developing country status.1821 The WTO also supplements this so-called "cal ed “special and differential" ” treatment (SDT) for developing countries with trade capacity-building measures to provide technical assistance and help implement WTO obligations, and with permissions for countries to
extend nonreciprocal, trade preference programs.
In WTO parlance, when countries agree to open their markets further to foreign goods and services, they "bind"“bind” their commitments or agree not to raise them. For goods, these bindings
amount to ceilings on tariff rates. A country can change its bindings, but only after negotiating with its trading partners, which could entail compensating them for loss of trade. As shown in Figure 2, one of the achievements of the Uruguay Round was to increase the amount of trade under binding commitments. Bound tariff rates are not necessarily the rates WTO members apply in practice to imports from trading partners; so-calledcal ed applied MFN rates can be lower than bound rates, as reflected in tariff reductions under the GATT. Figure 3 shows average applied MFN
tariffs worldwide. In 20172019, the United States simple average MFN tariff was 3.4%.
3%.
A key issue in the Doha Round for the United States was lowering major developing countries' ’
relatively high bound tariffs to below their applied rates in practice to achieve commercially commercial y
meaningful new market access.
meaningful new market access.
|
![]() |
Source: Data from WTO, Understanding the WTO: Basics, http://www.wto.org. Created by CRS. Notes: Percentages reflect shares of total tariff lines, but are not trade-weighted. The Uruguay Round was conducted from 1986 to 1994. |
|
![]() |
|
Promising not to raise a trade barrier can have a significant economic effect because the promise
provides traders and investors certainty and predictability in the commercial environment. A growing body of economic literature suggests certainty in the stability of tariff rates may be just as important for increasing global trade as reduction in trade barriers.1922 This proved particularly important during the 2009 global economic downturn. Unlike in the 1930s, when countries reacted to slumping world demand by raising tariffs and other trade barriers, the WTO reported
that its 153 members (at the time), accounting for 90% of world trade, by and large did not resort
to protectionist measures in response to the crisis.20
23
20 For more information, see https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm11_e.htm. 21 T he WT O does not specify criteria for “developing” country status, though a sub-group, least-developed countries, are defined under United Nations criteria. See, “Who are the developing countries in the WT O?” https://www.wto.org/english/tratop_e/devel_e/d1who_e.htm.
22 See for example, Kyle Handley and Nuno Limao, “Policy Uncertainty, T rade, and Welfare: T heory and Evidence for China and the United States,” American Economic Review, vol. 107, no. 9 (2017). 23 WT O, “ Overview of Developments in the International Trading Environment,” WT/TPR/OV/12, November 18, 2009, p. 4.
Congressional Research Service
7
World Trade Organization: Overview and Future Direction
Figure 1. WTO Structure
Source: WTO, https://www.wto.org/english/thewto_e/whatis_e/tif_e/organigram_e.pdf.
Figure 2. Uruguay Round Impact on Tariff Bindings
Source: Data from WTO, Understanding the WTO: Basics, http://www.wto.org. Created by CRS.
Congressional Research Service
8
link to page 22
World Trade Organization: Overview and Future Direction
Notes: Percentages reflect shares of total tariff lines; not trade-weighted. The Uruguay Round was 1986-1994.
Figure 3. Average Applied Most-Favored Nation (MFN) Tariffs
Source: WTO, 2020, https://www.wto.org/english/res_e/reser_e/tariff_profiles_e.htm. Created by CRS.
The promotion of fair and undistorted competition is another important principle of the WTO. While the WTO is often described as a "“free trade"” organization, numerous rules are concerned with ensuring transparent and non-discriminatory competition. In addition to nondiscrimination, MFN treatment and national treatment concepts aim to promote "fair"“fair” conditions of trade. WTO
rules on subsidies and antidumping in particular aim to promote fair competition in trade through recourse to trade remedies, or temporary restriction of imports, in response to allegedal eged unfair trade practices—see " “Trade Remedies."21”24 For example, when a foreign company receives a prohibited subsidy for exporting as defined in WTO agreements, WTO rules allowal ow governments to impose
duties to offset any unfair advantage found to cause injury to their domestic industries.25
The scope of the WTO is broader than the GATT because, in addition to goods, it administers multilateral multilateral agreements on agriculture, services, intellectualintel ectual property, and certain trade-related investment measures. These newer rules in particular are forcing the WTO and its DS system to
deal with complex issues that go beyond tariff border measures.
As the GATT did for 47 years, the WTO provides a negotiating forum where members reduce barriers and try to sort out their trade problems. Negotiations can involve a few countries, many countries, or all al members. As part of the post-Uruguay Round agenda, negotiations covering basic
telecommunications and financial services were completed in 1997 under the auspices of the WTO in 1997. SelectedWTO. Groups of WTO members also negotiated deals to eliminate tariffs on certain information technology products and improve rules and procedures for government procurement. A more
24 WT O, “Anti-dumping, subsidies, safeguards: contingencies, etc.” https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm8_e.htm. 25 See CRS Report R46296, Trade Remedies: Antidumping, by Christopher A. Casey, and CRS In Focus IF10018, Trade Rem edies: Antidum ping and Countervailing Duties, by Vivian C. Jones and Christopher A. Casey .
Congressional Research Service
9
link to page 42 link to page 28 World Trade Organization: Overview and Future Direction
recent significant accomplishment was the WTO Trade Facilitation Agreement in 2017,
addressing customs and logistics barriers.
The latest round of multilateral negotiations, the Doha Development Agenda (DDA), or Doha
Round, launched in 2001, has achieved limited progress to date, as the agenda proved difficult and contentious. Despite a lack of consensus on its future, many view the round as effectively over.2226 The negotiations stalledstal ed over issues such as reducing domestic subsidies and opening markets further in agriculture, industrial tariffs, nontariff barriers, services, intellectualintel ectual property rights, and SDT for developing countries. The negotiations exposed fissures between developed
countries, led by the United States and the EU, on the one handEU, and developing countries, led by China, Brazil, and
IndiaIndia, on the other hand, who have come to play a more prominent role in global trade.
The inability of countries to achieve the objectives of the Doha Round prompted many to
question the utility of the WTO as a negotiating forum, as well wel as the practicality of conducting a large-scale negotiation involving 164 participants with consensus and the single undertaking as guiding principles. At the same time, many proposals have been advancedmembers have advanced several proposals for moving forward from Doha and making the WTO a stronger forum for negotiations in the future.2327 (See "
“Policy Issues and Future Direction.")
The”)
With some exceptions, such as the Trade Facilitation Agreement, the WTO arguably has been more successful in the negotiation of discrete items to which not all al parties must agree or be bound (see "“Plurilateral Agreements (Annex 4)”"). Some view these plurilaterals as a more
promising negotiating approach for the WTO moving forward given their flexibility, as they can involve subsets of more "“like-minded"” partners and advance parts of the global trade agenda. Some experts have raised concerns, however, that this approach could lead to "“free riders"”—those who benefit from the agreement but do not make commitments—foras agreements on an MFN basis, or otherwise, could isolate some countries who do not participate and may face new trade restrictions
or disadvantages as a result. Others argue that only thoughthrough the single undertaking approach to negotiationswith
multiple issues under negotiation can there be trade-offs that are sufficient to bring all al members on board.
The third overal function of the WTO is to provide a mechanism to enforce its rules and settle trade disputes. A central goal of the United States during the Uruguay Round negotiations was to
strengthen the DS mechanism that existed under the GATT. While the GATT'’s process for settling disputes between member countries was informal, ad hoc, and voluntary, the WTO DS process is more formalized and enforceable.2428 Under the GATT, panel proceedings could take years to complete; any defending party could block an unfavorable ruling; failure to implement a ruling carried no consequence; and the process did not cover all al the agreements. Under the WTO, there are strict timetables—though not always followed—for panel proceedings; the defending
party cannot block rulings; there is one comprehensive DS process covering all al the agreements; and the rulings are enforceable. WTO adjudicative bodies can authorize retaliation if a member fails to implement a ruling or provide compensation. Yet, under both systems, considerable emphasis is placed on having the member countries attempt to resolve disputes through
26 For example, see “T he Doha round finally dies a merciful death,” Financial Times, December 21, 2015. 27 See CRS Report RL32060, World Trade Organization Negotiations: The Doha Development Agenda , by Ian F. Fergusson; and CRS Report RS22927, WTO Doha Round: Im plications for U.S. Agriculture, by Randy Schnepf. 28 T his stronger DS system was created, in part due to demands from Congress based on concerns that the GAT T approach was ineffective in eliminating barriers to U.S. exports. In fact, it was first princ ipal trade negotiating objective set out in the Omnibus T rade and Competitiveness Act of 1988, P.L. 100-418, §1101(b)(1), 19 U.S.C. 2901(b)(1).
Congressional Research Service
10
link to page 23 link to page 23 World Trade Organization: Overview and Future Direction
emphasis is placed on having the member countries attempt to resolve disputes through consultations and negotiations, rather than relying on formal panel rulings. See "Dispute “Dispute
Settlement Understanding (DSU)" ” for more detail on WTO procedures and dispute trends.
The statutory basis for U.S. membership in the WTO is the Uruguay Round Agreements Act (URAA, P.L. 103-465), which approved the trade agreements resulting from the Uruguay Round.
The legislation contained general provisions on
U.S. priorities and objectives for the GATT/WTO have been reflected in various trade promotion authority (TPA) legislation since 1974. For example, the Omnibus Trade and Competitiveness Act of 1988 specificallyspecifical y contained provisions directing U.S. negotiators to negotiate disciplines on agriculture, DS, intellectualintel ectual property, trade in services, and safeguards, among others, that resulted in WTO agreements in the Uruguay Round (see text box above). The Trade Act of 2002 provided U.S. objectives for the Doha Round, including seeking to expand commitments on e-commerce and
clarifications to the WTO DS system. The 2015 TPA, perhaps reflecting the impasse of the Doha Round, was more muted, seeking full implementation of existing agreements, enhanced compliance by members with their WTO obligations, and new negotiations to extend
commitments to new areas.25
29
Section 125(b) of the URAA sets procedures for congressional disapproval of WTO participation. It specifies that Congress'’s approval of the WTO agreement shall shal cease to be effective "“if and only if"” Congress enacts a privileged joint resolution callingcal ing for withdrawal. Congress may vote every five years on withdrawal; resolutions were introduced in 2000 and 2005, however neither
passed.30 The debates in 2000 and 2005 were characterized by concerns about certain dispute settlement cases, especial y adverse decisions on trade remedies, and beliefs that WTO
29 See CRS Report R43491, Trade Promotion Authority (TPA): Frequently Asked Questions, by Ian F. Fergusson and Christopher M. Davis. 30 For the 2000 and 2005 resolutions, see https://www.congress.gov/bill/106th-congress/house-joint-resolution/90/actions and https://www.congress.gov/bill/109th-congress/house-joint -resolution/27/actions.
Congressional Research Service
11
link to page 18 link to page 13 World Trade Organization: Overview and Future Direction
membership impinges U.S. sovereignty. WTO supporters emphasized the economic benefits and value of an open and rules-based trading system. Several factors shaped past debates. In 2000, China had yet to join the WTO. In 2005, China had acceded but was not yet playing a pivotal role, and the Doha Round, launched in 2001, was actively being negotiated. More recently, U.S. concerns with the WTO have grown in some quarters and perception of WTO’s benefits have dimmed among some Members.31 In May 2020, withdrawal resolutions were introduced during
the 116th Congress by Representatives DeFazio and Pal one (H.J.Res. 89) and by Senator Hawley (S.J.Res. 71).32 A rule change proposed by the House Rules Committee and adopted by the House, as wel as by an interpretation of the statute reportedly made by the Senate
Parliamentarian, are likely to prevent votes from occurring on the measures.33
however neither passed.26 The next possible consideration of such a resolution would be in 2020.
WTO Agreements The WTO member-led body negotiates, administers, and settles disputes for agreements that cover goods, agriculture, services, certain trade-related investment measures, and intellectual intel ectual property rights, among other issues. The WTO core principles are enshrined in a series of trade agreements that include rules and commitments specific to each agreement, subject to various exceptions. The GATT/WTO system of agreements has expanded rulemaking to several areas of international trade, but does not extensively cover some key areas, including multilateral
investment rules, trade-related labor or environment issues, and emerging issues like digital trade
or the commercial role of state-owned enterprises.
The Marrakesh Agreement is the umbrellaumbrel a agreement under which the various agreements, annexes, commitment schedules, and understandings reside. The Marrakesh Agreement itself created the WTO as a legal international organization and sets forth its functions, structure,
secretariat, budget procedures, decisionmaking, accession, entry-into-force, withdrawal, and other provisions. The Agreement contains four annexes. The three major substantive areas of
commitments undertaken by the members are contained in Annex 1.
The Multilateral Agreement on Trade in Goods establishes the rules for trade in goods through a series of sectoral or issue-specific agreements (seesee Table 2). Its core is the GATT 1994, which includes GATT 1947, the amendments, understanding, protocols, and decisions of the GATT from 1947 to
1994, cumulatively known as the GATT-acquis, as well wel as six Understandings on Articles of the GATT 1947 negotiated in the Uruguay Round. In addition to clarifying the core WTO principles, each agreement contains sector- or issue-specific rules and principles. The schedule of commitments identifies each member'’s specific binding commitments on tariffs for goods in general, and combinations of tariffs and quotas for some agricultural goods. Through a series of
negotiating rounds, members agreed to the current level of trade liberalization (see (Figure 2 above).
31 For example, see Senator Josh Hawley’s op-ed, “T he WT O Should be Abolished,” New York Times, May 5, 2020. 32 CRS Insight IN11399, The WTO Withdrawal Resolutions, by Ian F. Fergusson and Christopher M. Davis. 33 Doug Palmer, “New ruling quashes Hawley’s hope for Senate WT O withdrawal vote,” Politico, July 1, 2020.
Congressional Research Service
12
World Trade Organization: Overview and Future Direction
Table 2. Marrakesh Protocol to the GATT 1994
Agreement on
Agreement on
Agreement on Import
Agreement on Trade-
Agriculture
Implementation of
Licensing Procedures
Related Aspects of
Article VI (Anti-
Intel ectual Property
dumping)
Rights (TRIPS)
Agreement on the
Agreement on
Agreement on Subsidies
Understanding on Rules
Application of Sanitary and
Implementation of
and Countervailing
and Procedures Governing
Phytosanitary Measures
Article VII (Customs
Measures
the Settlement of Disputes
(SPS)
Valuation)
Agreement on Technical
Agreement on
Agreement on
Agreement on Trade
Barriers to Trade (TBT)
Preshipment Inspection
Safeguards
in Civil Aircraft
Agreement on Trade-
Agreement on Rules of
General Agreement
Agreement on
Related Investment
Origin (ROO)
above).
| Agreement on Implementation of Article VI (Anti-dumping) | Agreement on Import Licensing Procedures | Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) |
Agreement on the Application of Sanitary and Phytosanitary Measures (SPS) | Agreement on Implementation of Article VII (Customs Valuation) |
|
|
Agreement on Technical Barriers to Trade (TBT) | Agreement on Preshipment Inspection |
|
|
Agreement on Trade-Related Investment Measures (TRIMS) | Agreement on Rules of Origin (ROO) |
|
|
In the last four rounds of negotiations, WTO members aimed to expand international trade rules beyond tariff reductions to tackle barriers in other areas. For example, agreements on technical
barriers to trade (TBT) and sanitary and phytosanitary (SPS) measures aim to protect a country's ’s rights to implement domestic regulations and standards, while ensuring they do not discriminate
against trading partners or unnecessarily restrict trade.27
The Agreement on Agriculture (AoA) includes rules and commitments on market access and
disciplines on certain domestic agricultural support programs and export subsidies. Its objective was to provide a framework for WTO members to reform certain aspects of agricultural trade and domestic farm policies to facilitate more market-oriented and open trade.2835 Regarding market access, members agreed not to restrict agricultural imports by quotas or other nontariff measures, converting them to tariff-equivalent levels of protection, such as tariff-rate quotas—a process called "cal ed “tariffication."” Developed countries committed to cut tariffs (or out-of-quota tariffs, those
tariffs applied to any imports above the agreed quota threshold) by an average of 36% in equal increments over six years; developeddeveloping countries committed to 24% tariff cuts over 10 years. Special safeguards to temporarily restrict imports were permitted in certain events, such as falling prices or surges of imports.
34 T BT refers to technical regulations, standards and certification and conformity assessment pro cedures; while SPS refers to food safety and animal and plant health measures. 35 WT O, “Agriculture: fairer markets for farmers,” https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm3_e.htm.
Congressional Research Service
13
link to page 49 World Trade Organization: Overview and Future Direction
Special safeguards to temporarily restrict imports were permitted for products considered
sensitive by a member in certain events, such as fal ing prices or surges of imports.
The AoA also categorizes and restricts agricultural domestic support programs, according to their
potential to distort trade. Members agreed to limit and reduce the most distortive forms of domestic subsidies over 6 to 10 years, referred to as "“amber box"” subsidies and measured by the Aggregate Measure of Support (AMS) index.2936 Subsidies considered to cause minimal distortion on production and trade are not subject to spending limits and are exempted from obligations as "“green box"” and "“blue box"” subsidies or under de minimisminimis (below a certain threshold) or SDT
provisions. A so-cal ed “peace” clause protected members using domestic provisions. In addition, export subsidies were to be capped and subject to incremental reductions, both by value and quantity of exports covered. A so-called "peace" clause protected members using subsidies that comply with the agreement from being challengedchal enged under other WTO agreements, such as through use of countervailing duties; the clause expired after nine years in 2003. In addition, AoA commitments
required that export subsidies were to be capped and subject to incremental reductions.
Members are required to Members are required to regularly submit notifications regularly on the implementation of AoA commitmentscommitments on market access, domestic subsidies, and export competition—though some countries, including the United States, have raised concerns that these requirements are not
abided by in a consistent fashion.
Further agricultural trade reform was a major priority under the Doha Round, but to date, negotiations have seen limited progress to date (see "Ongoing WTO Negotiations"). However, in 2015,on resolving major issues. Members have advanced some areas for reform, however, for example, in 2015 members reached an agreement to fully eliminate
export subsidies for agriculture.
The framework of the GATT did not address the growing linkages between trade and investment. During the Uruguay Round, the Agreement on Trade-Related Investment Measures (TRIMS) was drafted to address certain investment measures that may restrict and distort trade. The agreement
did not address the regulation or protection of foreign investment, but focused on investment measures that may violate basic GATT disciplines on trade in goods, such as nondiscrimination. SpecificallySpecifical y, members committed not to apply any TRIM that is inconsistent with provisions on national treatment or a prohibition of quantitative restrictions on imports or exports. TRIMS includes an annex with an illustrativeil ustrative list of prohibited measures, such as local content
requirements—requirements to purchase or use products of domestic origin. The agreement also includes a safeguard measure for balance of payment difficulties, which permits developing
countries to temporarily suspend TRIMS obligations.
While TRIMS and other WTO agreements, such as the GATS (see below), include some provisions pertaining to investment, the lack of comprehensive multilateral rules on investment led to several efforts under the Doha Round to consider proposals, which to date have been unfruitful (see "“Future Negotiations" on Selected Issues”). In December 2017, 70 WTO members announced plans to begin new discussions on developing a multilateral framework on investment facilitation, in
part to complement the successful negotiation of rules on trade facilitation.
The GATT agreements focused solely on trade in goods, excluding services. Services were eventuallyeventual y covered in the
GATS as a result of the Uruguay Round agreements.30.37 The GATS provides the first and only multilateral framework of principles and rules for government policies and regulations affecting trade in servicesservices
trade. It has served as thea foundation on which rules in otherfor bilateral and regional trade agreements oncovering services.
services are based.
The services trade agenda is complex due to the characteristics of the sector. "Services"“Services” refers to a growing range of economic activities, such as audiovisual, construction, computer and related services, express delivery, e-commerce, financial, professional (e.g., accounting and legal services), retail and wholesaling, transportation, tourism, and telecommunications. Advances in information technology and the growth of global supply chains have reduced barriers to trade in
services, expanding the services tradable across national borders. But liberalizing trade in services can be more complex than for goods, since the impediments faced by service providers occur largely within the importing country, as so-called "cal ed “behind the border"” barriers, some in the form of government regulations. While the right of governments to regulate service industries is widely recognized as prudent and necessary to protect consumers from harmful or unqualified providers,
a main focus of WTO members is whether these regulations are applied to foreign service
providers in a discriminatory and unnecessarily trade restrictive manner that limits market access.
The GATS contains multiple parts, including definition of scope (excluding government-provided
services); principles and obligations, including MFN treatment and transparency; market access and national treatment obligations; annexes listing exceptions that members take to MFN treatment; as well wel as various technical elements. Members negotiated GATS on a positive list basis, which means that the commitments only apply to those services and modes of delivery listed in each member'’s schedule of commitments.3138 WTO members adopted a system of
classifying four modes of delivery for services to measure trade in services and classify government measures that affect trade in services, including cross-border supply, consumption abroad, commercial presence, and temporary presence of natural persons (Figure 4). Under GATS, unless a member country has specificallyspecifical y committed to open its market to suppliers in a
particular service, the national treatment and market access obligations do not apply.
In addition to the GATS, some members made specific sectoral commitments in financial services and telecommunications. Negotiations to expand these commitments were later folded into the broader services negotiations.
WTO members aimed to update GATS provisions and market access commitments as part of the Doha Round. Several WTO members have since submitted revised offers of services liberalization, but in the view of the United States and others the talks have not yielded adequate
offers of improved market access (see "“Future Negotiations"”). Given the lack of progress, in 2013, 23 WTO members, including the United States, representing approximately 70% of global services trade, launched negotiations of a services-specific plurilateral agreement.3239 Although outside of the WTO structure, participants designed the Trade in Services Agreement (TiSA) negotiations in a way that would not preclude a concluded agreement from someday being
brought into the WTO. TiSA talks were initially initial y led by Australia and the United States, but have since stalled
since stal ed; the Trump Administration has not stated a formal position on TiSA.
The TRIPS Agreement marked the first time multilateral trade rules incorporated intellectual intel ectual property rights (IPR)—legal, private, enforceable rights that governments grant to inventors and artists to encourage innovation and creative output.3340 Like the GATS, TRIPS was negotiated as
part of the Uruguay Round and was a major U.S. objective for the round.
The TRIPS Agreement TRIPS sets minimum standards of protection and enforcement for IPR. Much of the agreement sets out the extent of coverage of the various types of intellectualintel ectual property, including patents, copyrights, trademarks, trade secrets, and geographical indications. TRIPS includes provisions on nondiscrimination and
on enforcement measures, such as civil and administrative procedures and remedies. IPR disputes under the agreement are also subject to the WTO DS mechanism.
The TRIPS Agreement'’s newly placed requirements on many developing countries elevated the debate over the relationship between IPR and development. At issue is the balance of rights and obligations between protecting private right holders and securing broader public benefits, such as
access to medicines and the free flow of data, especiallyespecial y in developing countries. TRIPS includes flexibilities flexibilities for developing countries allowingal owing longer phase-in periods for implementing obligations and, separately, for pharmaceutical patent obligations—these were subsequently extended for LDCs until January 2033 or until they no longer qualify as LDCs, whichever is earlier.34 The 2001 WTO "Doha Declaration"
40 For more detail, see CRS Report RL34292, Intellectual Property Rights and International Trade, by Shayerah Ilias Akhtar and Ian F. Fergusson.
Congressional Research Service
16
World Trade Organization: Overview and Future Direction
earlier.41 The 2001 WTO “Doha Declaration” committed members to interpret and implement TRIPS obligations in a way that supports public health and access to medicines.3542 In 2005, members agreed to amend TRIPS to allowal ow developing and LDC members that lack production capacity to import generic medicines from third country producers under "“compulsory licensing" arrangements.36”
arrangements.43 The amendment entered into force in January 2017.37
While WTO agreements uphold MFN principles, they also allowal ow exceptions to binding tariffs in
certain circumstances. The WTO Agreement on Subsidies and Countervailing Measures (ASCM), the WTO Agreement on Safeguards, and articles in the GATT, commonly known as the Antidumping Agreement, allowal ow for trade remedies in the form of temporary measures (e.g., primarily duties or quotas) to mitigate the adverse impact of various trade practices on domestic industries and workers. These include actions taken against dumping (sellingsel ing at an unfairly low price) or to counter certain government subsidies, and emergency measures to limit "fairly"-“fairly”-
traded imports temporarily, designed to "safeguard"“safeguard” domestic industries.
Supporters of trade remedies view them as necessary to shield domestic industries and workers from unfair competition and to level the playing field. Other domestic constituents, including some importers and downstream consuming industries, voice concern that antidumping (AD) and countervailing duty (CVD) actions can serve as disguised protectionism and create inefficiencies in the world trading system by raising prices on imported goods. How trade remedies are applied to imports has become a major source of disputes under the WTO (see below).
The United States has enacted trade remedy laws that conform to the WTO rules:38
The DS system, often calledcal ed the "“crown jewel"” of the WTO, has been considered by some observers to be one of the most important successes of the multilateral trading system.3946 WTO agreements contain provisions that are either binding or nonbinding. The WTO Understanding on
Rules and Procedures Governing the Settlement of Disputes—Dispute Settlement Understanding or DSU—provides an enforceable means for WTO members to resolve disputes arising under the binding provisions.4047 The DSU commits members not to determine violations of WTO obligations or impose penalties unilaterally, unilateral y, but to settle complaints about allegedal eged violations under DSU rules and procedures.
In recent years, there have been some cal s by members for reform of the DS system to deal with procedural delays and new strains on the system, including the growing
volume and complexity of cases and disagreement over the role of the Appel ate Body (AB).
The Dispute Settlement Body (DSB) is a plenary committee of the WTO, which oversees the
panels and adopts the recommendation of a DS panel or Appellate Body (AB) panelAB panel (see below). Panels are composed of three (or five in complex cases) panelists—not citizens of the members involved—chosen through a roster of "well “wel qualified governmental and/or non-governmental individuals" ” maintained by the Secretariat. WTO members must first attempt to settle a dispute through consultations, but if these fail, a member seeking to initiate a dispute may request that a panel examine and report on its complaint. A respondent party is able to block the establishment of a
panel at the DSB once, but if the complainant requests its establishment again at a subsequent meeting of the DSB, a panel is established. At its conclusion, the panel recommends a decision to the DSB that it will wil adopt unless all al parties agree to block the recommendation. The DSU sets out a timeline of approximately one year for the initial resolution of disputes (seesee Figure 5); however,
cases are rarely resolved in this timeframe.
The DSU also provides for AB review of panel reports in the event a panel decision is appealed. The AB AB is composed of seven rotating panelists serving, appointed by the DSB, that serve four-year terms, with the possibility of a one-term reappointment. According to the DSU, appeals are to be limited
to questions of law or legal interpretation developed by the panel in the case (Article 17.6). The AB AB is to make a recommendation, and the DSB is to ratify that recommendation within 120 days of the ratification of the initial panel report, but again, such timely resolution rarely occurs. The United States has raised several issues regarding the practices of the AB and has blocked the
appointments of several judges—for more on the current debate, see "“Proposed Institutional Reforms."
Following the adoption of a panel or appellateappel ate report, the DSB oversees the implementation of the findings. The losing party is then to propose how it is to bring itself into compliance "“within a reasonable period of time"” with the DSB-adopted findings. A reasonable period of time is
determined by mutual agreement with the DSB, among the parties, or through arbitration. If a dispute arises over the manner of implementation, the DSB may form a panel to judge compliance. If a party declines to comply, the parties negotiate over compensation pending full implementation. If there is still stil no agreement, the DSB may authorize retaliation in the amount of the determined cost of the offending party'’s measure to the aggrieved party's economy. There have been some calls for reform of the DS system to deal with the procedural delays and new strains on the system, including the growing volume and complexity of cases.
’s economy. Filing a DS case provides a way for countries to resolve disputes through a legal process and to do so publicly, signaling to domestic and international constituents the need to address outstanding issues. DS procedures can serve as a deterrent for countries considering not abiding
by WTO agreements, and rulings can help build a body of case law to inform countries when they
implement new regulatory regimes or interpret WTO agreements.
That said, WTO agreements and decisions of panels are not self-executing and cannot directly modify U.S. law. If a case is brought against the United States and the panel renders an adverse decision, the United States would be expected to remove the offending measure within a reasonable period of time or face the possibility of either paying compensation to the complaining member or becomingcomplainant
or be subject to sanctions, often in the form of higher tariffs on imports of certain U.S. products.
As of the beginning of October 2019
As of mid-2020, the WTO has initiated 590nearly 600 disputes on behalf of its members and issued more than 350 rulings, with 2018 marking its most active year to date.41DS activity peaking in 2018.48 Nearly two-thirds of WTO members have participated in the DS system. Not all al complaints result in formal panel proceedings; about
48 WT O, “Dispute settlement activity—some figures,” https://www.wto.org/english/tratop_e/dispu_e/dispustats_e.htm.
Congressional Research Service
19
link to page 25 link to page 26
World Trade Organization: Overview and Future Direction
half were resolved during consultations. Complainants have usual y wonhalf were resolved during consultations. The complainants usually win their cases, in large part because they initiate tend to only initiate disputes that they have a highhigher chance of winning. In the words of WTO DGof WTO Director-General (DG) Roberto Azevêdo, the widespread use of the DS system is evidence it "“enjoys tremendous confidence among the membership, who value it as a fair, effective, efficient
mechanism to solve trade problems."42
”49
The United States is an active user of the DS system. Among WTO members, the United States has been a complainant in the most dispute cases since the system was established in 1995, initiating 124 disputes, followed by the EU with 102 disputes.43initiating 124 disputes.50 The two largest targets of complaints initiated by the United States are
China and the EU, which, combined, account for more than one-thirdthird (Figure 6).
Figure 6. WTO Disputes Involving the United States |
![]() |
Source: WTO, https://www.wto.org/english/tratop_e/dispu_e/find_dispu_cases_e.htm Notes: Does not include cases with U.S. |
August 1, 2020.
As a respondent in 155 dispute cases since 1995, the United States has also had the most disputes filed against it by other WTO members, followed by the EU (8587 disputes) and China (44 disputes). The EU is the largest source of disputes filedhas filed the most cases against the United States, followed by Canada, China, South Korea, Brazil, and India. A large number of complaints concern U.S. trade remedies, in particular the
particular methodologies used for calculating and imposing antidumping duties on U.S. imports.
Several pending WTO disputes are of significance to the United States. One involves China's complaints over U.S. and EU failure to grant China market economy status (see "China's Accession and Membership"). Other cases involve challenges These include chal enges
to the tariff measures imposed by the Trump Administration under U.S. trade laws, including Section 201 (safeguards), Section 232 (national security), and Section 301 ("unfair"“unfair” trading practices) (Table 3). Nine WTO members, including China, the EU, Canada, and Mexico, initiated separate complaints at the WTO, based on allegationsal egations that U.S. Section 232 tariffs on steel and aluminum imports are inconsistent with WTO rules. In May 2019, the cases involving Canada and Mexico were withdrawn, due to a negotiated settlement with the United States.44 51
Consultations were unsuccessful in resolving the disputes, and panels have been established and composed in the seven remaining casesremaining disputes and panel decisions are expected in late 2020. Most countries notified their consultation requestscomplaints pursuant to the Agreement on Safeguards, though some countries also allegealso al ege that U.S. tariff measures and related exemptions are contrary
49 WT O, “WT O disputes reach 500 mark,” November 10, 2015, https://www.wto.org/english/news_e/news15_e/ds500rfc_10nov15_e.htm.
50 Dispute count as of early August 2020. WT O, https://www.wto.org/english/tratop_e/dispu_e/find_dispu_cases_e.htm.
51 T he three countries announced a joint monitoring and consultation system to replace the tariffs. See https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/may/united-states-announces-deal-canada-and.
Congressional Research Service
20
link to page 30 link to page 30 World Trade Organization: Overview and Future Direction
that U.S. tariff measures and related exemptions are contrary to U.S. obligations under several provisions of the GATT. Several other WTO members have
requested to join the disputes as third parties.
On July 16,
In 2018, the United States filed its own WTO complaints over retaliatory tariffs imposed by five six
countries (Canada, China, EU, Mexico, Russia, and Turkey) in response to U.S. actions, and in late August, it.52 Most recently, in July 2019 the United States filed a similar case against India. The cases are in the panel stage (except for resolved cases with Canada and Mexico)case against Russia.45 Most recently, the United States filed a case against India in July 2019 based on its retaliation. The United States has invoked the the so-called national security exception (GATT Article XXI) in defense of its tariffs (see "“Key Exceptions
under GATT/WTO”"), and states that the tariffs are not safeguards as claimed by other countries. By early 2019, the majority of the disputes had entered the panel phase; the United States requested a panel in its case with India in September.
Table 3. WTO Challenges to Tariff Measures Imposed by Trump Administration
Under U.S. Trade Laws
Complainant
Dispute
Issue
country
number
Date Filed / Latest Status
SECTION 201
U.S. safeguard measure on
South Korea
DS545 5/14/18 consultations requested;
crystalline silicon photovoltaic
9/26/18 panel established but not yet composed
products
China
DS562 8/14/18 consultations requested
10/24/19 panel composed
U.S. safeguard measure on
South Korea
DS546 5/14/18 consultations requested;
large residential washers
7/01/19 panel composed
imports SECTION 232 U.S. tariffs on steel and
China
DS544 4/05/18 consultations requested;
aluminum imports
01/25/19 panel composed
India
DS547 5/18/18 consultations requested;
01/25/19 panel composed
EU
DS548 6/01/18 consultations requested;
01/25/19 panel composed
Canada
DS550 6/01/18 consultations requested;
05/23/19 settled or terminated (withdrawn, mutual yUnder U.S. Trade Laws
Issue |
Complainant country |
Dispute number |
Date Filed / Status |
|
SECTION 201 |
||||
U.S. safeguard measure on crystalline silicon photovoltaic products |
South Korea |
DS545 |
5/14/18 consultations requested; 9/26/18 panel established |
|
China |
DS562 |
8/14/18 consultations requested 8/15/19 panel established |
||
U.S. safeguard measure on large residential washers imports |
South Korea |
DS546 |
5/14/18 consultations requested; 9/26/18 panel established; 7/01/19 panel composed |
|
SECTION 232 |
||||
U.S. tariffs on steel and aluminum imports |
China |
DS544 |
4/05/18 consultations requested; 11/21/18 panel established; 01/25/19 panel composed |
|
India |
DS547 |
5/18/18 consultations requested; 12/4/18 panel established; 01/25/19 panel composed |
||
EU |
DS548 |
6/01/18 consultations requested; 11/21/18 panel established; 01/25/19 panel composed |
||
Canada |
DS550 |
6/01/18 consultations requested; 11/21/18 panel established; 05/23/19 settled or terminated (withdrawn, mutually agreed solution) |
||
Mexico |
DS551 |
6/05/18 consultations requested; 11/21/18 panel established; agreed solution)
Mexico
DS551 6/05/18 consultations requested;
05/28/19 settled or terminated (withdrawn, | ||
Norway |
DS552 |
6/12/18 consultations requested; 11/21/18 panel established; 01/25/19 panel composed |
||
Russia |
DS554 |
6/29/18 consultations requested; 11/21/18 panel established; 01/25/19 panel composed |
||
Switzerland |
DS556 |
7/09/18 consultations requested; 12/4/18 panel established; 01/25/19 panel composed |
||
Turkey |
DS564 |
8/15/18 consultations requested; 11/21/18 panel established; 01/25/19 panel composed |
||
SECTION 301 |
||||
U.S. tariffs on certain Chinese imports |
China |
DS543 |
4/04/18 consultations requested; 1/28/19 panel established; 06/03/19 panel composed |
|
China |
DS565 |
8/23/18 consultations requested |
Source: WTO, https://www.wto.org/english/tratop_e/dispu_e/dispu_status_e.htm.
. Note: Status as of October 1, 2019.
Annex 3 sets out the procedures for the regular trade policy reviews that are conducted by the Secretariat to report on the trade policies of the membershipmembers. These reviews are carried out by the Trade Policy Review Body (TPRB) and are conducted periodicallyperiodical y with the largest economies (United States, EU, Japan, and China) evaluated every three years, the next 16 largest economies every five years, and remaining economies every seven years. These reviews are meant to increase
transparency of a country'’s trade policy and enable a multilateral assessment of the effect of policies on the trading system. TheseThe reviews also allowal ow each member country to question specific
practices of other members, and may serve as a forum to flag, and possibly avoid, future disputes.
The most recent trade policy review of China occurred in July 2018.4653 During the review members noted and commended some recent initiatives of China to open market access and liberalize liberalize its foreign investment regime. Several concerns were also raised, including "“the preponderant role of the State in general, and of state-owned enterprises in particular,"” and "China'“China’s support and subsidy policies and local content requirements, including those that may be part of the 2025 [Made in China] plan."47
”54 2018 Trade Policy Review of the United States
The most recent trade policy review ”56 While |
Most WTO agreements in force have been negotiated on a multilateral basis, meaning the entire body of WTO members subscribes to them. By contrast, plurilateral agreements are negotiated by a subset of WTO members and often focus on a specific sector. A handful of such agreements
supplement the main WTO agreements discussed previously.52
59
Within the WTO, members have two ways to negotiate on a plurilateral basis, also known as "“variable geometry."53”60 A group of countries can negotiate with one another provided that the group extends the benefits to all al other WTO members on an MFN basis—the foundational nondiscrimination principle of the GATT/WTO. Because the benefits of the agreement are to be
shared among all al WTO members and not just the participants, the negotiating group likely would include those members forming a critical mass of world trade in the product or sector covered by the negotiation in order to avoid the problem of free riders—those countries that receive trade benefits without committing to liberalization. An example of this type of plurilateral agreement granting unconditional MFN is the Information Technology Agreement (ITA), in which tariffs on
selected information technology goods were lowered to zero, as negotiated by WTO members
comprising more than 90% of world trade in these goods (see below).
A second type of WTO plurilateral is the non-MFN agreement, often referred to as "“conditional-MFN." ”
In this type, participants undertake additional obligations among themselves, but do not extend the benefits to other WTO members, unless they directly participate in the agreement. Also known as the "club"“club” approach, non-MFN plurilaterals allow for willingal ow for wil ing members to address policy issues not covered by WTO disciplines. However, these types of agreements require a waiver from the entire WTO membership to commence negotiations. Some countries are reluctant even to allow to al ow other countries to
negotiate for fear of being left out, even while not being ready to commit themselves to new disciplines. Yet, according to one commentator, these members are "“simply outsmarting themselves"
themselves” by encouraging more ambitious members to take negotiations out of the WTO.
The Government Procurement Agreement (GPA) is an early example of a plurilateral agreement
with limited WTO membership—first developed as a code in the 1979 Tokyo Round. As of the end of 2019, 48 WTO members (including the 28 EU member countries and United States) participate in the GPA; non-GPA signatories do not enjoy rights under the GPA.54 The GPA 61 The GPA
57 “Concluding Remarks of the Chairperson, Ambassador Sunanta Kangvalkulkij” T rade Policy Review Body, December 19, 2018. https://www.wto.org/english/tratop_e/tpr_e/tp482_crc_e.htm.
58 “U.S. Criticized at WT O,” Washington Trade Daily, December 18, 2018. 59 One example is the Agreement on T rade in Civil Aircraft , which entered into force in 1980 between 32 WT O members, including the United States. T he agreement eliminates import duties on all aircraft, other than military aircraft, and other specified products. See https://www.wto.org/english/tratop_e/civair_e/civair_e.htm.
60 Peter Sutherland et al., “T he Future of the WT O: Addressing institutional challenges in the new millennium,” World T rade Organization, 2004, p. 64. 61 In November 2018, WT O members approved in principle the UK’s market access offer to continue GPA membership as a separate member, following its pending withdrawal from the EU. See WT O, https://www.wto.org/
Congressional Research Service
23
World Trade Organization: Overview and Future Direction
provides market access for various nondefense government projects to contractors of its signatories.5562 Each member specifies government entities and goods and services (with thresholds and limitations) that are open to procurement bids by foreign firms of the other GPA members. For example, the U.S. GPA market access schedules of commitments cover 85 federal-level
entities and voluntary commitments by 37 states.56
63
Negotiations to expand the GPA were concluded in March 2012, and a revised GPA entered into force on April 6, 2014. Several countries, including China—which committed to pursuing GPA participation in its 2001 WTO accession process—are in long-pending negotiations to accede to
the GPA. Australia wasthe GPA. South Korea, Moldova, and Ukraine were the latest WTO membersmember to join the revised GPA in 2016May 2019. According to estimates by the U.S. Government Accountability Office (GAO), from 2008 to 2012, 8% of total global government expenditures, and approximately one-third of U.S. federal government
procurement, was covered by the GPA or similar commitments in U.S. FTAs.57
Unlike
Unlike the GPA, the Information Technology Agreement (ITA) is a plurilateral agreement that is applied on an unconditional MFN basis. In other words, all al WTO members benefit from the tariff reductions enacted by parties to the ITA regardless of their own participation.58 Originally 65 Original y concluded in 1996 by a subset of WTO members, the ITA provides tariff-free treatment for covered IT products; however, the agreement does not cover services or digital products like software. In December 2015, a group of 51 WTO members, including the United States,
negotiated an expanded agreement to cover an additional 201 products and technologies, valued at over $1 trillion tril ion in annual global exports.5966 Members committed to reduce the majority of tariffs by 2019. In June 2016, the United States initiated the ITA tariff cuts. China began its cuts in mid-
September 2016, with plans to reduce tariffs over five to seven years.
Trade Facilitation Agreement with plans to reduce tariffs over five to seven years. ITA members are expected to review the agreement's scope in 2018 to determine if additional product coverage is needed.
Impact of the WTO Trade Facilitation Agreement According to WTO estimates, global export gains from full implementation of the TFA could range from $750 billion to more than $3.6 trillion dollars per year and, for the 2015-2030 time period, could increase world export growth by 2.7% a year and world GDP growth by over 0.5% a year. The Organisation for Economic Co-operation and Development (OECD) estimates that TFA implementation could lower the costs of doing trade as much as 12.5%-17.5% globally. |
The Trade Facilitation Agreement (TFA) is the newest WTO multilateral trade agreement, entering into force on February 22, 2017, and perhaps the lasting legacy of the Doha Round, since
it is the only major concluded component of the negotiations.6067 The TFA aims to address multiple trade barriers confronted by exporters and importers and reduce trade costs by streamlining, modernizing, and speeding up the customs processes for cross-border trade, as well wel as making it more transparent. Some analysts view the TFA as evidence that achieving new multilateral agreements is possible and that the design, including special and differential treatment provisions,
could serve as a template for future agreements.
english/news_e/news18_e/gpro_28nov18_e.htm.
62 For more information on the GPA, see https://www.wto.org/english/tratop_e/gproc_e/gp_gpa_e.htm. 63 For the U.S. GPA schedule, see https://www.wto.org/english/tratop_e/gproc_e/gp_app_agree_e.htm. 64 U.S. GAO, United States Reported Opening More Opportunities to Foreign Firms T han Other Countries, but Bett er Data Are Needed, GAO-17-168, February 9, 2017, p. 10. Also, see CRS In Focus IF11580, U.S. Governm ent Procurem ent and International Trade, by Andres B. Schwarzenberg.
65 For more information on the ITA, see https://www.wto.org/english/tratop_e/inftec_e/inftec_e.htm and https://www.wto.org/english/tratop_e/inftec_e/itaintro_e.htm.
66 UST R, “U.S. and WT O Partners Announce Final Agreement on Landmark Expansion of Information T echnology Agreement,” December 2015, https://go.usa.gov/xPftt. 67 See CRS Report R44777, WTO Trade Facilitation Agreement, by Rachel F. Fefer and Vivian C. Jones.
Congressional Research Service
24
World Trade Organization: Overview and Future Direction
The TFA has three sections. The first is the heart of the agreement, containing the main
Impact of the WTO Trade Facilitation
provisions, of which many, but not allal , are
Agreement
, are binding and enforceable. Mandatory articles include requiring members to publish information, including publishing certain items online; issue advance rulings in a reasonable amount of time; and provide for appeals or reviews, if requested.
The second section provides for SDT for developing country and LDC members, allowing them more time and assistance to implement the binding and enforceable. Mandatory articles
According to WTO estimates, global export gains from
include requiring members to publish
ful implementation of the TFA could range from $750
information, including publishing certain
bil ion to more than $3.6 tril ion dol ars per year and, for the 2015-2030 time period, could increase world
items online; issue advance rulings in a
export growth by 2.7% a year and world GDP growth
reasonable amount of time; and provide for
by over 0.5% a year.
appeals or reviews, if requested. The second
The Organisation for Economic Co-operation and
section provides for SDT for developing
Development (OECD) estimates that TFA
country and LDC members, al owing them
implementation could lower the costs of doing trade as
more time and assistance to implement the
much as 12.5%-17.5% global y.
agreement. The TFA is the first WTO agreement in which members determine their own implementation schedules and in which progress in implementation is explicitly linked to technical and financial capacityc apacity. The TFA requires that "“donor members,"” including the United States, provide the needed capacity building
and support. FinallyFinal y, the third section sets institutional arrangements for administering the TFA.
Under WTO agreements, members generallygeneral y cannot discriminate among trading partners, though specific market access commitments can vary significantly by agreement and by member. WTO
rules permit some broad exceptions, which allowal ow members to adopt trade policies and practices that may be inconsistent with WTO disciplines and principles such as MFN treatment, granting special preferences to certain countries, and restricting trade in certain sectors, provided certain
conditions are met. Some of the key exceptions follow.
General exceptions. GATT Article XX grants WTO members the right to take certain measures necessary to protect human, animal, or plant life or health, or to conserve exhaustible natural resources, among other aims. The measures, however, must not entail "arbitrary" or "unjustifiable" discrimination between countries where the same conditions prevail, or serve as "“arbitrary” or “unjustifiable” discrimination between countries, or serve as “disguised restriction on
international trade."” GATS Article XIV provides for similar exceptions for trade in services.
National security exception. GATT Article XXI protects the right of members to take any action they consider "considered “necessary for the protection of essential national security interests",” as related to (i)
fissionable materials; (iii ) traffic in arms, ammunition, and implements of war, and such traffic in other goods and materials carried out to supply a military establishment; and (iiii i) taken in time of war or other emergency in international relations. Similar exceptions relate to trade in services
(GATS Article XIV bis) and intellectual intel ectual property rights (TRIPS Article 73).
More favorable treatment to developing countries. The so-called "treatment to developing countries. The so-cal ed “enabling clause"” of the GATT—calledcal ed the "“Decision on Differential and More Favorable Treatment, Reciprocity and Fuller Participation of Developing Countries"” of 1979—enables developed country members to grant differential and more favorable treatment to developing countries that is not extended to
other members. For example, this permits granting unilateral and nonreciprocal trade preferences to developing countries under special programs, such as the U.S. Generalized System of
Preferences (GSP), and also relates to regional trade agreements outside the WTO (see below).
Exceptions for regional trade
Congressional Research Service
25
link to page 32 World Trade Organization: Overview and Future Direction
Exceptions for regional trade agreements (RTAs). WTO countries are permitted to depart from the MFN principle and grant each other more favorable treatment in trade agreements outside the WTO, provided certain conditions are met. Three sets of rules generallygeneral y apply. GATT Article XXIV applies to goods trade, and allowsal ows the formation of free trade areas and customs unions (areas with common external tariffs). These provisions require that RTAs be notified to the other WTO members, cover "substantially all trade,"“substantial y al trade,” and do not effectively raise barriers on imports
from third parties. GATS Article V allowsal ows for economic integration agreements related to services trade, provided they entail "“substantial sectoral coverage,"” eliminate "substantially all “substantial y al discrimination,"” and do not "“raise the overall overal level of barriers to trade in services"” on members outside the agreement. Paragraph 2(c) of the "“enabling clause,"” which deals with special and differential treatment, allowsal ows for RTAs among developing countries in goods trade, based on the "
“mutual reduction or elimination of tariffs."” RTA provisions in the GATS also allow greater flexibility al ow greater
flexibility in sectoral coverage within services agreements that include developing countries.
There are currently 164 members of the WTO. Another 22 countries are seeking to become members.6168 Joining the WTO means taking on the commitments and obligations of all the multilateral al the multilateral agreements. Governments are motivated to join not just to expand access to foreign
markets but also to spur domestic economic reforms, help transition to market economies, and promote the rule of law.6269 While any state or customs territory fully in control of its trade policy may become a WTO member, a lengthy process of accession involves a series of documentation
of a country'’s trade regime and market access negotiation requirements (seesee Figure 7).63
70
For example, Kazakhstan joined the WTO on November 30, 2015, after a 20-year process. Afghanistan became the 164th164th WTO member on July 29, 2016, after nearly 12 years of negotiating its accession terms. Other countries have initiated the process but face delays. Iran first applied for membership in 1996 and, while it submitted its Memorandum on the Foreign
Trade Regime in 2009 (a prerequisite for negotiating an accession package), Iran has not begun
the bilateral negotiation process, and the United States is unlikely to support its accession.64
71
As the WTO generallygeneral y operates by member consensus, any single member could block the accession of a prospective new member. As part of the process, a prospective member must satisfy specific market access conditions of other WTO members by negotiating on a bilateral basis. The United States has been a central arbiter of the accession process for countries like China (joined in 2001, see below), Vietnam (2007), and Russia (2012), with which permanent
normal trade relations had to be established concurrently under U.S. law for the United States to
receive the full benefits of their membership.
China formallyformal y joined the WTO in December 2001.6572 China has emerged as a major player in the global economy, as the fastest-growing economy, largest merchandise exporter, and second-
largest merchandise importer worldwide. China'’s accession into the WTO on commercially commercial y meaningful terms was a major U.S. trade objective during the late 1990s.66 Entry into the WTO was viewed by many as an important catalyst for spurring additional economic and trade reforms and the opening of China'’s economy in a market, rules-based direction.67 These73 These reforms have made China an increasingly significant market for U.S. exporters, a central factor in global supply
chains, and a major source of low-cost goods for U.S. consumers. At the same time, China has yet toto fully transitiontransition to a market economy and the government continues continues to intervene in many parts
of the economyeconomy, which has created a growing debate over the role of the WTO in both respects.
Negotiations for China'’s accession to the GATT and then the WTO began in 1986 and took more than 15 years to complete. During WTO negotiations, China sought to enter the WTO as a developing country, while U.S. trade officials insisted that China'’s entry into the WTO had to be based on "commercially“commercial y meaningful terms" ” that would require China to significantly reduce trade and investment barriers within a relatively short time. In the end, a compromise was reached that required China to make immediate and
extensive reductions in various trade and investment barriers, while allowingal owing it to maintain some level of
protection (or a transitional period of protection) for certain sensitive sectors (see text box).68
|
According to USTR, afteral owed).
After joining the WTO, China began to implement economic reforms that facilitated its transition toward a market economy and increased its openness to trade and foreign direct investment (FDI). China also generallygeneral y implemented its tariff cuts on schedule. However, by 2006, U.S. officials and companies noted evidence of some trends toward a more restrictive trade regime and
more state intervention in the economy.7075 In particular, observers have voiced concern about various Chinese industrial policies, such as those that foster indigenous innovation based on forced technology transfer, domestic subsidies, and IP theft. Some stakeholders have expressed concerns over China'’s mixed record of implementing certain WTO obligations and asserted that,
in some cases, China appeared to be abiding by the letter but not the "spirit"“spirit” of the WTO.71
76
The United States and other WTO members have used dispute settlementset lement (DS) procedures on a number of occasions to address China's alleged’s al eged noncompliance with certain WTO commitments. As a respondent, China accounts for about 12% of total WTO disputes since 2001. The United
States has brought 23 dispute cases against China at the WTO on issues, including IPR protection, subsidies, and discriminatory industrial policies, and has largely prevailed in most cases. Though some issues remain contested, China has largely complied with most WTO rulings.7277 China has also increasingly used DS to confront what it views as discriminatory measures; to date, it has
brought 16 cases against the United States (as of October 2019).
August 2020).
More broadly, the Trump Administration has questioned whether WTO rules are sufficient to address the challengeschal enges that China'’s economy presents. USTR Robert Lighthizer expressed this view in remarks in September 2017: "“The sheer scale of their coordinated efforts to develop their
economy, to subsidize, to create national champions, to force technology transfer, and to distort
75 See UST R, 2016 Report to Congress on China’s WTO Compliance, January 2017, and the annual UST R National Trade Estim ate Reports for specific examples. 76 For example, see Written testimony by the U.S.-China Business Council, “China’s Implementation of its World T rade Organization Commitments,” Submitted in response to the Office of the U.S. T rade Representative’s Request for Comments and Notice of Public Hearing Concerning China’s Compliance with WT O Commitments, September 21, 2016; and Atkinson et al., Stopping China’s Mercantilism : A Doctrine of Constructive, Alliance-Backed Confrontation, Information Technology and Innovation Foundation, March 16, 2017.
77 James Bacchus, Simon Lester, and Huan Zhu, “Disciplining China at the WT O,” CAT O Institute, Policy Analysis No. 856, November 15, 2018.
Congressional Research Service
28
link to page 56 link to page 56 link to page 56 World Trade Organization: Overview and Future Direction
economy, to subsidize, to create national champions, to force technology transfer, and to distort markets in China and throughout the world is a threat to the world trading system that is unprecedented. Unfortunately, the World Trade Organization is not equipped to deal with this problem."73”78 USTR views efforts to resolve concerns over Chinese trade practices to date as limited in effectiveness, including through WTO DS, as well wel as recent proposals by WTO members to craft new rules and WTO reforms.7479 In its latest annual report to Congress on China's ’s
WTO compliance for 20182019, USTR stated:
[The WTO DS] mechanism is not designed to address a trade regime that broadly conflicts with the fundamental underpinnings of the WTO system. No amount of WTO DS by other WTO members would be sufficient to remedy this systemic problem. Indeed, many of the most harmful of the most harmful policies and practices being pursued by China are China are not even directly disciplined by WTO rules.75
Another related concern some have is China'80
Another related U.S. concern is China’s claim that it is a "“developing country"” under the WTO, and, in particular, implications for concessions under ongoing and future WTO negotiations.76 81 Through developing country status, which countries self-designate, countries are entitled to certain rights under special and differential treatment (SDT), among other provisions in WTO
agreements (for more discussion, see "“Treatment of Developing Countries"” and text box). While it is unclear the extent of SDT provisions China has sought in current ongoing negotiations, China is a part of the coalition group of Asian developing members at the WTO and has claimed to be a developing country in various fora.7782 In the view of the Trump Administration, "“the United States has never accepted China'’s claim to developing-country status,"” and the WTO should change its approach to affording flexibilities based on developing country status.78 (See "Treatment of Developing Countries"). Chinese officials have asserted that despite being the world'83 (See “Treatment of
Developing Countries”.) Some Members of Congress also view this issue as a priority for WTO reform in order to address what they perceive as China’s “predatory trade practices and abuse.”84 Chinese officials assert that despite being the world’s second-largest economy, China remains a
s second-largest economy, China remains a developing country, due to its relatively low GDP per capita and other economic challenges.79
chal enges.85
Concerns over China'’s trade actions despite its WTO commitments have led the Trump Administration to increase the use of unilateral mechanisms outside the WTO that in its view more effectively address Chinese "“unfair trade practices;"” the recent Section 301 investigation of Chinese IPR and technology transfer practices and resulting imposition of tariffs is evidence of this strategy.80
78 “U.S. T rade Policy Priorities: Robert Lighthizer, United States T rade Representative,” September 18, 2017, CSIS, https://www.csis.org/events/us-trade-policy-priorities-robert -lighthizer-united-states-trade-representative.
79 See UST R, 2019 Report to Congress on China’s WTO Compliance, March 2020. 80 Ibid, pp. 14-15. 81 See “U.S. Statement at the T rade Policy Review of the People’s Republic of China,” Statement as delivered by Ambassador Dennis C. Shea on Behalf of the United States of America, July 11, 2018, Geneva.
82 In its June 2018 white paper “China and the World T rade Organization,” which reflects on its compliance with WT O obligations and support for the multilateral trading system, China called itself the “largest developing country in the world.” See http://www.xinhuanet.com/english/2018-06/28/c_137286993.htm. 83 T he White House, “Memorandum on Reforming Developing-Country Status in the World T rade Organization,” July 26, 2019. 84 Rep. Darin LaHood and Rep. Anthony Gonzalez, “Reforming China’s unfair practices at the WT O will level the global playing field,” Op-ed, Washington Examiner, August 4, 2020. 85 “China remains largest developing country: economist,” Xinhua, April 15, 2018. As per the World Bank, China is considered a developed country, though it is often distinguished as an “ emerging market.” However, based on World Bank classifications of countries by income groupings, using gross national income (GNI) per capita, China is considered an upper-middle income economy. See World Bank, https://www.worldbank.org/en/country/china/overview and https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups.
Congressional Research Service
29
link to page 50 link to page 50 World Trade Organization: Overview and Future Direction
this strategy.86 Prior to the establishment of the WTO, the United States resorted to Section 301 relatively frequently, in particular due to concerns that the GATT lacked an effective DS system.81 87 When the United States joined the WTO in 1995, it agreed to use the DS mechanism rather than act unilateral yact unilaterally; many analysts contend that the United States has violated its WTO obligations by imposing tariffs against China under Section 301. Following its investigation, the United States also initiated a WTO DS case against China's "’s “discriminatory technology licensing" in March ” in 2018.
Subsequently, China filed its own complaints at the WTO over U.S. tariff actions (see above).
The United States has pursued cooperation to some extent with other countries with similar
concerns over certain Chinese trade practicesChinese non-market policies and practices, and the need to clarify and improve WTO rules on industrial subsidies and SOEsstate-owned enterprises (SOEs) in particular.8288 In December 2017, the United States, EU, and JapanDecember 2017, USTR Lighthizer, the European Commissioner for Trade Cecelia Malmström, and Japan's Minister of the Economy, Trade and Industry Hiroshige Seko announced new trilateral efforts to cooperate on issues related to government-supported excess capacity, unfair competition caused by market-distorting subsidies and SOEs, forced technology transfer, and local content requirements.83 China, while not specifically named, is widely believed as the intended target and motivation of the coordinated action.89 The three officials have made advances toward a draft text on stronger rules on industrial subsidies;
however, talks appear to have make limited progress since mid-2019.90 (See “Competition with
SOEs and Non-Market Practices”.)
“Non-market oriented”three officials continued talks in 2018 and 2019, issuing a scoping paper on stronger rules on industrial subsidies and joint statements on technology transfer and "market-oriented conditions," and signaled progress toward a draft text on subsidies rules.84 Talks appear, however, to have make limited progress since mid-2019. Some experts have questioned whether recent U.S. tariff actions might undermine efforts to coordinate further action to address these challenges (see "Selected Challenges and Issues for Congress").
"Non-market oriented" policies and practices of China are a central driver of recent efforts. A related WTO dispute involving China was poised to have significant implications for the treatment of China'’s economy under WTO rules, in particular debate over the terms of China's "’s “nonmarket economy"economy” (NME) status under its WTO accession protocol.8591 USTR Lighthizer described the case as "“the most serious litigation matter we have at the WTO"” and that a decision in favor of China would be "cataclysmic"“cataclysmic” for the WTO.8692 Both the United States and EU continue to treat
China as a nonmarket economy in antidumping and countervailing duty proceedings, a point of contention for China. Under its accession, China agreed to allow otheral ow WTO members to continue to use alternative methodologies, such as surrogate countries, for assessing prices and costs on products subject to antidumping measures. This concession was a result of WTO members'AD measures, amid their concerns that distortions in the Chinese economy caused by government intervention result in Chinese prices that do not reflect market forces, making them poorly suited to determining dumping margins. China contends that language in. China contends
that its WTO accession protocol requires all WTO al members to terminate their use of the alternative methodology by December 11, 2016. The NME distinction is important to China as it has often resulted in higher AD margins on Chinese exports; moreover, a significant share of Chinese
86 CRS In Focus IF11346, Section 301 of the Trade Act of 1974, by Andres B. Schwarzenberg. 87 Chad P. Bown, “Rogue 301: T rump to Dust Off Another Outdated US T rade Laws,” Peterson Institute for International Economics, August 3, 2017, https://piie.com/blogs/trade-investment-policy-watch/rogue-301-trump-dust-another-outdated-us-trade-law. 88 Some experts suggest that the United States should pursue a comprehensive, multilateral case at the WT O with a broad coalition of countries sharing concerns about certain Chinese practices that either violate one or more specific WT O commitments or that “nullify or impair” a benefit provided to WT O members (known as a non -violation claim under Article XXIII of the GAT T ). See U.S.-China Economic and Security Review Commission, Hearing on U.S. Tools to Address Chinese Market Distortions, written testimony of Jennifer Hillman, June 8, 2018.
89 UST R, “Joint Statement by the United States, European Unio n and Japan at MC11,” December 11, 2017. 90 UST R, “Joint Statement on T rilateral Meeting of the T rade Ministers of the United States, Japan, and the European
Union,” press release, May 31, 2018; and “Joint Statement of the Trilateral Meeting of the T rade Ministers,” press release, January 9, 2019 and May 23, 2019.
91 Section 301 through 310 of the T rade Act of 1974, commonly called “Section 301,” is one of the principal statutory means by which the United States addresses “unfair” foreign trade barriers to U.S. exports and enforces U.S. rights under trade agreements. Section 301 applies to foreign acts, policies, and practices that UST R determines either violates, or is inconsistent with, a trade agreement; or is “unjustifiable” and burdens or restricts U.S. trade. 92 David Lawder, “U.S. formally opposes China market economy status at the WT O,” Reuters, November 30, 2017.
Congressional Research Service
30
World Trade Organization: Overview and Future Direction
exports is subject to trade remedies.93methodology by December 11, 2016, including the United States, which has classified China as a NME for trade remedy cases since 1981. The NME distinction is important to China because it has often resulted in higher antidumping margins on Chinese exports; moreover, a significant share of Chinese exports is subject to trade remedies, namely AD duties.87 The United States and the EU have argued that the WTO language is vague and did not automaticallyautomatical y obligate them to extend market economy status
(MES) to China because it is still stil not a market economy.88
On December 12,94
In December 2016, China requested consultations under WTO DS with the United States and EU over the failure to grant China MES. In April 2017, a panel was established in the EU case, and in . In November 2017, the United States formallyformal y submitted arguments as a third party in support of the EU.EU; China'’s case involving the United States did not progress. The EU-China panel said it expected to issue its final report during the second quarter of 2019.89 On May 7,95 In May 2019, however,
China requested to suspend its dispute with the EU before the findings were issued.90
The latestThe last WTO Ministerial Conference (MC11) took place in December 10-13, 2017, in Buenos Aires, Argentina. Argentina. The Ministerial generally convenes every two years to make decisions and announce progress on multilateral trade agreements. After countries were unable to complete the Doha Round (see text box below), many
questioned what could effectively be achieved at MC11. questioned what could effectively be achieved at the 11th Ministerial in 2017. Members have made some progress in recent years, reaching the Trade Facilitation Agreement in 2013, followed by a small package of deals in 2015 concerning agriculture and rules for LDCs. Still, they remain sharply divided over how to prioritize both unresolved and new issues on the agenda, and, more fundamentally, how to conduct negotiations to better facilitate successful outcomes.
WTO Director-General Azevêdo had tempered expectations for major negotiated outcomes or announcements at the 11th Ministerial, acknowledging that "members'“members’ positions continue to diverge significantly on the substantial issues."91”97 These differences were perhaps most apparent by the inability of WTO members to reach consensus over a draft Ministerial Declaration, largely due to staunch disagreements over including references to the mandate of the Doha Round
(see text box).9298 Instead the Ministerial became primarily an opportunity for members to take
stock of ongoing talks and further define priority work areas.
Although WTO members had worked intensively to build consensus over proposals in several areas, including reducing fisheries subsidies, a permanent solution to public stockholding for food security, domestic services regulations, and e-commerce. Some members pushed for new initiatives in areas such as investment facilitation; others like India advocated for a greater focus on trade facilitation in services.93 The U.S. proposal to improve overall transparency at the WTO, with penalties for countries that fail to comply with notification requirements, did not garner enough support to be discussed extensively at the Ministerial.94
The 11th Ministerial
MC11 did not result in major breakthroughs. WTO members committed to intensify negotiations to reduce fisheries subsidies negotiations, ", “with a view to adopting"” an agreement by the next Ministerial; the United States has supported these efforts. A joint statement was issued by 60 members in support of advancing multilateral negotiations on domestic regulations in services. Subsets of WTO members also issued statements committing to new work programs or open-ended talks for
interested parties to potentiallypotential y conclude plurilateral agreements in areas, including the following:95
Of these, the United States signed on to the declaration in support of e-commerce.
The lack of concrete multilateral outcomes at the 11th Ministerial98 WTO members; and
93 Chad P. Bown, “ Should the United States Recognize China as a Market Economy?” Peterson Institute for International Economics, December 2016.
94 T he expectation back in 2001 was that China would transition to a market economy within 15 years. 95 WT O, “DS516: European Union – Measures Related to Price Comparison Methodologies,” https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds516_e.htm.
96 Some speculate that this action was in anticipation of some findings that were not favorable to China. T om Miles, “China pulls WT O suit over claim to be a market economy,” Reuters, June 17, 2019. 97 WT O, “DG Azevêdo details process for MC11 as preparations enter final stages,” November 28, 2017, https://www.wto.org/english/news_e/spra_e/spra201_e.htm.
98 “MC11 expected to end without Ministerial declaration as U.S., India clash over language on development,” Inside U.S. Trade, December 13, 2017.
99 Number of countries in the talks reflects current participants, which expanded since the original announcemen ts. WT O, “New initiatives on electronic commerce, investment facilitation and MSMEs,” December 13, 2017, https://www.wto.org/english/news_e/news17_e/minis_13dec17_e.htm.
Congressional Research Service
31
World Trade Organization: Overview and Future Direction
Micro, small and medium-sized enterprises: among 90 WTO members.
The lack of concrete multilateral outcomes at MC11 was a reminder of the continued resistance of some countries to a new agenda outside of the original 2001 Doha mandate. In the view of EU
Trade Commissioner Cecilia Malmström, the Ministerial " “laid bare the deficiencies of the negotiating function at the WTO"” and that "“members are systematicallysystematical y being blocked from addressing the pressing realities of global trade."” Malmström blamed the lack of progress on "“procedural excuses and vetoes"” and "“cynical hostage taking."96”100 Some developing country members, including India, attempted to block multilateral progress in a range of areas—including the renewal of the decades-old moratorium on e-commerce customs duties—absent absent
more progress on Doha issues, such as agricultural stockholding for food security. Such "“hostage-taking"taking” tactics, widely acknowledged to have hindered progress in the Doha Round, further
highlight the difficulty of achieving future consensus among all al 164 members.
In contrast, the United States general y164 members.
While the United States provided input and signaled support for select proposals, the overall perception of some observers was a lack of U.S. leadership in the Ministerial discussions.97 Consistent with the Trump Administration's "America First" trade policy, the U.S. stated objective for the Ministerial was broadly to "advocate for U.S. economic and trade interests, including WTO institutional reform and market-based, fair trade policies."98 Several observers were relieved when USTR Lighthizer acknowledged in Ministerial remarks that the WTO plays an important role, even as he outlined key criticisms. The United States viewed the Ministerial outcome positively—that it signaled "“the impasse at the WTO was broken,"” paving the way for like-minded countries to pursue new work in other areas.99101 USTR expressed U.S. support in particular for forthcoming work on e-commerce, scientific standards for agriculture, and disciplines on fisheries subsidies.
What Happened to the Doha Round
The Doha Round launched in November 2001, but after nearly two decades of negotiations, members
We recognize that many Members reaffirm
Put simply, Procedural rigidities Countries have disagreed about how to learn best from |
While WTO members did not announce any negotiated outcomes at the 11th Ministerial meeting, several countries committed“modernize” the WT O.
100 European Commission, “EU Statement at the Heads of Delegations meeting,” Buenos Aires, Argentina, December 13, 2017, http://trade.ec.europa.eu/doclib/docs/2017/december/tradoc_156464.pdf. 101 UST R, “UST R Robert Lighthizer Statement on the Conclusion of the WT O Ministerial Conference,” press release, December 2017.
Congressional Research Service
32
link to page 42 link to page 42 World Trade Organization: Overview and Future Direction
Outlook for MC12, 2021 The Ministerial general y convenes every two years to make decisions and announce progress on
multilateral trade agreements. With Kazakhstan as the host for MC12, members scheduled the Ministerial for June 2020 in the expectation of more accommodating weather. Following the mixed results of MC11, the United States and other WTO members had hoped MC12 would be an action-forcing event to conclude key negotiations and make progress on multiple initiatives, demonstrating the value of the WTO. MC12 was also to serve as a critical forum for taking stock
of various WTO reform proposals and the crisis in the DS system.
Due to the COVID-19 pandemic, MC12 was postponed to 2021.102 During COVID-19, some WTO activities have continued virtual y, including General Council meetings, and some in person
as wel , as limited staff returned to offices in May. But several negotiations stal ed as members reevaluate whether it is viable and appropriate for talks to be conducted virtual y. The strategic direction for MC12 wil be shaped by new leadership of the WTO Secretariat, following DG Azevêdo’s announcement that he wil resign at the end of August 2020, a year before his term’s end. Azevêdo resigned early to prevent the DG selection from coinciding with MC12, potential y
diverting political attention from achieving critical outcomes (see text box under “Policy Issues
and Future Direction”).
Selected Ongoing WTO Negotiations Despite the postponement of the 2020 Ministerial, several countries continue to make progress on some to make progress on ongoing talks, including fisheries subsidies and e-commerce. In other areas, such as agriculture and environmental goods, talks remain stalledlargely stal ed with no clear path forward. The
various states of ongoing talks raise the stakes for making progress at the nextrescheduled Ministerial in 2021.
Agriculture
For some issues, Ministerial to be held in June 2020.
For some issues multilateral solutions arguably remain ideal, for example, disciplines on agricultural subsidies, which are widely used by developed and advanced developing countries alike. While the Doha Round largely did not achieve its comprehensive negotiating mandate to lower agricultural tariffs and subsidies, negotiations more limited in scope have continued.103 The
2015 Nairobi Ministerial agreed to eliminate export subsidies for agriculture, but the issue of public stockholding remains seemingly intractable. Public stockholding, also known as food security programs, —otherwise known as price support or supply control programs—is used by governments, especiallyespecial y in developing countries, to purchase and stockpile food to release to the public during periods of market volatility or shortage. These programs bolster domestic farm prices by removing surplus stocks from the market. Some governments may release portions of these government-owned
stocks to the public during periods of market volatility or shortage, but a major concern is that some of these stocks may be exported at below their purchase price, thus acting as indirect export subsidies. These programs can also become problematic when governments purchase food at a
price and quantity that effectively become trade-distorting domestic support. While no agreement was reached at Buenos Aires, some developing countries, such as India, have demanded that the issue be resolved before new issues are considered in the WTO work program.
The work program agreed to at the Buenos Aires is being negotiated through the Committee on Agriculture—Special Session. Working Groups have met to seek convergence in the areas of domestic support, market access, export competition, export prohibition/restrictions, public stockholding, and cotton. No breakthrough has been announced in these talks.
The United States has also flagged the broader issue of notification and transparency. Under WTO agreements, members are required
Since the last Ministerial, working groups have met to seek convergence in the areas of domestic support, market access, export competition, export prohibition/restrictions, public stockholding, and cotton trade issues. With the postponement of MC12, members have exchanged views in 102 WT O, “ DG Azevêdo provides urgent information to WTO members on MC12 date and venue,” Press release, March 12, 2020.
103 For more detailed analysis, see CRS Report R46456, Reforming the WTO Agreement on Agriculture, by Anita Regmi, Nina M. Hart, and Randy Schnepf.
Congressional Research Service
33
World Trade Organization: Overview and Future Direction
writing on issues, including public stockholding and special safeguard mechanisms for developing countries. Recognizing the potential social and economic impact of the COVID-19 pandemic, the chair of the Agriculture Committee plans to seek member feedback on the ongoing
negotiations in an effort to revitalize reform efforts in September 2020.104
As part of WTO reform efforts, the United States has also flagged the broader issue of notifications and transparency, which has implications for agricultural trade reform. WTO agreements require members to notify subsidies and trade-distorting support to ensure transparency and consistency with a member'’s obligation. Compliance with notifications has
been notoriously lax, with some countries years behind on their reporting. According to U.S.
Department of Agriculture trade counsel, Jason Hafemeister, these practices have consequences:
In the absence of transparency, how are we to determine whether Members are complying with existing obligations? Moreover, only with comprehensive and current information can negotiators understand, discuss, and address the problems that face farmers today: high tariffs, trade distorting support, and non-tariff barriers.100
The United States with other countries is105
Some experts see a transparency agreement as a feasible outcome for an eventual MC12. The
United States and other countries are also raising issues of special and differential treatment in the
agriculture negotiations (see below).
As noted above, WTO members committed to negotiate disciplines related to fisheries subsidies at the 11th Ministerialthat contribute to overcapacity and overfishing with a view toward reaching an agreement by
2020. The proposals aim to meet the goals outlined in United Nationsthe UN Sustainable Development Goal 14 targeting illegal,
targeting il egal, unregulated, and unreported (IUU) fishing. Faced with a self-imposed deadline year-end 2019 to reach agreement, members continue to grapple with the ambition of the talks. Members have tabled proposals to
The United States has sought application of the commitments to all countries, while some developing country members have sought flexibilities in implementing commitments.102 For example, India is seeking a complete exemption from subsidies disciplines on overfished stocks.103
While the United States has actively participated in the negotiations, U.S. Ambassador to the WTO Dennis Shea noted in July 2019 that "Apart from some progress on notifications, it is our view that these negotiations do not appear to be on track to finish by the end of this year," adding that "while it was encouraging to see the introduction of new, and in some cases, bridging, proposals, there was also a great deal of restating old positions and rehashing the same debates that have tied up the negotiations prior to and since MC11."104
Digital Electronic Commerce/Digital Trade
Digital trade has emerged as a major force in world trade since the Uruguay Round, creating end products (e.g., email or social media), enabling trade in services (e.g., consulting), and facilitating goods trade through services, such as logistics and supply chain management that depend on digital digital data flows. While the GATS contains explicit commitments for telecommunications and financial services that underlie e-commerce, trade barriers related to digital trade, information flows, and other related issues are not specificallyspecifical y included. The WTO Work Program on
Electronic Commerce was established in 1998 to examine trade-related issues for e-commerce under existing agreements.105110 Under the work program, members agreed to continue a temporary moratorium on e-commerce customs duties, and have renewed the moratorium at each ministerial meeting. Members had extended the moratorium on customs duties on electronic transmissions until MC12, but it is unclear if the extension wil be sustained after the delayed Ministerial, given
the opposition of some developing countries and lack of agreement on what would constitute the
scope of electronic transmissions.
Separate from the work program, at the 11th Ministerial, over 75 countries agreed to “meeting. Some developing countries, however, have begun to question the moratorium, seeing it as blocking a potential government revenue stream. Progress under the work program has largely stalled as multiple members have put forward competing views on possible paths forward, and the 2017 Ministerial ended with an agreement to "endeavor to reinvigorate our work."106
Separate from the work program, at the 11th Ministerial, over 75 countries agreed to "initiate initiate
exploratory work on negotiations on electronic commerce issues in the WTO."107”111 After initial talks, information exchanges and education, especiallyespecial y targeting developing country members, the United States and other parties formallyformal y launched the e-commerce initiative in January 2019,108112 and negotiations commenced in March 2019. CoordinatedKnown as the Joint Statement Initiative on E-commerce (JSI) and coordinated by Australia, Japan, and Singapore, the participants now 84 participants
are a mix of developed and developing countries and include the United States, European UnionEU, and China , among others. As with the work program, some developing countries have opted not to participate in the negotiations. For example, India and South Africa stated they do not want to accept international constraints on efforts to protect their domestic industry or raise potential tariff
revenue on digital products, actions could be prohibited or curtailed under a new agreement.
Multiple
Multiple negotiating parties submitted proposals outlining their positions and desired scope for the negotiations.109113 The United States was one of the first parties to submit a discussion paper. The U.S. proposal includes "“trade provisions that represent the highest standard in safeguarding
and promoting digital trade" trade” and reflects the U.S. support for a market-driven, open, interoperable internet under a multi-stakeholder system.110114 The paper echoes many of the commitments
107 Hannah Monicken, “WTO to start fisheries text negotiations in fall; U.S. sees ‘missing pieces’,” Inside U.S. Trade, July 21, 2020.
108 “WT O Polarized over Fisheries Subsidies,” Washington Trade Daily, July 2020. 109 White House, “ Executive Order on Promoting American Seafood Competitiveness and Economic Growth ,” May 7, 2020.
110 WT O, “Electronic Commerce,” https://www.wto.org/english/tratop_e/ecom_e/ecom_e.htm. 111 Joint Statement on Electronic Commerce, WT O WT/MIN(17).60, December 13, 2017. 112 Joint Statement on Electronic Commerce, WT O WT/L/1056, January 25, 2019. 113 All proposals can be found on the WT O online documents portal: https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S001.aspx.
114 United States, Joint Statement on Electronic Commerce, WT O INF/ECOM/23, April 26, 2019.
Congressional Research Service
35
World Trade Organization: Overview and Future Direction
The paper echoes many of the commitments contained in the proposed U.S.-Mexico-Canada Agreement (USMCA), signed in November 2018which entered into force in July 2020. On the other hand, a proposal by China focuses on facilitating narrowly on e-commerce and global value chains as a means to assist WTO members, especiallyespecial y developing countries, in benefiting from digital trade.111 Discussions continue over the scope of the negotiations, such as whether and how to address issues like data flows and privacy, and on the potential structure of any agreement. It is unclear how, or if, the plurilateral effort will overlap or be incorporated into the existing multilateral work program.
The EGA negotiations, were initiated in mid-2014 by 14 WTO membersto liberalize trade in environmental goods
through tariff liberalization. The original 14 participants, including the United States, the EU, and China, represented nearly 90% of global trade in covered environmental goods;120 talks have since expanded to include 18 WTO membersChina, seek to liberalize trade in environmental goods through tariff liberalization. Current EGA members represent 86% of global trade in covered environmental goods. Like the ITA, the EGA would be an open plurilateral plurilateral agreement so that the benefits achieved through negotiations would be extended on an MFN basis to all al WTO members. Despite 18 rounds of negotiations, members were unable to conclude the agreement by the December 2016 General Council meetingmeeting of the General Council in December 2016, and no
, and no negotiations have taken place since. Several stakeholders blamed China for the lack of progress, as it rejected the list of products to be included and requested several lengthy tariff phaseout periods which other countries refused to accept.112121 The EGA'’s future now remains uncertain—; while several countries have expressed support for resuming the talks, the Trump Administration has not put
forward a public position on the agreement.113
The inability of WTO members to conclude a comprehensive agreement during the Doha Round raised new questions about the WTO'’s future direction. Many intractable issues from Doha remain unresolved, and members have yet to reach consensus on a way forward. Persistent differences about the extent and balance of trade liberalization continue to stymielimit progress, as evidencedindicated by the outcomes of recent ministerial meetings. Further, members remain divided over
adopting new issues on the agenda, amid concerns that the WTO could lose relevance if its rules are not updated to reflect the modern global economy. Some WTO members seek to incorporate new issues that pose challengeschal enges to the trading system, such as digital trade, competition with
SOEs, global supply chains, and the relationship between trade and environment issues.
These divisions have calledcal ed into question the viability of the "“single undertaking,"” or one-package approach in future multilateral negotiations and suggest broader need for institutional reform if the WTO is to remain a relevant negotiating body. Moreover, the consistent practice of some countries like India to block discussion of new issues serves as a reminder of the power of a
single member to halt progress in the WTO'’s consensus-based system.
As a result of slow progress at the WTO, countries have increasingly turned to other venues to advance trade liberalization and rules, namely plurilateral agreements and preferential FTAs
outside the WTO. Plurilaterals have been seen as having the potential to resurrect the WTO's ’s relevance as a negotiating body, but have also been seen as possibly undermining multilateralism , if the agreements are not extended to all al WTO members on an MFN basis. Regional trade agreements have also been seen as potential laboratories for new rules. How these negotiations and agreements will wil ultimately affect the WTO'’s status as the preeminent global trade institution
is widely debated.
The fundamental longstanding chal enges facing the WTO are compounded by recent developments that have further strained the trading system. In the near-term, COVID-19 has
highlighted serious economic and trade policy chal enges, in addition to the health crisis, and has spurred protectionist trade and investment policies and disruptions to supply chains that may have lasting effects.123 Many observers have cal ed for better global coordination in policy responses, with some advocating for a new WTO plurilateral agreement on medical goods. Whether the WTO is equipped to play a meaningful role in the crisis is also tied to broader questions about the
need for systemic reform of the institution. As Deputy DG Alan Wolff posited in May 2020:124
In the current upsurge in criticism of the inadequacies of the collective res ponses to the pandemic, the WTO is receiving heightened scrutiny. Were the WTO Members to join together to meet the trade challenges of the coronavirus and the desperately needed economic recovery, most public criticisms of the WTO would likely disappear. But the problems preceded the pandemic and will, absent reforms, persist after the pandemic is over and its after-effects have been addressed. It is necessary to understand what values the multilateral trading system is designed to promote before it can be reformed.
Prior to the crisis, concerns were already mounting aboutis widely debated. In addition, an open question is whether U.S. leadership within these initiatives will continue under the Trump Administration.
More recently, concerns for some have been mounting about further strains on the multilateral system, due to the growing use of trade protectionist policies by both developed and developing countries, the recent U.S. unilateral tariff actions and
123 See for example, OECD, COVID-19 and International Trade: Issues and Actions, June 12, 2020, http://www.oecd.org/coronavirus/policy-responses/covid-19-and-international-trade-issues-and-actions-494da2fa/; Chad P. Bown, “COVID-19 Could Bring Down the T rading System: How to Stop Protectionism From Running Amok,” Foreign Affairs, April 28, 2020, https://www.foreignaffairs.com/articles/united-states/2020-04-28/covid-19-could-bring-down-trading-system. 124 WT O, “ DDG Wolff: T his is the time to consider the future of the multilateral trading system ,” May 27, 2020.
Congressional Research Service
37
link to page 44 World Trade Organization: Overview and Future Direction
tariff actions and counterretaliation by other countries, and the escalating trade disputes between major economies. Many countries are questioning whether the WTO is equipped to effectively handle the challengeschal enges of emerging markets like China, where the state may play a central role in international trade, as well wel as the deepening trade tensions between major economic players. Some experts view the multilateral trading system as facing a potential crisis, while others remain optimistic that the current state of affairs could spur renewed focus on reforms of the system. Certain
WTO members, including the EU, Canada, Japan, and the United States, are exploring some areas for
reform and have submitted various proposals (see below).
.
New WTO leadership wil face ushering the trading system through these chal enges. WTO members are currently in the process of selecting a new DG among eight candidates (see text box). The process requires al 164 members to agree by consensus on the appointment. WTO members and observers view the outcome of the DG race and fresh leadership as important to inject new momentum into the institution, amid efforts to increase its relevance and chart a path forward. The WTO has expedited the intensive selection process, usual y lasting nine months, to
conclude possibly by early November, after Azevêdo steps down and following the U.S.
presidential election.125
Selection of WTO Director-General
Notwithstanding the lack of formal power of the WTO Secretariat, the DG is an advocate for the global trading system and often wields “soft power,” relying on diplomatic and political heft in helping members build consensus or break stalemates—an increasingly difficult task in recent years.126 As a result, some have argued that the Secretariat should be granted more authority to table proposals and advance new rules.127 In the current DG race, analysts have variously cal ed for an “honest broker” and dealmaker, politician over technocrat, or a “peacekeeper.” DG qualifications broadly include “extensive experience in international relations, encompassing economic, trade and/or political experience; a firm commitment to the work and objectives of the WTO; proven leadership and managerial ability; and demonstrated communication skil s.”128 The eight candidates in 2020 have a breadth of experience (Table 4). A recent survey suggests management and political experience, economics training, and WTO negotiating experience are preferred characteristics.129 Experts speculated at the onset that Nigeria’s Ngozi Okonjo-Iweala and Kenya’s Amina Mohamed lead the field.130 WTO DG appointments general y have alternated between developing and developed countries, and have hailed from al regions except Africa, the Middle East, and North America—regions home to five current candidates. With Azevêdo from Brazil, some developed countries view it as their moment, while African countries strongly argue it is their turn. No female has ever served as DG, and some are cal ing for a change to the status quo. Candidates have emphasized that regardless of these factors, the person most qualified for the position should be chosen. Some have highlighted their political neutrality for managing differences between the United States and China as advantages to their candidacy.
125 Members were unable to agree on which deputy DG would serve as acting DG at the end of August until the selection process concludes, attributed to disagreements between the U.S. and China. “U.S. official: China blocked acting DG compromise at WT O,” Inside U.S. Trade, July 30, 2020. 126 David T inline and T atiana Lacerda Prazeres, “5 reasons why the role of WT O Director -General matters,” World Economic Forum, June 5, 2020, https://www.weforum.org/agenda/2020/06/5-reasons-why-the-world-trade-organization-wto-director-general-position-matters-roberto-azevedo-step-down/. 127 Doug Palmer, “U.S. dismisses ‘invalid’ WT O Appellate Body ruling,” Politico Pro Trade, April 23, 2020. 128 WT O, Procedures for the Appointment of Director-Generals, WT /L/509, January 20, 2003. 129 Fiorinia et al., “Selecting the next WT O Director-General: What the trade community thinks,” VoxEU, July 8, 2020, https://voxeu.org/article/selecting-next-wto-director-general-what -trade-community-thinks. 130 Jim Brunsden and Alan Bettie, “Kenyan and Nigerian candidates lead field for WT O chief,” Financial Times, July 8, 2020.
Congressional Research Service
38
World Trade Organization: Overview and Future Direction
Table 4. WTO DG Candidates
Candidate (by order of announcement)
Country
Background and Key Positions
Jesús Seade Kuri
Mexico
Foreign Affairs Under Secretary for North America
Former Deputy DG of the WTO
Former Deputy DG of the GATT
Ngozi Okonjo-Iweala
Nigeria
Former Finance Minister
Former Managing Director World Bank
Abdel-Hamid Mamdouh
Egypt
Senior Counsel, King & Spalding LLP
Former WTO official
Tudor Ulianovschi
Moldova
Former Foreign Minister
Former Ambassador to WTO
Yoo Myung-hee
South Korea
Trade Minister
Amina C. Mohamed
Kenya
Secretary for Sports, Culture and Heritage
Former Foreign Affairs and Trade Minister; Chair of 2015 WTO Ministerial Conference
Former Deputy Secretary-General United Nations
Mohammad Maziad Al-Tuwaijri
Saudi Arabia
Royal Court Adviser
Former Economy and Planning Minister
Former Banking Executive
Liam Fox
United Kingdom
Former Trade Secretary
Source: WTO, “Candidates for DG selection process 2020,” https://www.wto.org/english/thewto_e/dg_e/dgsel20_e/dgsel20_e.htm
DG candidates met (primarily virtual y) with WTO members from July 15-17 to present views and answer questions.131 This campaign phase, expected to last through September 7, is fol owed by consultations among members over two months to narrow the field and build consensus around a candidate (two candidates are to be eliminated in the first round and three candidates in the second round, leaving two for the final selection). A selection committee, headed by the GC Chair, leads this process. The committee then issues its recommendation on the candidate most likely to gain consensus, and members make their final decision.132 Regarding ideal qualities for a DG, in testimony to Congress USTR Lighthizer cal ed for leadership that supports fundamental, across the-board reform and understands the nature of problems facing market economies in dealing with China and current rules that fail to discipline large state-run economies.133 He noted that any “whiff of anti-Americanism” would be grounds for a U.S. veto.
COVID-19 and WTO Reactions As countries across the world grapple with COVID-19, many WTO activities have been disrupted and trade policy chal enges have emerged. Experts have emphasized trade policies as playing a
major role in two respects. First in helping respond to COVID-19 and second, in assisting in the recovery. The WTO committed to work with other international organizations to minimize disruptions to cross-border trade and global supply chains—in particular those central to combatting the virus. The WTO has also sought to inform members of the impact of the pandemic, and cal ed on members to abide by notification obligations on trade-related measures
131 For candidates statements, see https://www.wto.org/english/thewto_e/dg_e/dgsel20_e/dgsel20_e.htm. 132 In the (rare) absence of consensus, procedures specify that as a last resort there can be recourse to other voting procedures.
133 House Ways and Means Committee, Hearing on the President’s 2020 Trade Policy Agenda, written testimony by Ambassador Robert E. Lighthizer, June 17, 2020.
Congressional Research Service
39
World Trade Organization: Overview and Future Direction
taken in response. Many countries, including the United States, have imposed temporary restrictions on exports of certain medical goods and some foodstuffs to mitigate potential shortages.134 At the same time, some countries have since lifted restrictions or implemented measures to liberalize trade.135 A WTO report in April 2020 warned of the policies’ long-term costs, in terms of lower supply and higher prices.136 WTO leadership urged careful consideration of ripple effects of export curbs, as most major countries are both exporters and importers of
medical supplies, and emphasized use of WTO-consistent tools to address critical shortages, such as unilateral y eliminating tariffs or other taxes, expediting customs procedures, and using subsidies to generate production. In April, the WTO estimated a plunge in global trade in 2020, with a potential recovery in 2021 dependent on the duration of the pandemic and countries’ policy choices.137 For the latter, transparency is viewed as critical y important; however, members have
been slow to formal y notify new measures.138
WTO agreements are flexible in permitting emergency measures related to national security or health that may contravene WTO obligations. They broadly require, however, that such
restrictions be targeted, temporary, and transparent, and do not unnecessarily restrict trade. GATT Article XI prohibits export bans and restrictions, other than duties, taxes or other charges, but al ows members to apply restrictions temporarily “to prevent or relieve critical shortages of foodstuffs or other products essential” to the exporting country, among other circumstances. In the case of foodstuffs, members must give “due consideration to the effects on food security” of
importers. As previously discussed, general exceptions providing policy flexibility require that restrictions are not “a means of arbitrary or unjustifiable discrimination,” or “disguised restriction on international trade,” among other conditions.
Several WTO agreements have relevance to health-related policy, such as TBT, SPS, GATS and TRIPS. Others guide implementation of policies, including the WTO’s core principle of
nondiscrimination and rules on subsidies. Specific commitments have contributed to liberalized trade in medical products: (1) tariff negotiations during the Uruguay Round; (2) a plurilateral Agreement on Pharmaceutical Products, updated in 2011; and (3) the expanded ITA in 2015. These have improved market access for medical products, but barriers remain. An April 2020 WTO report estimates nearly $600 bil ion in annual trade in critical medical products with limited availability during COVID-19.139 For these products, the average applied MFN tariff is 4.8%, but
certain products, such as hand soap and face masks, have relatively high tariffs in some countries.
As measures to restrict trade spread in early 2020, some countries including the G-20
recommitted to WTO guidance that measures be targeted, temporary, and transparent. A group of seven countries led by New Zealand and Singapore issued stronger statements to maintain open and connected supply chains.140 Forty-two WTO members pledged to lift emergency measures as soon as possible; the United States, EU, and China did not join the pledge. Experts have 134 CRS In Focus IF11551, Export Restrictions in Response to the COVID-19 Pandemic, by Christopher A. Casey and Cathleen D. Cimino-Isaacs. 135 WT O, “ WT O report on G20 shows moves to facilitate imports even as trade restrictions remain widespread,” June 29, 2020, https://www.wto.org/english/news_e/news20_e/trdev_29jun20_e.htm.
136 WT O, Export Prohibitions and Restrictions, Information Note, April 23, 2020. 137 WT O, “T rade falls steeply in first half of 2020,” Press Release, June 22, 2020, https://www.wto.org/english/news_e/pres20_e/pr858_e.htm. 138 WT O, “COVID-19 and world trade,” https://www.wto.org/english/tratop_e/covid19_e/covid19_e.htm. 139 WT O, Trade in Medical Goods in the Context of Tackling COVID-19, Information Note, April 3, 2020. 140 See https://www.international.gc.ca/gac-amc/news-nouvelles/2020-03-25-joint-ministerial-statement-declaration-ministerielle-commune.aspx?lang=eng.
Congressional Research Service
40
World Trade Organization: Overview and Future Direction
advocated for more coordinated trade policies worldwide or concrete action in the WTO.141 In
June, the Ottawa Group recommended a range of actions, with a central role for the WTO:142
In response to these challenges, thinking has begun on trade policy actions that would support an inclusive, sustainable, and resilient recovery as well as what trade rules should be adapted or developed to guide collaborative policy responses to future global crises. In this context, the WTO must play an important role in helping ensure coordination and coherence between actions its members take. This will require initiative and engagement by WTO members in order to be successful.
Some WTO members advocate for a plurilateral agreement on medical goods, modeled after the ITA. Other members acknowledge that there is neither time nor political wil to conclude a round of tariff negotiations in the near term, but advocate for unilateral reductions. New Zealand and Singapore recently agreed to an “open plurilateral” agreement to remove tariffs, not to impose export restrictions, and to remove nontariff barriers on COVID-19 related products.143 The two
countries have encouraged others to join. U.S. trade officials have said they prioritize dealing with the crisis before discussing the WTO role.144 Per USTR Lighthizer remarks in May to G20 trade ministers: “while we are in the midst of the crisis, we caution against embarking upon new plurilateral tariff cutting negotiations, or trying to dictate what the future role of the WTO may be in terms of addressing longer-term actions. Indeed, we find it inappropriate to use this crisis,
which has been tragic for the global community, to push other agendas.”
Negotiating Approaches
Plurilateral Agreements
In contrast to the consensus-based agreements of the WTO, some members, including the United
In contrast to the consensus-based agreements of the WTO, some members, including the United States, point to the progress made in sectoral or plurilateral settings as the way forward for the institution.114 By assembling coalitions of interested parties, negotiators may more easily and quickly achieve trade liberalizing objectives, as shown by the ITA. Sectoral agreements are viewed as one way to pursue new agreements and extend WTO disciplines and commitments in new areas, including, for example, U.S. trade priorities in digital trade and SOEs. The
commitments by some WTO members to pursue talks in e-commerce, investment facilitation, and SMEs
SMEs and other areas, could plant the seeds for future plurilaterals.
Plurilateral
Plurilateral negotiations, however, still stil involve resolving divisions among developed and
advanced developing countries. Members were able ultimately to overcome their differences in the ITA negotiation, but thus far have been unable to reach consensus in the EGA. At the same time, the participation of developing and emerging market economies, such as China and India, is
141 For example, see Richard E. Baldwin and Simon J. Evenett ed., COVID-19 and Trade Policy: Why Turning Inward Won’t Work, Centre for Economic Policy Research, April 2020; Wendy Cutler, “Coronavirus: T he Need to Adjust and Reshape Our T rade Agenda,” March 17, 2020, https://asiasociety.org/policy-institute/coronavirus-need-adjust-and-reshape-our-trade-agenda; Jennifer Hillman, “ Six Proactive Steps in a Smart T rade Approach to Fighting COVID-19,” Think Global Health, March 20, 2020, https://www.thinkglobalhealth.org/article/six-proactive-steps-smart-trade-approach-fighting-covid-19; and Anabel Gonzalez, “ A memo to trade ministers on how trade policy can help fight COVID-19,” T rade and Investment Policy Watch blog, https://www.piie.com/blogs/trade-and-investment -policy-watch/memo-trade-ministers-how-trade-policy-can-help-fight-covid.
142 Government of Canada, “ June 2020 Statement of the Ottawa Group: Focusing Action on Covid-19,” June 15, 2020, https://www.international.gc.ca/world-monde/international_relations-relations_internationales/wto-omc/2019-06-covid-19.aspx?lang=eng.
143 See https://www.mfat.govt.nz/en/trade/covid-19-and-trade/. 144 “U.S.: Wait until crisis subsides to address WT O’s role,” Inside U.S. Trade, May 15, 2020.
Congressional Research Service
41
link to page 64 link to page 64 World Trade Organization: Overview and Future Direction
time, the participation of developing and emerging market economies, such as China and India, is critical to achieving agreements that cover a meaningful share of global trade. There is also a concern that plurilateral agreements not applied on an MFN basis could lead nonparticipating countries to become marginalized from the trading system and face new trade restrictions. To attract a critical mass of participants and lower barriers for developing countries and LDCs who may be hesitant to agree to ambitious commitments, agreements could allow flexibility in al ow flexibility in
implementation timeframes and provide additional assistance, as in the TFA.
Some experts question whether potential waning U.S. leadership in plurilateral and multilateral trade negotiations might slow momentum toward concluding new agreements (see " “Value of the Multilateral
Multilateral System and U.S. Leadership and Membership”"). The Trump Administration has yet to clarify its position on plurilaterals pursued under the Obama Administration, such as EGA and
TiSA, which have stalledstal ed, but is supporting new efforts on e-commerce/digital trade.
Given that the WTO allowsal ows its members to establish preferential FTAs outside the WTO that are
consistent with WTO rules, many countries have formed bilateral or regional FTAs and customs areas; since 1990, the number of RTAs in force has increased seven-fold, with 290 trade around 300 agreements notified to the WTO and in force, as of the end of 2018.115.145 FTAs have often provided more negotiating flexibility flexibility for countries to advance new trade liberalization and rulemaking that builds on WTO agreements; however, the agreements vary widely in terms of scope and depth. Like plurilaterals, many view comprehensive FTAs as having potential for advancing the global trade agenda. Also
However, like plurilaterals, however FTAs can also have downsides compared to multilateral deals.
The United States currently has 14 FTAs in force with 20 countries, with some new partial
agreements completed or in progress. The Trump Administration has stated a preference for negotiating bilateral FTAs, rather than multiparty agreements. In November 2018October 2019, the United States, Mexico, and Canada signed the proposed USMCA, which revamps the North American Free Trade Agreement (NAFTA).116 The United States and South Korea also agreed to some modifications of their bilateral FTA. In October 2019, the United States and Japan signed the "first stage" of bilateral trade agreements covering agricultural market access and some industrial goods tariffs, as well as rules on digital trade.117 In addition, USTR notified Congress of its intent to begin trade negotiations with the EU (and separately the UK), but talks have yet to progress, and has expressed interest in pursuing additional bilateral agreements in the future with other countries.
In general, U.S. FTAs are considered to be "WTO-plus" and Japan signed the “first stage” of trade agreements covering certain agricultural and industrial goods market access, as wel as rules on digital trade—the agreements did not require congressional approval.146 In January 2020, Congress approved the USMCA between the United States, Mexico, and Canada, which replaces the North American Free Trade Agreement
(NAFTA).147 In addition, USTR notified Congress of trade negotiations with the EU, the UK, and
most recently, Kenya.
In general, U.S. FTAs are considered to be “WTO-plus” in that they reaffirm the WTO agreements, but also eliminate most tariff and nontariff barriers and contain rules and obligations in areas not covered by the WTO. For example, most U.S. FTAs include access to services markets beyond what is contained in the GATS or, more recently, digital trade obligations and disciplines to address distortions from state-led trade practices. The recent . The U.S. limited agreement recently concludedagreements with Japan, however, would represent a significant shift in approach from recent U.S. FTAs, which typically
which typical y involve one comprehensive negotiation and agenda. Several analysts question the extent to which the limitedstage-one agreement adheres to GATT Article XXIV, which requires that FTAs cover "substantially all trade,"requiring that FTAs
145 As of the end of 2019. WT O RT A database, https://rtais.wto.org/UI/PublicMaintainRTAHome.aspx. 146 White House, “Joint Statement of the United States and Japan,” September 25, 2019. https://www.whitehouse.gov/briefings-statements/joint -statement-united-states-japan-2/; UST R, “ FACT SHEET : U.S.-Japan T rade Agreement,” September 2019, https://ustr.gov/about-us/policy-offices/press-office/fact-sheets/2019/september/fact -sheet -us-japan-trade-agreement .
147 CRS In Focus IF10997, U.S.-Mexico-Canada (USMCA) Trade Agreement, by M. Angeles Villarreal and Ian F. Fergusson.
Congressional Research Service
42
link to page 48
World Trade Organization: Overview and Future Direction
cover “substantial y al trade,” in particular given the exclusion of U.S.-Japan auto trade.148 in particular given the exclusion of U.S.-Japan auto trade.118 Whether or not the agreement violates the letter or spirit of this provision likely depends on the timeline and scope of the next stage of U.S.-Japan talks, which both sides have indicated aim to be comprehensive in scope, and whether another WTO member would challengechal enge it via WTO dispute settlement.119149 In practice, however, WTO members have rarely challengedchal enged other trading partners' ’
agreements for consistency with these requirements under formal dispute settlement proceedings.120
at DS proceedings.150
While U.S. FTAs cover some major trading partners, the majority of U.S. trade, including with significant trade partners such as China and the EU, continues to rely solely on the terms of
market access and rulemaking in WTO agreements. In 20172019, the United States traded $3.4 trillion 6 tril ion
with non-FTA partners, compared to $1.8 trillion2 tril ion with its FTA partners (Figure 8).
trade agreement, which entered into effect in January 2020 covers a portion (5%), but not al bilateral goods trade and second-stage talks remain incomplete, Japan is not included as a ful FTA partner for il ustrative purposes.
More recently, groups of countries have also been pursuing so-called "cal ed “mega-regional"” trade
agreements that have broad membership and cover significant shares of global trade. These include the CPTPP Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) signed in March 2018 between 11 countries in the Asia-Pacific region to replace the TPP, ongoingproposed TPP, near complete negotiations over the Regional Comprehensive Economic Partnership (RCEP) between the Association of Southeast Asian Nations (ASEAN) and sixfive of its FTA
148 “Analysts question WT O compliance of U.S.-Japan deal,” Inside U.S. Trade, September 17, 2019. In addition, the GAT S includes a similar provision.
149 U.S. negotiating objectives, released at the outset of the talks in December 2018, suggested a broad range of issues beyond tariffs and digital trade would be covered. See https://ustr.gov/countries-regions/japan-korea-apec/japan/us-japan-trade-agreement -negotiations.
150 Petros C. Mavroidis, “If I Don’t Do It, Somebody Else Will (or Won't),” Journal of World Trade, vol. 40, no. 1 (February 2006): 187-214.
Congressional Research Service
43
World Trade Organization: Overview and Future Direction
of its FTA partners including China,151 and the Pacific Alliance Al iance signed in June 2012 among Chile, Colombia, Mexico, and Peru. Such agreements could potentiallypotential y help to consolidate trade rules across regionsregions, and to a varying extent, address new issues not covered by the WTO. With U.S. withdrawal from the TPP and Trump Administration'’s preference for bilateral negotiations, the United States is likely to play a more limited role in shaping rules in such fora.
under the current
Administration.
There has been wide debate regarding the relationship of preferential FTAs to the WTO and multilateral multilateral trading system.121152 Some argue that crafting new rules through mega-regionals could
undermine the trading system, create competing regional trade blocs and rules, lead to trade diversion, and marginalize countries not participating in the initiatives.122153 In remarks in July 2020, USTR Lighhizer claimed “we should have a multilateral system or a bunch of bilateral systems,” noting that otherwise the two systems fundamental y conflict with one another.154 On the other hand, some view such agreements as potentiallypotential y spurring new momentum at the global level. WTO DG Azevêdo has supported the latter sentiment, expressing that "“RTAs [regional trade
agreements] are blocks which can help build the edifice of global rules and liberalization."123 ”155 Many analysts have viewed the CPTPP specificallyspecifical y through this lens.124156 Some experts view plurilateral plurilateral agreements in particular as potential vehicles for bringing new rulemaking from RTAs into the multilateral trading system.125, as NAFTA did for the groundbreaking Uruguay Round in 1994.157 While RTAs may propagate precisely what the multilateral system—with MFN and
national treatment at its underpinnings—was designed to prevent, namely trade diversion and fragmented trading blocs, some observers believe it may be the only way trade may be liberalized
in the future as additional interested parties could join the agreements over time.
Since the founding of the WTO, the landscape of global trade has changed dramaticallydramatical y. The commercial internet, the growth of supply chains, and increasing trade in services have all al contributed to the tremendous expansion of trade. However, WTO disciplines have not been
significantly modernized or expanded since 1995, aside from the TFA and the renegotiation of the ITA and the GPA. In addition to ongoing WTO efforts to negotiate new trade liberalization and rules in areas like e-commerce and digital trade, the following are selected areas of trade policy that could be subjects for future negotiations multilaterallymultilateral y within the WTO, or as plurilaterals. Meaningful progress in areas such as services, competition with SOEs, investment, and labor and
environment issues could help increase the relevance of the WTO as a negotiating body.
More 151 India, an original member, dropped out of RCEP in December 2019, when RCEP members announced the agreement’s preliminary conclusion. CRS Insight IN11200, The Regional Comprehensive Economic Partnership: Status and Recent Developm ents, by Cathleen D. Cimino-Isaacs and Michael D. Sutherland.
152 For example, see World Economic Forum, Regional Trade Agreements: Game Changers or Costly Distractions for the World Trading System , July 2014. 153 For more on the debate, see CRS Report R45198, U.S. and Global Trade Agreements: Issues for Congress, by Brock R. Williams.
154 David Lawder and Andrea Shalal, “Lighthizer says bilateral trade pacts conflict with multilateral trading system ,” Reuters, July 9, 2020. 155 WT O, “Regional trade agreements ‘cannot substitute’ the multilateral trading system,” September 25, 2014, https://www.wto.org/english/news_e/spra_e/spra33_e.htm.
156 See CRS Report R44489, The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress, coordinated by Ian F. Fergusson and Brock R. Williams.
157 For example, see Chad P. Bown, Mega-Regional Trade Agreements and the Future of the WTO, Council on Foreign Relations, Part of Discussion Paper Series on Global and Regional Governance, September 2016.
Congressional Research Service
44
World Trade Organization: Overview and Future Direction
recently, the COVID-19 pandemic, and subsequent disruption to supply chains and spread of new trade restrictions have also led to some cal s for a dedicated plurilateral agreement on medical
goods trade.
Services
Since the GATS, the scope of global trade in services has increased tremendously, spurred by
Since the GATS, the scope of global trade in services has increased tremendously, spurred by advances in IT and the growth of global supply chains. Yet, these advances are largely not reflected in the GATS. WTO members committed to further services negotiations (GATS Article XIX), which began in 2000 and were incorporated into the Doha Round. Further talks were spurred by the recognition among many observers that the GATS, while it extendedextending the principles of nondiscrimination and transparency to services trade, was not thought to did not provide much actual liberalization, as many countries simply bound existing practices.126158 However, services negotiationstalks during Doha also succumbed to the resistance of developing countries
developing countries’ resistance to open their markets in response to developed country demands, as wel as well as dissatisfaction with other aspects of the single undertaking. Whether the stalled plurilateral stal ed
plurilateral TiSA talks will wil ultimately lead to services reform in the WTO is an open question.
Aside from increased market access, several issues are ripe for future negotiations at the WTO, such as transition from the current positive list schedule of commitments to a negative list.127 159 Instead of a member declaring which services are open for competition, it would need to declare which sectors are exempted. This exercise in itself could force members to reexamine their approximately 25-year-old commitments and decide whether current market access barriers will be maintained. New services sectors, such as online education and telemedicine, that were not envisioned at the founding of GATS could also be the subject of future negotiations, at least on a plurilateral basis. The issue of "servicification" wil
be maintained. Before the pandemic, WTO members had been discussing proposals on market access for tourism and related services and environmental services. The issue of “servicification” of traditional goods industries—for example, services that are sold with a good, such as insurance or maintenance services, or enabling services, such as distribution, transportation, marketing, or retail—has also attracted attention as the subject of possible WTO negotiations.128160 Other issues of
interest to members include services facilitation (transparency, streamlining administrative procedures, simplifying domestic regulations),129161 and emergency safeguards, envisioned in the GATS (Article X) as an issue for future negotiation.
Recently members have focused on the economic impact of COVID-19 on sectors such as tourism, transport and distribution services as wel as the
chal enges and opportunities presented for digital services delivery and digital inclusion.
Competition with SOEs and Non-Market Practices
The United States and other members of the WTO see an increased need to discipline state-owned or state-dominated enterprises engaged in international commerce, and designated monopolies, whether through the WTO or through regional or bilateral FTAs. However, WTO rules on competition with state-owned or state-dominated enterprises are limited to state trading
enterprises (STE)—enterprises, such as agricultural marketing boards, that influence the import
158 Gary Clyde Hufbauer, “Liberalization of Services T rade,” in Trans-Pacific Partnership: An Assessment, ed. Cathleen Cimino-Isaacs and Jeffrey J. Schott, (Washington, DC: Peterson Institute of International Economics, 2016).
159 U.S. FT As use a negative list approach, and the proposed T iSA negotiations use a hybrid approach to apply a negative list to national treatment commitments and a positive list for market access. 160 International Centre for T rade and Sustainable Development (ICT SD), “Negotiating Disciplines on Domestic Regulations in Services,” June 2018, https://www.ictsd.org/themes/services-and-digital-economy/research/negotiating-disciplines-on-domestic-regulations-in.
161 Marta Soprana, “ Services facilitation in regional trade agreements and opportunities for convergence,” The E15 Initiative, October 2018, http://e15init iative.org/blogs/services-facilitation-in-regional-trade-agreements-and-opportunities-for-convergence/.
Congressional Research Service
45
World Trade Organization: Overview and Future Direction
enterprises (STE)—enterprises, such as agricultural marketing boards, that influence the import or export of a good. GATT Article XVII requires them to act consistently with GATT commitments on nondiscrimination, to operate in accordance with commercial considerations, and to abide by other GATT disciplines, such as disciplines on import and export restrictions. The transparency obligations consist of reporting requirements describing the reason and purpose of
the STE, the products covered by STE, a description of its functions, and pertinent statistical information.130
162
Meanwhile, countries desiring disciplines on SOEs have turned to FTAs. The TPPCPTPP and the proposed USMCA USMCA have dedicated chapters on SOEs. The USMCA includes commitments that SOEs of a party act in accordance with commercial considerations; requires parties to provide
nondiscriminatory treatment to like goods or services to those provided by SOEs; and prohibits most noncommercial assistance to its SOESOEs, among other issues. The USMCA SOE chapter in USMCA likely iscould also be aimed at countries other than the three USMCA parties, such as China, to signal their negotiating intentions going forward. While there could be a desire to multilateralize these
disciplines, they likely would face objections from those members engaged in such practices.
State support provided to SOEs, including subsidies, is a closely related issue, as it can play a major role in market-distorting behavior under current rules. The WTO ASCMAgreement on Subsidies and Countervailing Measures (ASCM) covers the provision of specified subsidies granted to
SOEs, including by the government or any "“public body."” Some members, including the United States and EU, have contested past interpretations by the WTO AppellateAppel ate Body of what qualifies as a public body as too narrow, and remain concerned that a large share of Chinese and other SOEs in effect have avoided being subject to disciplines.131163 As discussed, the United States, EU, and Japan are engaged in ongoing discussions to strengthen WTO rules. A January 2020 joint statement by the trilateral proposed areas for changes to the existing WTO ASCM rules on industrial
subsidies.164 Recommended changes include expanding the types of prohibited subsidies, reversing the burden of proof to the subsidizing country, and incentives for subsidy notifications, among others. China opposes the proposal and stated it wil not negotiate new rules on industrial subsidies.165 It is unclear if the trilateral members or others wil pursue a plurilateral agreement on subsidy disciplines; moreover, analysts emphasize that such efforts must ultimately achieve buy-
in from China and others to have a lasting impact.166 Regardless, members may seek to revisit multilateral competition rules if market distortions emerge in the post-pandemic economic recovery, given many governments have provided subsidies and other forms of support to
domestic industries during the economic downturn.
Investment
With limited are engaged in ongoing discussions on strengthening rules on industrial subsidies and SOEs, including "how to develop effective rules to address market-distorting behavior of state enterprises and confront particularly harmful subsidy practices."132 They commit to both "maintain effectiveness of existing WTO disciplines" and also initiate negotiations on "more effective subsidy rules" in the near future. At the latest meetings in May 2019, regarding industrial subsidies, the three partners indicated progress on "text-based work on increasing transparency, identifying harmful subsidies that merit stricter treatment and ensuring that appropriate benchmarks can be used" and their aim to increase outreach to other WTO members.133
With limited provisions under TRIMS and GATS, rules and disciplines covering international investment are not part of the WTO. More extensive protection for investors was one of the "“Singapore issues"” proposed at the 1996 WTO Ministerial as a topic for future negotiations, but
162 WT O, “T echnical Information on State T rading Enterprises,” https://www.wto.org/english/tratop_e/statra_e/statra_info_e.htm.
163 European Commission, WTO Modernization, Concept Paper, September 2018, pp. 4-5; and UST R, Statement by the U.S. to the Dispute Settlement Body, March 2011, https://ustr.gov/sites/default/files/uploads/Mar25%20Stmt%20US%20AD-CVD%20fin.pdf. 164 “Joint Statement of the T rilateral Meeting of the T rade Ministers of Japan, the United States and the E uropean Union,” January 14, 2020, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/january/joint-statement -trilateral-meeting-trade-ministers-japan-united-states-and-european-union.
165 Doug Palmer, “ Envoy: China can't support WT O talks on industrial subsidies,” Politico Pro, May 12, 2020. 166 Wendy Cutler and Andrew Chatzky, Curbing State-Driven Trade Policies: How to Craft New & Effective Approaches to Counter Distortive Practices, Asia Society Policy Institute, July 2020.
Congressional Research Service
46
World Trade Organization: Overview and Future Direction
proposed at the 1996 WTO Ministerial as a topic for future negotiations, but then dropped under opposition from developing countries at the 2003 Cancun Ministerial. The OECD also attempted to liberalize investment practices and provide investor protections through a Multilateral Agreement on Investment, however, that effort was abandoned in 1998 in the face
of widespread campaigns by nongovernment organizations in developed countries.
While multilateral attempts to negotiate investment disciplines have not borne fruit, countries have agreed to investment protections within bilateral investment treaties (BITs) and chapters in bilateral and regional FTAs. The U.S. "“model BIT"” serves as the basis for most recent U.S. FTAs.134167 These provisions are often negotiated between developed countries and developing
countries—often viewed as having less robust legal systems—that want to provide assurance that incoming FDI will wil be protected in the country. Developed countries themselves have begun to
diverge on the use and inclusion of provisions on investor-state dispute settlement (ISDS).135
168
Incorporating investment issues more fully in the WTO would recognize that trade and investment issues are increasingly interlinked. Moreover, bringing coherence to the nearly 3,000 BITs or trade agreements with investment provisions could be a role for the WTO. In addition, agreement on investment disciplines could help to resolve the thorny issue of investment adjudication between the competing models of ISDS and an investment court, as proposed by the
EU in its recent FTAs, given that disputes likely would remit to WTO DS. While it remains unclear whether developing countries would be more amenable to negotiating investment disciplines multilaterally
disciplines multilateral y than they were in 2003, this area could be ripe for plurilateral activity.
In the meantime, since the MinisterialMC11 some WTO members arehave been pursuing the development of a multilateral multilateral framework on investment facilitation. The group is comprised of a mix of developed and developing economies, including the EU, Canada, China, Japan, Mexico, Singapore, and
Russia, but not the United States.136
Labor and environmental provisions were not included in the Uruguay Round agreements, largely at the insistence of developing countries.137170 Some observers maintain that this has created major gaps in global trade rules and call cal for the WTO to address these issues.138171 Related provisions have developed and evolved within U.S. FTAs outside the WTO. Recent U.S. FTAs require partner countries to adhere to internationallyinternational y recognized labor principles of the International Labor
Organization (ILO) and applicable multilateral environmental agreements, and to enforce their labor or environmental laws and not to derogate from these laws to attract trade and investment. The CPTPP and proposed Recent agreements like the CPTPP and USMCA also contain provisions, though not identical,
167 CRS In Focus IF10052, U.S. International Investment Agreements (IIAs), by Martin A. Weiss and Shayerah Ilias Akhtar, and CRS Report R43052, U.S. International Investm ent Agreem ents: Issues for Congress, by Shayerah Ilias Akhtar and Martin A. Weiss.
168 T he United States has pursued ISDS in most of its FT As. In the proposed USMCA, the T rump Administration restricted recourse to ISDS in the case of Mexico and ended the application of ISDS with Canada. Recent EU agreements contain an investment court model with a standing body replacing ad hoc tribunals common to ISDS.
169 “Joint Ministerial Statement on Investment Facilitation for Development,” WT/MIN(17)/59, December 13, 2017. 170 One labor-related provision, GAT T Article XX(e) provides an exception to trade obligations for measures “relating to products of prison labor.” 171 For example, in the view of T hea Lee of the Economic Policy Institute, WT O rules are currently “lopsided” and do not adequately protect the interests of workers, consumers, and the environment; in particular, the WTO should recognize that “violation of internationally recognized workers’ rights is as much an unfair trade policy as the violation of patents or copyrights.” Senate Foreign Relations Committee, Hearing on Multilateral Economic Institutions and U.S. Foreign Policy, written testimony by T hea M. Lee, November 27, 2018.
Congressional Research Service
47
World Trade Organization: Overview and Future Direction
USMCA also contain provisions, though not identical, prohibiting the most harmful fisheries subsidies, and relating to illegal il egal trafficking, marine species, air quality, marine litter, and sustainable forestry. More broadly, while inclusion of labor and environmental provisions withinin FTAs has expanded in the past decade, in general the commitments
can vary widely in their scope and depth, with only some subject to DS mechanisms.139
172 While general provisions on labor and environment may be a heavy lift at this time given these differences, the WTO has undertaken an effort to discipline fisheries subsidies, which could have a beneficial environmental effect (see above). However, fisheries subsidies may be a special case, as it directly pertains to an existing trade-related agreement, the ASCM.
Many observers, including some Members of Congress, believe the WTO needs to adopt reforms to continue its role as the foundation of the world trading system. In particular, its negotiating function has atrophied following the collapse of the Doha Round. Its DS mechanism, while functioning, is viewed by some WTO members as cumbersome and time consuming. And some observers, including U.S. officials, contend it has exceeded its mandate when deciding cases.
Potential changes described below address institutional and negotiation reform, as well wel as reforms to the DS system. Reforms concern the administration of the organization, including its procedures and practices, and attempts to address the inability of WTO members to conclude new agreements. DS reforms attempt to improve the working of the DS system, particularly the Appellate Body (AB). Addressing concerns related to the DS system may take priority in the near term, as the WTO faces a pending crisis should the AB fall below its three-member quorum on December 10, 2019.
Certain WTO members have begun to explore
Appel ate Body (AB), which fel below its three-member quorum in December, chal enging the
WTO’s ability to effectively enforce DS decisions.
Certain WTO members have been exploring some aspects of reform.173 In September some aspects of reform.140 In July 2018, the European Commission produced a discussion paper on WTO reform proposals, and in September 2018, the
European Commission published a revised paper on its comprehensive approach "“to modernise the WTO and to make international trade rules fit for the challengeschal enges of the global economy."141”174 As noted, the United States, EU, and Japan have issued scoping papers and joint statements on strengthening WTO
disciplines on industrial subsidies and SOEs and cooperating on forced technology transfer.142
In addition,.
In addition, in late 2018 Canada organized a ministerial among a small smal group of "“like-minded" ” countries interested in WTO reform, including Australia, Brazil, Chile, the EU, Japan, Kenya, Mexico, New Zealand, Norway, Singapore, South Korea, and Switzerland, held in Ottawa on October 24-25, 2018 based on a discussion draft of its various proposals.143. Canadian trade officials have said that "“starting small has allowedsmal has al owed us to address problems head-on and quickly develop
proposals,"” while acknowledging that a larger effort must include the United States and China.144 175 In a joint communiqué, the group of 13 countries emphasized that "“the current situation at the WTO is no longer sustainable,"” and identified three areas in particular requiring "urgent consideration"“urgent consideration”: safeguarding and strengthening the DS system; reinvigorating the WTO's ’s negotiating function; including how the development dimension can be best pursued in
rulemaking; and strengthening the monitoring and transparency of WTO members' trade policies.145 The group held its third meeting in May 2019, and confirmed that "’ trade
172 T he ILO reports that less than a third of trade agreements have labor-related provisions (as of 2016). Of those, nearly half are U.S., EU or Canadian agreements, while about a quarter are between South -South trading partners. See ILO, Labour-related provisions in trade agreem ents, GB.328/POL/3, September 2016. 173 For a database listing of some of the ongoing reform efforts by country, see CSIS, “WT O Reform T racker,” https://tradeguys.csis.org/trade-explained/wto-tracker/.
174 European Commission, “EU proposals on WT O modernization,” WK8329/2018 INIT, July 5, 2018 ; and “European Commission presents comprehensive approach for the modernization of the World T rade Organization,” press release, September 18, 2018, http://europa.eu/rapid/press-release_IP-18-5786_en.htm.
175 Janyce McGregor, “Global trade reform must include China, U.S., Jim Carr says after hosting WT O meeting,” CBC News, October 25, 2018.
Congressional Research Service
48
World Trade Organization: Overview and Future Direction
policies.176 The group held its third meeting in May 2019, and confirmed that “work continues apace on developing concrete proposals to be brought forward for consideration by the wider membership."146”177 Some Members of Congress have expressed support for these new efforts to address long-standing
address longstanding concerns of the United States.147
178
China held its own mini-ministerial among 34 WTO members in November 2019 to discuss reform efforts, and called on all cal ed on al parties "“to firmly support the multilateral trading system, resolutely oppose unilateralism and protectionism, actively participate in the necessary reform of
the WTO….and enhance the WTO'’s confidence"148
While consensus in decisionmaking is a long-standing core practice at the GATT/WTO, voting on a nonconsensus basis is authorized for certain activities on a one member-one vote basis. For example, interpretations of the WTO agreements and country waivers from certain provisions require a three-fourths affirmative vote for some matters, while a two-thirds affirmative vote is required for an amendment to an agreement. However, even when voting is possible, the practice of consensus decisionmaking remains the norm.
As an organization of sovereign entities, some observers believe the practice of consensus decisionmaking gives legitimacy to WTO actions. Consensus assures that actions taken are in the
self-interest of all al its members. Consensus also reassures small smal countries that their concerns must be addressed. However, the practice of consensus has often led to deadlock, especiallyespecial y in the Doha Round negotiations. The ability to block consensus also has perpetuated so-called "hostage taking,"cal ed “hostage
taking,” in which a country can block consensus over an unrelated matter.
In order to attempt to expedite institutional decisionmaking, some expert observers have proposed
alternatives to the current system, such as the following:
The "“single undertaking"” method by which WTO members negotiate agreements means that during a negotiating round, all al issues are up for negotiation until everything is agreed. On one
hand, this method, in which nothing is agreed until everything is agreed, is suited for large, complex rounds in which rules and disciplines in many areas of trade (goods, services, agriculture, IPR, etc.) are discussed. It permits negotiation on a cross-sectoral basis, so countries can make a concession in one area of negotiation and receive a concession elsewhere. The method is intended to prevent smallersmal er countries from being "steamrolled"“steamrolled” by the demands of
larger economies, and helps ensure that each country sees a net benefit in the resulting agreement.
On the other hand, arguably, the single undertaking has contributed to the breakdown of the negotiating function under the WTO, exemplified by the never-completed Doha Round, as issues
of importance to one country or another served to block consensus at numerous points during the round. Some members, including the EU, have calledcal ed for "“flexible multilateralism," ” based on continued support for full multilateral negotiations where possible, but pursuit of plurilateral
agreements on an MFN basis where multilateral consensus is not possible.150
An important task of the WTO is to monitor each member'’s compliance with various agreements. A WTO member is required to notify the Secretariat of certain relevant domestic laws or practices so that other members can assess the consistency of WTO members'’ domestic laws, regulations, and actions with WTO agreements. Required notifications include measures concerning
subsidies, agricultural support, quantitative restrictions, technical barriers to trade, and sanitary and phytosanitaryTBT, and SPS standards.
Compliance with the WTO agreement'’s notification requirements, especiallyespecial y regarding government subsidy programs, has become a serious concern among certain members, including the United States. Many WTO members are late in submitting their required notifications or do
not submit them at allal . This effectively prevents other members from fully examining the policies of their trading partners.
In response, some members—notably the United States and the EU—have proposed incentives for compliance or sanctions for noncompliance with notification
reporting requirements. These include the following:
In November 2018, the United States, EU, Japan, Argentina, and Costa Rica put forward a joint proposal that reflects several of these elements, including penalties for noncompliance.153184 It also specifies exemptions for developing countries that lack capacity and have requested assistance to help fulfill
help fulfil notification obligations.
A country'’s development status can affect the pace at which a country undertakes its WTO obligations. Given that WTO members self-designate their status, some members hold on to developing-country status even after their economies begin more to resemble their developed-
country peers.154185 In addition, some of the world'’s largest economies, including China, India, and Brazil, may justify developing country status because their per capita incomes more closely resemble those of a developing country than those of developed countries. Developing country status enables a country to claim special and differential treatment (SDT) both in the context of existing obligations and in negotiations for new disciplines (see text box).155186 The WTO specifies, however, that while the designated status is based on self-selection, it is "“not necessarily automatically
automatical y accepted in all al WTO bodies."156
”187
Several developed countries, including the EU and United States, have expressed frustration at
this state of affairs. In January 2019, the United States circulated a paper warning that the WTO is at risk of becoming irrelevant due to the practice of allowing members to self-designate their development status to obtain special and differential treatment.157188 On July 26, 2019, President Trump issued a "“Memorandum on Reforming Developing-Country Status in the World Trade Organization."158”189 The President stated that the WTO dichotomy between developed and developing countries is outdated and "has allowed“has al owed some WTO Members to gain unfair
advantages in the international trade arena." He specifically” He specifical y mentioned China, stating that "“the United States has never accepted China'’s claim to developing-country status, and virtuallyvirtual y every current economic indicator belies China'’s claim."” The President instructed USTR to work to reform the WTO self-declaration practice and, if no substantial progress is made within 90 days, to take certain unilateral actions, such as no longer treating a country as developing if the USTR
183 European Commission, “EU proposals on WT O modernization,” WK8329/2018 INIT, July 5, 2018. 184 “Procedures to Enhance T ransparency and Strengthen Not ification Requirements Under WT O Agreements,” JOB/GC/204, November 1, 2018.
185 T he WT O does not specify criteria for “developing” or “developed” country status, but least-developed countries are defined under U.N. criteria.
186 For examples of types of the SDT provisions in WT O agreements, see https://www.wto.org/english/tratop_e/devel_e/teccop_e/s_and_d_eg_e.htm. 187 “Understanding the WT O: T he Organization,” https://www.wto.org/english/thewto_e/whatis_e/tif_e/org7_e.htm. 188 “An undifferentiated WT O: Self-declared development status risk institutional irrelevance,” Communications from the United States, WT /GC/W/757, January 16, 2019.
189 T he White House, “Memorandum on Reforming Developing-Country Status in the World T rade Organization,” July 26, 2019.
Congressional Research Service
51
World Trade Organization: Overview and Future Direction
actions, such as no longer treating a country as developing if the USTR believes that designation to be improper, and to publish a list of all al economies USTR believes to be "inappropriately"
be “inappropriately” claiming developing-economy status.
The U.S. memorandum received a mixed response from other WTO members. Defending its
developing country status and the availability of SDT, a Chinese Foreign Ministry spokesperson insisted that the principle of SDT "“reflects the core values and basic principles of the WTO"” and "“must be safeguarded no matter how the WTO is reformed."” At the same time, she stated that in claiming the status, "“China does not intend to shy away from its due international responsibilities,"” while the U.S. position shows the United States to be "“capricious, arrogant and selfish."159
selfish.”190 China, India, South Africa, and others defend the relevance of development status, claiming that, "“the persistence of the enormous development divide between the developing and developed Members of the WTO is reflected on a wide range of indicators."160”191 Developed countries, such as Norway and others, also have emphasized the importance of SDT as a "“tool for enabling development and greater participation in the multilateral trading system."161”192 Further, in their view, "“negotiating criteria for designating Members'’ access to S&D is unlikely to be
productive. What matters is responding adequately to the specific development needs of Members."” On the other hand, some countries, like, South Korea, Brazil, and Singapore have , recently
agreed not to seek SDT,162193 and Taiwan had previously officially changed its status to "developed"“developed” in 2018.163
194
Several other suggestions have been made to address the situation, including encouraging countries to graduate from developing country status; setting quantifiable criteria for development status; targeting SDT in future agreements on a needs-driven, differential basis; and requiring full eventual implementation of all al new agreements.164195 Some of these steps were implemented in the
WTO Trade Facilitation Agreement.
The Meaning of The WTO does not apply established definitions of
These provisions are |
Supporters of the multilateral trading system consider the dispute settlement mechanism (DSM) not only a success of the system, but essential to maintain the relevance of the institution, especially
especial y while the WTO has struggled as a negotiating body. However, the DSM is facing increased pressure for reform, in part due to long-standing U.S. objections over certain rules and procedures. USTR Lighthizer contends that the WTO has become a "“litigation-centered organization,"” which has lost its focus on negotiations.167198 While WTO members have actively used the DSM since its creation, some have also voiced concerns about various aspects, including procedural delays and compliance, and believe the current system could be reformed to be fairer
and more efficient.
The Doha Round included negotiations to reform the DS system through "“improvements and clarifications"
clarifications” to DSU rules.168199 A framework of 50 proposals was circulated in 2003 but countries were unable to reach consensus.169200 Discussions have continued beyond Doha with a primary focus on 12 issues, including third-party rights, panel composition, and remand authority of the Appellate Appel ate Body. Under prior Administrations, the United States proposed greater control for WTO members over the process, guidelines for the adjudicative bodies, and greater transparency,
such as public access to proceedings. However, these negotiations have yet to achieve results.
Some experts suggest that enhancing the capabilities and legitimacy of the DS system will wil likely require several changes, including improving mechanisms for oversight, narrowing the scope of
and diverting sensitive issues from adjudication, improving institutional support, and providing WTO members more input over certain procedures.170201 Other analysts point to major challenges chal enges facing the dispute resolutionDS system that could have the potential to either dismantle the current system or further catalyze change. These include most notably, the possibility that the Appellate Body cease to operate in December 2019, a forthcoming ruling on WTO disputes over U.S. Section 232 tariffs on steel or aluminum, or resolution of the long-standing, though currently dormant, dispute regarding China'Appel ate Body ceasing to operate in
197 WT O Committee on T rade and Development, Special and Differential Treatment Provisions in WTO Agreements and Decisions, Note by the Secretariat, WT /COMT D/W/219, September 22, 2016.
198 UST R Robert Lighthizer, “Opening Plenary Statement,” December 11, 2017. 199 “Doha WT O Ministerial 2001: Ministerial Declaration,” WT /MIN(01)/DEC/1, November 20, 2001, https://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm.
200 T here have been some cases of past DSU procedural reforms, such as the decisions to accept outside counsel and am icus curiae briefs in panel deliberations. See Craig VanGrasstek, The History and Future of the World Trade Organization, World T rade Organization, 2013.
201 Robert McDougall, “ Crisis in the WT O: Restoring the WT O Dispute Settlement Function ,” Centre for International Governance Innovation, CIGI Papers No. 194, October 2018.
Congressional Research Service
53
World Trade Organization: Overview and Future Direction
December 2019 and forthcoming rulings on WTO disputes over U.S. Section 232 tariffs, or resolution of the long-standing, though currently dormant, dispute regarding China’s treatment as a nonmarket economy.171202 Many analysts point to the impasse over reform of the DS system as also reflecting deeper systemic issues concerning the inability of the WTO to keep up with structural changes in the global economy. As oneOne report concludes, the WTO's "’s “dispute settlement function cannot be safeguarded unless, at the same time, the WTO'’s rule-making function is also
strengthened and the substantive trade rules are modernized."172
The immediate flashpoint to the system is the refusal of the United States to consent to the appointment of new AB jurists. The United States has long-standing objections to decisions involving the AB'’s interpretation of certain U.S. trade remedy laws in particular—the subject of
the majority of complaints brought by other WTO members against the United States.173 The AB consists of204 The AB’s seven jurists are appointed to four-year terms on a rolling basis, with the possibility of a one-term reappointment. Each dispute is heard by three jurists. The Trump Administration, as wel as well as the Obama Administration in one instance, blocked the process to appoint new jurists as their term’s expired, leaving the AB with one member in December 2019.205 Deputy DG of the WTO Alan Wolff summarized the stakes of
the Appel ate Body ceasing to function: with member countries, blocked the process to appoint new jurists, leaving only three AB jurists remaining to hear all cases.174
Concerns are rising that the AB, already facing a backlog of cases, could come to a halt on December 10, 2019, if additional appointments are not made.175 Deputy DG of the WTO Alan Wolff summarized the stakes, noting that if the Appellate Body were to cease to function, member countries would be unable to appeal an adverse panel decision against one of their policies, and without that option, "“there is a risk of every trade dispute devolving into small smal
and not so small smal trade wars, consisting of retaliation and counter-retaliation."176
”206
WTO members and other stakeholders are exploring a number of options, absent timely reforms by December of the Appellate Bodyin the absence of a functioning AB, that may support the current system (see below), to forestall forestal collapse of dispute settlement altogether. Some interimInterim or permanent solutions under discussiondebated include the possible creation of a parallel dispute settlementparal el DS system that mirrors the WTO but does not include the United States; fall fal back to a GATT-like system where a disputing party can block decisions; or tacit agreement by members to
accept panel decisions without appeal.177 For example, in July 2019, the EU and Canada announced agreement on an interim appeal arbitration arrangement based on WTO rules207 Most notably, on April 30, 2020, a group of members led by the EU put into effect an ad hoc Multi-Party Interim Appeal Arbitration Arrangement (MPIA), pursuant to Article 25 of the DSU, which would apply to bilateral disputes in the event the Appellate Body is unable to hear appeals.178 The United States, however, criticized the proposal as "endorsing and legitimizing" the Appellate Body practices that "breached the rules set by WTO members,"as a temporary measure to arbitrate disputes, which mirrors the main functions of the WTO appeals system.208 On July 31, the MPIA took a final step toward becoming operational when members formal y decided on the pool of 10 standing
arbitrators to hear appeals. To date, 22 WTO members, including China, are part of the MPIA; it
does not apply to cases involving members who have not joined, including the United States.
The United States, has criticized these efforts as “endorsing and legitimizing” the Appel ate Body
practices that “breached the rules set by WTO members,” that have been central to U.S. concerns.179 One study by the Centre for International Governance Innovation (CIGI)209 One study considers the merits of interim solutions, suggesting that "“no-appeal and appeal-arbitration agreements can preserve rights for some members, but solutions that attempt to exclude the United States are not in the interests of most members."180
The United States expounded on some of the perceived shortcomings of the dispute settlementDS system in its most recent trade policy agenda. Arguably the and lengthy report on the AB issued in February 2020.214 Arguably, the main U.S. complaint is that the system, particularly the AB, is "adding to or diminishing U.S. rights by not applying the WTO agreements as written" in the areas of subsidies, antidumping and countervailing duties has “overreached on substantive issues, engaged in impermissible gap-fil ing, and read into the WTO agreements rules that are
simply not there… adding to or diminishing the rights and obligations of WTO Members.” 215 This is particularly so in the areas of subsidies, AD and CVDs, standards, and safeguards., standards, and safeguards.181 At its crux, the current controversy is over the autonomy of the AB, its deference to the DSB, and its obligations to implement the provisions of the DSU. The United States has been the most vocal in its criticisms, yet other WTO members have expressed similar concerns. While the United States
has not tabled specific reforms for these complaints to the WTO membership, it has criticized aspects of the DS system in various General Council meetings and reports. Meanwhile, several members, singly or in groups, have tabled proposals or suggestions on how to reform AB procedures and practices. The General Council launched an informal process on the functioning of the AB of the Appellate Body at its December 2018 meeting. This group has met regularly, and its’s facilitator, Ambassador David Walker of New Zealand, proposed in October 2019 a list of items of convergence among its participants as a
draft decision of the General Council—the United States ultimately declined to back the draft decision. Under each of the following issues, U.S. concerns are raised along with Ambassador Walker'
Walker’s proposals to address them.182
216
Disregard for the 90-day, DSU-mandated deadline for AB appeals. USTR claims that the AB does not have the authority to fail to meet the deadline without consulting the DSB, maintaining
210 CIGI Expert Consultation on WTO Reform , Special Report: Spring 2019, Centre for International Governance Innovation (CIGI), September 12, 2019, p. 18.
211 Permanent Mission of Japan to the International Organizations in Geneva, “T rade Policy Review: Japan,” Statement, July 8, 2020, https://www.geneve-mission.emb-japan.go.jp/itpr_en/statement_trade_20200708.html. 212 Senate Finance Committee, Hearing on WTO Reform: Making Global Rules Work For Global Challenges, written testimony by Jennifer Hillman, July 29, 2020.
213 Senate Finance Committee, Hearing on WTO Reform: Making Global Rules Work For Global Challenges, written testimony by T homas R. Graham, July 29, 2020. 214 UST R called the report the “the first comprehensive study of the Appellate Body’s failure to comply with WT O rules and interpret WTO agreements as written,” and published it “to examine and explain the problem, not dictate solutions.” See Report on the Appellate Body of the World Trade Organization, February 2020. 215 Ibid, pp. 8-9. 216 WT O General Council, “Informal Process Related to the Functioning of the Appellate Body – Report by the Facilitator, H.E. David Walker (New Zealand), (Job /GC/222), T uesday October 15, 2019.
Congressional Research Service
55
World Trade Organization: Overview and Future Direction
that the deadline “does not have the authority to fail to meet the deadline without consulting the DSB, maintaining that the deadline "helps ensure that the AB focuses its report on the issue on appeal.” The
facilitator found convergence on the following issues:
During the Obama Administration, the United States blocked the reappointment of a South
Korean jurist to the AB in May 2016. The United States cited what it considered "“abstract discussions"discussions” in prior decisions by the jurist that went beyond the legal scope of the WTO.184218 This action has led to the concern that the prospect of non-reappointment could affect the independence of the AB system.185219 However, one former AB jurist opines that, "“reappointment is an option, not a right,"” and callscal s for the WTO members to determine if a more formal process
similar to initial appointment of AB jurists is needed for reappointment.186
220
217 UST R indicates this plank requires immediate attention, noting “the United States is resolute in its view that Members need to resolve this issue before moving on to the issue of replacing Appellate Body Members.” See UST R 2018 Annual Report, March 2018, p. 26.
218 Shawn Donnan, “US accused of undermining WT O,” Financial Times, May 30, 2016. 219 European Commission, “EU proposals on WT O modernization,” (WK8329/2018 INIT), July 5, 2018, p. 16. 220 WT O, “Farewell Speech of Appellate Body Member Ricardo Ramirez-Hernandez, May 28, 2018, https://www.wto.org/english/tratop_e/dispu_e/ricardoramirezfarwellspeech_e.htm.
Congressional Research Service
56
World Trade Organization: Overview and Future Direction
Dispute Settlement Understanding, Article 3.2
The dispute settlement |
Other criticisms of the AB involve the extent to which it can interpret WTO agreements. The United States, in arguing for a more restrictive view of the power of the DSB, points to Article 3.2 that "“recommendations and rulings of the DSB cannot add to or diminish the rights and obligations provided in the covered agreements"” (see text box above). However, those supporting a more expansive view of the DSU'’s role can point to the same article, which highlights the role "“to clarify the existing provisions of those agreements in accordance with customary rules of
interpretation of public international law."” The scope and reach of the AB'’s activities is an enduring controversy for the organization, not limited to the Trump Administration. USTR has
flagged several specific practices relating to these issues, such as the following:
Issuing advisory opinions on issues not relevant to the issue on appeal. This point is relatedrelates to the U.S. concern that the AB is engaged in "judicial overreach"“judicial overreach” by going beyond deciding the case at hand. USTR contends that the ability to issue advisory opinions or interpretations of text rests with the Ministerial Conference or General Council. The facilitator found convergence on the
following issues:
The following two suggestions, while not part of the Walker recommendations, have also been raised in this context:
De novo review of facts or domestic law in cases on appeal. The United States allegesal eges that the AB
is not giving the initial panel due deference on matters of fact, including regarding the panel's ’s interpretation of domestic law. This point derives from USTR'’s view that a country'’s domestic or municipal law should be considered as fact, and that the panel'’s interpretation of the domestic law
is thus not reviewable by the AB. The facilitator found convergence on the following issues:
221 See, for example, Joost Pauwelyn, Appeal without Remand: A Design Flaw in WTO Dispute Settlement and How to Fix It, International Centre for Trade and Sustainable Development, June 2007; Canada submission, JOB/GC/201, p. 3.
Congressional Research Service
57
World Trade Organization: Overview and Future Direction
Treatment of AB decisions as precedent. Like the previous two concerns, this complaint speaks to the al egedthe alleged overreach of the AB. USTR asserts that while AB reports can provide "“valuable clarification"clarification” of covered agreements, they cannot be considered or substituted for the WTO agreements and obligations negotiated by members. However, according to one former DG of the WTO, "“the precedent concept used in the WTO jurisprudence is ... centrallycentral y important to the effectiveness of the WTO dispute settlement procedure goals of security and predictability."188”222 A
A related concern some WTO members have is "gap-filling"“gap-fil ing” by the DS system, where the legal precedent is unclear or ambiguous or there are no or incomplete WTO rules regarding a contested issue. Here there are diametrically diametrical y opposite beliefs: a U.S. trade practitioner asks, "Is filling“Is fil ing gaps and construing silences reallyreal y not the creation of rights and obligations through disputes vs. leaving such function to negotiations by the members?"189”223 The former DG, however, contends
that "“every juridical institution has at least some measure of gap-fillingfil ing responsibility as part of its efforts to resolve ambiguity."190”224 The issue of the legitimacy of precedence or gap-fillingfil ing may be one of the thorniest issues of all al with few solutions proposed that would potentiallypotential y satisfy
differences among members. The facilitator found convergence on the following issues:
” The Walker process also found consensus to establish a mechanism for regular dialogue between WTO members and the AB in an informal setting to discuss issues related to the functioning of the AB, but unrelated to particular cases.
It is likely that many of the issues that could arise from proposed reforms to the WTO system would require clarification of or amendment to the language of the Marrakesh Agreement or the DSU. Clarification could take the form of interpretation of the agreements. As noted above,
interpretation can be undertaken by the Ministerial Conference (held every two years), General Council, or DSB, with a three-fourths vote of the WTO membership. Amending the decisionmaking provisions of the Marrakesh Agreement (Article IX) or the DSU would require consensus of the membership at the Ministerial Conference (Marrakesh Agreement, Article X.8). Amendments to the Marrakesh Agreement would require a two-thirds vote of the membership. As
noted above, negotiations related to reforms of the DSM occurred during the Doha Round, and
222 Peter Sutherland et al., The Future of the WTO: Addressing institutional challenges in th e new millennium , World T rade Organization, 2004, p. 55.
223 T erence Stewart, “T he Broken Multilateral T rade Dispute System,” Asia Society Policy Institute, February 7, 2018. 224 Sutherland, 2004, p. 52.
Congressional Research Service
58
World Trade Organization: Overview and Future Direction
despite the criticism of the DSM by the United States and others, the General Council or the DSB
has not undertaken serious consideration of these reforms.
The United States criticized some of the Walker proposals as seeking to change WTO DS rules to
fit the practices objectionable to the United States, rather than adhering to the rules as originally original y negotiated. Instead of seeking to accommodate current practices, U.S. Ambassador to the WTO Dennis Shea proposed that WTO members "“engage in a deeper discussion"” of why the Appellate Appel ate Body has "“felt free to depart from what WTO Members agreed to,"” and that "“without this understanding, there is no reason to believe that simply adopting new or additional language, in
whatever form, will wil be effective in addressing the concerns shared by several Members."191 Meanwhile, the United States has also proposed a budget that would slash funding for the AB from $2 million to $100,000 and would reduce the spending for AB members to $100,000192
The United States has served as a leader in the WTO and the GATT since their creation.193 The United States played a major role in shaping GATT/WTO negotiations and rulemaking, many of which reflect U.S. laws and norms. It was a leading advocate in the Uruguay Round for expanding negotiations to include services and IPR, key sources of U.S. competitiveness, as well wel as binding DS to ensure new rules were enforceable. Today, many stakeholders across the United
States rely on WTO rules to open markets for importing and exporting goods and services, and to
defend and advance U.S. economic interests.
As noted above
As discussed, the Trump Administration has variously expressed doubt over the value of the WTO and multilateral trade negotiations to the U.S. economy. While President Trump’s initial talk of WTO withdrawal has abated, the Administration continues to express skepticism toward the value of multilateralism, often preferring bilateral negotiations to address “unfair trading practices.” While many view U.S. concerns as justified, the U.S. practice of blocking of the AB and reticence to debate specific reforms could cede U.S. leadership to others. At the same time,
reform of the multilateral trading system is a stated U.S.trade negotiations to the U.S. economy. As a candidate, President Trump asserted that WTO trade deals are a "disaster" and that the United States should "renegotiate" or "pull out," and repeated these threats at times throughout his presidency.194 While such talk has abated more recently, the Administration has continued to express skepticism toward the value of multilateral agreements, preferring bilateral negotiations to address "unfair trading practices." At the same time, "reform of the multilateral trading system" is a stated Administration trade policy objective, and the United States has remained engaged in certain initiatives and plurilateral efforts at the WTO, and has put forward several reform proposals in other areas. While some U.S. frustrations with the WTO are not new and are shared by other trading partners, the Administration's overall ’s overal approach has spurred new
spurred questions regarding the future of U.S. leadership of and participation in the WTO.
Most observers would maintain that the possibility of U.S. withdrawal from the WTO remains unlikely for procedural and substantive reasons. ProcedurallyProcedural y, a withdrawal resolution would have to pass
the House and Senate; it has also been debated what legal effect the resolution would have if adopted.227 While resolutions were introduced in May 2020 during the 116th Congress, a rule change proposed by the House Rules Committee and adopted by the House, as wel as by an interpretation of the statute reportedly made by the Senate Parliamentarian, are likely to prevent votes from occurring on the measures.228 Moreover, if the United States were to consider such a 225 Ambassador Dennis Shea, “Statements delivered by Ambassador Shea at the Meeting of the WT O General Council, July 23, 2019, https://geneva.usmission.gov/2019/07/23/statements-delivered-by-ambassador-dennis-shea-wto-general-council-meeting-july-23-2019/.
226 “UST R: If WT O Appellate Body never comes back, ‘that would be fine,’” Inside U.S. Trade, June 17, 2020. 227 For a discussion of the debate, see Jack Caporal et al., The WTO at a Crossroad, Center for Strategic and International Studies, September 2019. 228 Doug Palmer, “New ruling quashes Hawley’s hope for Senate WT O withdrawal vote,” Politico, July 1, 2020.
Congressional Research Service
59
World Trade Organization: Overview and Future Direction
step, withdrawal would have a number of practical consequences. The United States would face economic costs, since absent WTO membership, remaining members would no longer be obligated to grant the United States MFN status under WTO agreements, or uphold WTO rules on IPR and restrictions on the use of regulations, trade-related investment measures, or subsidies. Consequently, U.S. goods and services could face significant disadvantages in other markets, as members without FTAs with the United States could raise tariffs or other trade barriers on U.S.
exports at wil . More broadly, the United States would stand to lose influence over the writing of
future global trade rules.
A broader question is whether the WTO would flounder without U.S. leadership, or whether other members like the EU and China would expandadopted.195 Moreover, if the United States were to consider such a step, withdrawal would have a number of practical consequences. The United States could face economic costs, since absent WTO membership, remaining members would no longer be obligated to grant the United States MFN status under WTO agreements. WTO rules also restrict members' ability to use quotas, regulations, trade-related investment measures, or subsidies in ways that discriminate or disadvantage U.S. goods and services. They also require members to respect U.S. IPR. Consequently, U.S. businesses could face significant disadvantages in other markets, as members without FTAs with the United States could raise tariffs or other trade barriers at will. Nondiscrimination, a key bedrock principle of the multilateral trading system, could be eroded, particularly given the added impetus U.S. withdrawal could give to the proliferation of FTAs.
Withdrawal could also lead to a U.S. loss of influence over how important international trade matters are decided and who writes global trade rules. In the process, economic inefficiencies and political tensions could increase. Exiting the WTO and the international trading relationships it creates and governs could have broader policy implications, including for cooperation between the United States and allies on foreign policy issues.
Another question is whether the WTO would flounder without U.S. leadership, or whether other WTO members like the EU and China would increase their roles. As some in the United States question the value of WTO participation and leadership, other countries have begun to assertasserted themselves as leaders and advocates for the global trading system. As noted, cooperation on WTO reform has becomebeen elevated
as a major topic of discussion at recent high-level meetings, including the latest EU-China Summit held in April 2019 and at the summits led by Canada among trade ministers from 13 WTO members.196
Congressional including among the EU, China, and Canada.229
Ongoing congressional oversight could examine the value, both economic and political, of U.S. WTO membership and leadership in the WTO. As part of its oversight,. Congress could consider, or could ask the U.S. International Trade Commission to investigate, the value of the WTO or potential impact of withdrawal from the WTO WTO withdrawal
on U.S. businesses, consumers, federal agencies, laws and regulations, and foreign policy. Through resolutions some Members have expressed support for ongoing WTO reform efforts (H.Res. 746, introduced December 2019) and advocated for specific reforms and U.S. leadership (S.Res. 651, introduced July 2020). S.Res. 651, for example, cautioned that the United States “achieved its trade policy objectives through active leadership at the WTO, and that an absence of that leadership would be fil ed by nonmarket economies that are hostile to a host of United States
interests.” Congress could also hold broader debate over WTO participation in considering a
disapproval resolution of U.S. membership under the URAA.
H.Res. 746
Expressing the sense of the House of Representatives that the United States should reaffirm its commitment as a member of the WTO and work with other WTO members to achieve reforms at the WTO that improve the speed and predictability of dispute settlement, address longstanding concerns with the WTO’s Appel ate Body, increase transparency at the WTO, ensure that WTO members invoke special and differential treatment reserved for developing countries only in fair and appropriate circumstances, and update the WTO rules to address the needs of the United States and other free and open economies in the 21st century.
S.Res. 651
Expressing the sense of the Senate that, while the United States finds value and usefulness in the WTO in fulfil ing the needs of the United States and other free and open economies in the 21st century, significant reforms at the WTO are needed and the United States must therefore continue to demonstrate leadership to achieve those reforms.
Respect for the Rules and Credibility of the WTO The founding of the GATT and WTO were premised on the notion that an open, transparent and rules-based multilateral trading system was necessary to avoid a return to the nationalistic interwar trade policies of the 1930s. There arguably are substantial reasons for the United States and other countries to uphold the rules and enforce their commitments. A liberalized, rules-based global trading system increases competition for companies domestical y, but also helps to ensure
229 For example, see Delegation of the European Union to China, “Joint statement of the 21 st EU-China summit,” April 10, 2019, https://eeas.europa.eu/delegations/china_en/60836/Joint%20statement%20of%20the%2021st%20EU-China%20summit ; and Government of Canada, “ Ottawa Group and WT O reform,” https://www.canada.ca/en/global-affairs/news/2019/05/ottawa-group-and-wto-reform.html.
Congressional Research Service
60
World Trade Organization: Overview and Future Direction
that companies and their workers have access and opportunity to compete in foreign markets with the certainty of a stable, rules-based system. A system for enforcing the rules and resolving disputes that inevitably arise from repeated commercial interactions also helps ensure such trade
frictions do not spil over into broader international relations.
However, certain actions by the Trump Administration and other countries have raised questions about respect for the trading system, and could weaken the credibility of the WTO. In particular, recent U.S. actions to raise tariffs against major trading partners and obstruct the functioning of the DS system have prompted concerns from some that the United States may undermine the
effectiveness and credibility of the institution that it helped to create.230 Moreover, the outcomes of controversial dispute cases over U.S. tariffs could set important related precedents (see below). Some are concerned that U.S. actions may embolden other countries to protect their own industries under claims of protecting national security interests. At the same time, other countries’ retaliatory tariff actions may violate WTO commitments and are pending DS resolution. If the DS process cannot satisfactorily resolve the conflicts, further unilateral actions and tit-for-tat
retaliation could escalate. More broadly, many observers view the future of the trading system as
deeply intertwined with how the United States and China manage their ongoing trade frictions.
In recent years, countries have also been accused of imposing new trade restrictions and taking actions that are not in line with either the spirit or letter of WTO agreements—in particular, China’s state-led industrial policies, including subsidies, IPR violations, and forced technology transfer practices.231 In part, the WTO’s perceived inability to address Chinese policies and gaps in rules led to the United States resorting to Section 301 actions. Many increasingly view WTO relevance as waning, absent more concerted efforts to tackle systemic non-market practices,
which have driven recent U.S. and other’s efforts to explore new rules in and outside the WTO—efforts largely resisted by China. More broadly, countries’ pursuit of such measures in the name of national or economic security appears to further cal into question the viability of the rules-based system. While WTO agreements offer ample flexibility for temporary measures justified by national security or health crises, the spread of export restrictions following COVID-19 have
further amplified such concerns.
U.S. Sovereignty and the WTO
Under the Trump Administration, USTR has put new emphasis on “preserving national sovereignty” within the U.S. trade policy agenda, emphasizing that any multinational system to resolve trade disputes “must not force Americans to live under new obligations to which the
United States and its elected officials never agreed.”232 The question of sovereignty is not a new one. The Uruguay Round Agreements Act provided that U.S. law would prevail against an inconsistent provision or an application of a provision in a WTO agreement. Further, it specified that no U.S. law could be modified or amended by the agreements, including in areas of public health, environment, worker safety, or U.S. trade laws, unless specified in the implementing
legislation.233 In other words, an adverse DS decision against the United States would not change 230 CRS Report R45529, Trump Administration Tariff Actions (Sections 201, 232, and 301): Frequently Asked Questions, coordinated by Brock R. Williams. 231 In 2018, trade-restrictive measures imposed by G20 economies “hit a new high” between mid- and late 2018, compared to the previous reporting period, and was the largest recorded since 2012. “WT O report shows sharp rise in trade-restrictive measures from G20 economies,” November 27, 2018, https://www.wto.org/english/news_e/news18_e/trdev_22nov18_e.htm.
232 UST R, 2018 Trade Policy Agenda, March 2018, p. 3. 233 P.L. 103-465, Sec. 102.
Congressional Research Service
61
World Trade Organization: Overview and Future Direction
U.S. law; Congress would need to make the change to come into compliance with a DS decision or decline to do so, as Congress has done in the past. In that case, however, the other disputing party may impose retaliatory tariffs on the United States in compensation. In addition, the withdrawal procedures in the URAA responded to the same sovereignty concerns expressed in the
language above.234
While U.S. concerns regarding al eged “judicial overreach” in WTO dispute findings are long-standing, the Trump Administration has also emphasized unilateral action outside the WTO as a means of defending U.S. interests, including national security. Some observers fear that
disagreements at the WTO on issues related to national security (e.g., Section 232 tariffs) may be difficult to resolve through the existing DS procedures, given current disagreements related to the WTO AB and concerns over national sovereignty.235 WTO members and parties to the GATT have invoked Article XXI al owing measures to protect “essential security interests,” in a handful of other trade disputes. These parties, including the United States, have often argued that each
country is the sole judge of questions relating to its own security interests.
The outcome of a recent case could have implications for the adjudication of disputes involving U.S. steel and aluminum tariffs. In April 2019, a panel ruling in a Russia-Ukraine dispute
clarified the WTO’s role in evaluating the use of the national security exception, finding that DS panels are competent to review member actions justified under Article XXI.236 The panel determined that it had jurisdiction to review whether a WTO member’s actions were justified under Article XXI’s national security exception and that Russia satisfied the requirements for invoking the exception.237 The United States voiced concerns with the panel report, finding it
“insufficient,” and maintaining that Article XXI is “self-judging” and not subject to panel review.
Role of Emerging Markets
The broadened membership of the WTO over the past two decades has promoted greater integration of emerging markets such as Brazil, China, India, and Russia in the global economy, and helped ensure that developing country interests are represented on the global trade agenda. At the same time, many observers have attributed the inability of WTO members to collectively
reach compromise over new rules and trade liberalization to differing priorities for reforms and
market opening among developed countries and emerging markets.
One question is to what extent economies like China, with significant economic clout, wil take on greater leadership to play a more constructive role, advance the global trade agenda, and facilitate compromise among competing interests. China has voiced support for globalization and
234 During congressional debate over URAA, some Members proposed to create extra review mechanisms of WT O DS, and many Members stressed that only Congress can change U.S. laws as a result of dispute findings.
235 For more information, see CRS Report R45249, Section 232 Investigations: Overview and Issues for Congress, coordinated by Rachel F. Fefer. 236 WT O, “ Members adopt national security ruling on Russian Federation’s transit restrictions,” April 26, 2019. Ukraine argued that Russia’s restrictions and bans on the traffic of certain goods crossing its territory from Ukraine violated the GAT T and Russia’s Accession Protocol. Russia invoked the national security exception in GAT T Article XXI(b)(iii) in its defense, arguing that the panel lacked jurisdiction to evaluate the merits of Ukraine’s claims, and that deterioration in relations and conflict between Russia and Ukraine was a threat to its security interests.
237 T he panel determined requirements were met because: (1) Russia’s relations with Ukraine had deteriorated to the point that they constituted an “emergency in international relations”; (2) Russia’s trade restrictions qualified as measures “taken in time of this emergency”; and (3) Russia met all other requirements for invoking the exception. Ibid, Para. 8.1(d)(i)-(iv).
Congressional Research Service
62
World Trade Organization: Overview and Future Direction
the multilateral trading system under which it has thrived.238 The Chinese government’s 2018 white paper on the WTO stated that: “The multilateral trading system, with the WTO at its core, is the cornerstone of international trade and underpins the sound and orderly development of global trade. China firmly observes and upholds the WTO rules, and supports the multilateral trading system that is open, transparent, inclusive and nondiscriminatory.”239 At the same time, China has blocked progress in certain initiatives, including the WTO’s stal ed plurilateral on
environmental goods, is seeking to limit the scope of ongoing e-commerce negotiations, and has not put forward a sufficiently robust offer on procurement to join the GPA, a longstanding promise. More broadly, growing scrutiny of Chinese industrial policies and non-market practices are chal enging China’s role in the system, raising questions about the country’s wil ingness in
practice to take on meaningful leadership responsibility in the WTO context.
Another related concern voiced by the United States, including some Members of Congress, and other WTO members is the role of large emerging markets and use of developing country status by those and other countries to ensure flexibility in implementing commitments. The United
States is seeking to work with other members to set qualifications for such status, but the issue remains controversial. Members could be given incentives to graduate from developing country
status; moreover, different WTO agreements could offer different incentives or other flexibilities.
Priorities for WTO Reforms and Future Negotiations
Reform of the multilateral trading system remains among the Administration’s trade policy
objectives.240 Congress can take a number of steps to direct, influence, and signal support for U.S. priorities for ongoing and future WTO negotiations and reform. The primary legislative vehicle for establishing negotiating objectives is TPA. Congress could consider establishing specific or enhanced negotiating objectives for multilateral or plurilateral trade negotiations, possibly through legislation to amend TPA during its potential reauthorization after July 2021. Congress
could also consider specific reporting requirements in TPA, related to providing updates to
Congress on progress toward meeting WTO objectives or on WTO reform efforts.
As discussed, some Members have expressed congressional views on reforms through “sense of
Congress” resolutions and directed the executive branch to increase U.S. engagement in specific areas. Congress could hold oversight hearings or submit letters to ask USTR about specific actions, plans, or objectives regarding WTO reforms for the institution, dispute settlement procedures, or in regards to updating existing agreements to address trade barriers and economic practices not sufficiently covered by current rules. In July 2020, the Senate Finance Committee
held a hearing on WTO reform, expressing bipartisan agreement on the importance of improving the institution.241 Congress could request that USTR provide an update of ongoing plurilateral talks at the WTO, such as on e-commerce and digital trade—specified by Congress as a principal trade negotiating objective in TPA. Congress could also consider appropriating additional funds dedicated to WTO reform efforts. More broadly, Congress may consider the long-term
implications of recent U.S. and other countries’ restrictive and/or unilateral trade actions on current and future trade negotiations. Some experts argue that U.S. unilateral tariffs and blocking of AB appointments may limit other countries’ interest in engaging in negotiations to reduce trade 238 See, for example, President Xi Jinping’s remarks at the World Economic Forum in 2017, http://www.china.org.cn/node_7247529/content_40569136.htm.
239 China’s State Council Information Office, “China and the World T rade Organization,” white paper, June 2018, http://english.gov.cn/archive/white_paper/2018/06/28/content_281476201898696.htm.
240 UST R, 2018 Trade Policy Agenda, March 2018; and 2020 Trade Policy Agenda, February 2020. 241 Senate Finance Committee, Hearing on WTO Reform: Making Global Rules Work For Global Challenges, July 29, 2020.
Congressional Research Service
63
World Trade Organization: Overview and Future Direction
barriers and craft new rules. Such concerns are amplified with the proliferation of preferential FTAs outside the WTO, which may have potential discriminatory effects on non-participating
countries, including the United States.
Outlook The future outlook of the multilateral trading system is the subject of growing debate, as it faces serious chal enges, some longstanding and some emerging more recently. Some experts view the system as long stagnant and facing a crisis; others remain optimistic that the current state of
affairs could spur new momentum toward reforms and alternative negotiating approaches moving forward. Despite differing views, there is a growing consensus that the status quo is no longer sustainable, and that there is urgent need to improve the system and find ground for new
compromises if the WTO is to remain the cornerstone of the trading system.
Debate about the path forward continues. Recent proposals for WTO reforms and for new rules are under development and have provided the seeds for new ideas, though concrete solutions and next steps have yet to be agreed among countries involved in discussions and broader WTO membership. In the near term, several events on the horizon could provide added impetus for
resolving differences and assessing progress. The chal enges of COVID-19 have tested the resilience of global cooperation, disrupted global supply chains, and resulted in widespread trade protectionism. At the same time, several countries have reaffirmed the trading system, lifted restrictions and liberalized trade in response to the crisis, and view the WTO as playing an important role in tackling the trade policy chal enges. While some reform efforts are stal ed and the WTO DS system ceased to fully function in December 2019, the alternate arbitration
mechanism among the EU, China and some other WTO members began operations in 2020 and wil test a key function of the WTO. In addition, several U.S. WTO disputes, including ones involving China, are awaiting consequential decisions in 2020. More broadly, many observers view the future of the global trading system as deeply intertwined with how the United States and
China manage their trade relationship and ongoing frictions.
WTO members also are to face their rescheduled Ministerial in 2021, which many view as a critical action-forcing event. MC12 could provide an opportunity for countries to announce completion of negotiations and concrete progress in other priority areas, including plurilateral
efforts. MC12 and more broadly, the WTO as an institution wil be shaped by the vision of a new
Director-General seeking to inject new momentum into ongoing efforts.
Author Information
Cathleen D. Cimino-Isaacs, Coordinator
Ian F. Fergusson
Analyst in International Trade and Finance
Specialist in International Trade and Finance
Rachel F. Fefer
Analyst in International Trade and Finance
Acknowledgments
The authors thank Amber Hope Wilhelm, CRS Visual Information Specialist, who developed the graphics for this report.
Congressional Research Service
64
World Trade Organization: Overview and Future Direction
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress. Information in a CRS Report should n ot be relied upon for purposes other than public understanding of information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you wish to copy or otherwise use copyrighted material.
Congressional Research Service
R45417 · VERSION 10 · UPDATED
65 on U.S. businesses, consumers, federal agencies, laws and regulations, and foreign policy. Congress could vote on a resolution expressing support of the WTO, instructing USTR to prioritize WTO engagement, or, conversely, a resolution for disapproval of U.S. membership under the URAA in 2020.
The founding of the GATT and creation of the WTO were premised on the notion that an open and rules-based multilateral trading system was necessary to avoid a return to the nationalistic interwar trade policies of the 1930s. There are real costs and benefits to the United States and other countries to uphold the rules and enforce their commitments and those of other WTO members. A liberalized, rules-based global trading system increases international competition for companies domestically, but also helps to ensure that companies and their workers have access and opportunity to compete in foreign markets with the certainty of a stable, rules-based system. A framework for resolving disputes that inevitably arise from repeated commercial interactions may also help ensure such trade frictions do not spill over into broader international relations.
However, certain actions by the Trump Administration and other countries have raised questions about respect for the rules-based trading system, and could weaken the credibility of the WTO. In particular, recent U.S. actions to raise tariffs against major trading partners under Section 232 and Section 301,197 and to potentially obstruct the functioning of the DS system by withholding approval for appointments to the AB, have prompted concerns that the United States may undermine the effectiveness and credibility of the institution that it helped to create.198 Moreover, the outcomes of controversial ongoing dispute cases at the WTO, initiated by several countries over U.S. tariffs, could set precedents and have serious implications for the future credibility of the global trading system. In particular, several U.S. trading partners view U.S. action as blatant protection of domestic industry and not a legitimate use of the national security exception (see below). Some are concerned that U.S. actions may embolden other countries to protect their own industries under claims of protecting their own national security interests. Furthermore, U.S. tariff actions outside of the multilateral system's DS process may open the United States to criticism and could impede U.S. efforts to use the WTO for its own enforcement purposes. At the same time, others countries' retaliatory tariff actions may violate their WTO commitments and are subject to ongoing dispute settlement initiated by the United States. If the DS process cannot satisfactorily resolve the conflicts, further unilateral actions and a tit-for-tat retaliation could escalate.
Other countries have also been accused of imposing new trade restrictions and taking actions that are not in line with WTO agreements.199 In particular, China's industrial state policies, including IPR violations and forced technology transfer practices, arguably damage the credibility of the multilateral trading system that is based on respect for the consensus-based rules. In part, the WTO's perceived inability to address certain Chinese policies led to the United States resorting to Section 301 actions. Other countries' pursuit of industrial policy or imposition of discriminatory measures broadly in the name of national or economic security further call into question the viability of the WTO rules-based system.
Under the Trump Administration, USTR has put new emphasis on "preserving national sovereignty" within the U.S. trade policy agenda, emphasizing that any multinational system to resolve trade disputes "must not force Americans to live under new obligations to which the United States and its elected officials never agreed."200
The question of sovereignty is not a new one. The withdrawal procedures in the URAA responded to concerns that the WTO would infringe on U.S. sovereignty. During the congressional debate over the Uruguay Round agreements, there were some proposals to create extra review mechanisms of WTO dispute settlement, and many Members stressed that only Congress can change U.S. laws as a result of dispute findings.
While U.S. concerns regarding alleged "judicial overreach" in WTO dispute findings are long-standing, the Trump Administration has also emphasized unilateral action outside the WTO as a means of defending U.S. interests, including national security. Some observers fear that disagreements at the WTO on issues related to national security (e.g., Section 232 tariffs) may be difficult to resolve through the existing DS procedures, given current disagreements related to the WTO AB and concerns over national sovereignty.201 As noted previously, Article XXI of the GATT allows WTO members to take measures to protect "essential security interests." WTO members and parties to the GATT have invoked Article XXI in other trade disputes. These parties, including the United States, have often argued that each country is the sole judge of questions relating to its own security interests.
The outcome of a recent case could have implications for the adjudication of disputes before the WTO involving U.S. steel and aluminum tariffs. In April 2019, a panel ruling clarified the WTO's role in evaluating the use of the national security exception by members, finding that WTO DS panels are competent to review member actions justified under Article XXI.202 In a case involving Russia, Ukraine argued that several of Russia's restrictions and bans on the traffic of certain goods crossing its territory from Ukraine violated the GATT and related provisions of Russia's Accession Protocol.203 Russia invoked the national security exception in GATT Article XXI(b)(iii) in its defense, arguing that the panel lacked jurisdiction to evaluate the merits of Ukraine's claims, and that deterioration in relations and conflict between Russia and Ukraine was a threat to its security interests.204
The panel determined that it had jurisdiction to review whether a WTO member's actions were justified under Article XXI's national security exception and that Russia satisfied the requirements for invoking the exception because: (1) Russia's relations with Ukraine had deteriorated to the point that they constituted an "emergency in international relations"; (2) Russia's trade restrictions qualified as measures "taken in time of this emergency"; and (3) Russia met all other requirements for invoking the exception.205 Ukraine agreed not to appeal the ruling.206 The United States voiced concerns with the panel report, finding it "insufficient" and maintaining that Article XXI's national security exception is self-judging as determined by individual members and not subject to review by a WTO panel.
The broadened membership of the WTO over the past two decades has promoted greater integration of emerging markets such as Brazil, China, India, and Russia in the global economy, and helped ensure that developing country interests are represented on the global trade agenda. At the same time, many observers have attributed the inability of WTO members to collectively reach compromise over new rules and trade liberalization to differing priorities for reforms and market opening among developed countries and emerging markets.
One question is to what extent economies like China, with significant economic clout, will take on greater leadership; will such countries play a constructive role, advance the global trade agenda, and facilitate compromise among competing interests? China has voiced support for globalization and the multilateral trading system under which it has thrived.207 The Chinese government's recent white paper on the WTO stated the following: "The multilateral trading system, with the WTO at its core, is the cornerstone of international trade and underpins the sound and orderly development of global trade. China firmly observes and upholds the WTO rules, and supports the multilateral trading system that is open, transparent, inclusive and nondiscriminatory."208 At the same time, China has blocked further progress in certain initiatives, including the WTO plurilateral Environmental Goods Agreement, is seeking to limit the scope of the ongoing e-commerce negotiations, and has not put forward a sufficiently robust offer on government procurement to join that WTO agreement, a long-standing promise. With its industrial policies that advantage domestic industries, some analysts contend that China often abides by the letter but not the "spirit" of WTO rules, raising questions about the country's willingness in practice to take on more leadership responsibility in the WTO context.
Another related concern voiced by the United States and other WTO members is the role of large emerging markets and the use of developing country status by those and other countries to ensure flexibility in implementing future liberalization commitments. The United States could work with other WTO members to set specific criteria to clarify the "developing" country qualification. Members could be given incentives to graduate from developing status; moreover, different WTO agreements could offer different incentives.
The Administration included "reform of the multilateral trading system" in its 2018 trade policy objectives.209 Congress can take a number of steps to direct, influence, and signal support for U.S. priorities for ongoing and future WTO negotiations and reform. The primary legislative vehicle for establishing negotiating objectives related to the WTO is TPA. Congress could consider establishing specific or enhanced negotiating objectives for multilateral or plurilateral trade negotiations, possibly through legislation to amend TPA during its potential reauthorization after July 2021, or through a "sense of Congress" resolution that would express congressional views on reforms. Congress could also consider specific reporting requirements in TPA, related to providing updates to Congress on progress toward meeting WTO objectives or on WTO reform efforts. Congress could hold oversight hearings or submit letters to ask USTR about specific actions, plans, or objectives regarding WTO reforms for the institution, dispute settlement procedures, or in regard to updating existing agreements to address trade barriers and economic practices not sufficiently covered by current rules. Congress could consider appropriating additional funds dedicated to WTO reform efforts. Congress could also consider directing the executive branch to increase U.S. engagement in reform negotiations, for example, by endorsing the current trilateral negotiations between the U.S., EU, and Japan to develop new rules on nonmarket policies and practices, primarily aimed at China. In addition, Congress could request that USTR provide an update of ongoing plurilateral negotiations at the WTO, such as on e-commerce and digital trade—specified by Congress as a principal trade negotiating objective in TPA. Some experts argue however, that recent U.S. unilateral tariff actions may limit other countries' interest in engaging in future WTO or other negotiations to reduce international trade barriers and craft new rules. Such concerns are amplified given the proliferation of preferential FTAs outside the context of the WTO, which have the potential for discriminatory effects on countries not participating, including the United States. Congress may consider the long-term implications of the U.S. actions on current and future trade negotiations.
The future outlook of the multilateral trading system is the subject of growing debate, as it faces serious challenges, some long-standing and some emerging more recently. Some experts view the system as long stagnant and facing a crisis; others remain optimistic that the current state of affairs could spur new momentum toward reforms and alternative negotiating approaches moving forward. Despite differing views, there is a growing consensus that the status quo is no longer sustainable, and that there is urgent need to improve the system and find ground for new compromises if the WTO is to remain the cornerstone of the trading system.
Debate about the path forward continues. Recent proposals for WTO reforms and for new rules are under development and have provided the seeds for new ideas, though concrete solutions and next steps have yet to be agreed among countries involved in discussions and broader WTO membership. In the near term, several events on the horizon could provide added impetus for resolving differences and assessing progress. The DS system could cease to function in December 2019 if the terms of two of three remaining AB members continue to expire without the approval of new appointments. WTO members will also face their biennial Ministerial Conference in June 2020, which could provide an opportunity for countries to announce completion of ongoing negotiations, such as on fisheries subsidies, and concrete progress in other areas of long-standing priority, including the plurilateral efforts launched during the 2017 Ministerial. Meanwhile, other ambitious trade initiatives outside the WTO are proceeding, including the CPTPP, which entered into force in December 2018 for several members and which many analysts view as providing a possible template for future trade liberalization and rulemaking in several areas.
Author Contact Information
Acknowledgments
The authors thank Amber Hope Wilhelm, CRS Visual Information Specialist, who developed the graphics for this report.
1. |
Section 102(b)(13) of the Bipartisan Congressional Trade Priorities and Accountability Act of 2015 (Title I, P.L. 114-26), which reauthorized trade promotion authority (TPA). |
2. |
|
3. |
|
4. |
USTR, 2018 Trade Policy Agenda, March 2018. |
5. |
Barry Eichengreen and Douglas A. Irwin, "The Slide to Protectionism in the Great Depression: Who Succumbed and Why?" The Journal of Economic History, vol. 70, no. 4 (December 2010), pp. 871-897. |
6. |
One major reason the ITO lost momentum was the U.S. government's announcement in 1950 that it would no longer seek congressional ratification of the ITO Charter, due to opposition in the U.S. Congress. WTO, "The GATT years: from Havana to Marrakesh," https://www.wto.org/english/thewto_e/whatis_e/tif_e/fact4_e.htm. |
7. |
GATT Article XXIV. For more information see CRS Report R45198, U.S. and Global Trade Agreements: Issues for Congress, by Brock R. Williams. |
8. |
For more detail on perceived shortcomings of GATT dispute settlement, see "Historic development of the WTO dispute settlement system," https://www.wto.org/english/tratop_e/dispu_e/disp_settlement_cbt_e/c2s1p1_e.htm. |
9. |
WTO, World Trade Report 2007, pp. 201-209. |
10. |
WTO, World Trade Statistical Review 2018, https://www.wto.org/english/res_e/statis_e/wts2018_e/wts2018_e.pdf. |
11. |
WTO, "Pre-WTO legal texts," https://www.wto.org/english/docs_e/legal_e/prewto_legal_e.htm. |
12. |
Douglas A. Irwin, Free Trade Under Fire, Princeton University Press, 2009, p. 226. |
13. |
Ibid, p. 231. The Agreement on Government Procurement remained a plurilateral agreement—only applicable to GPA signatories and not all WTO members. |
14. |
Ibid, p. 239. |
15. |
"The WTO," https://www.wto.org/english/thewto_e/thewto_e.htm. |
16. |
Preamble to the Marrakesh Agreement Establishing the World Trade Organization, https://www.wto.org/english/docs_e/legal_e/04-wto_e.htm. |
17. |
For more information, see https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm11_e.htm. |
18. |
The WTO does not specify criteria for "developing" country status, though a sub-group, least-developed countries, are defined under United Nations criteria. See, "Who are the developing countries in the WTO?" https://www.wto.org/english/tratop_e/devel_e/d1who_e.htm. |
19. |
See for example, Kyle Handley and Nuno Limao, "Policy Uncertainty, Trade, and Welfare: Theory and Evidence for China and the United States," American Economic Review, vol. 107, no. 9 (2017). |
20. |
WTO, "Overview of Developments in the International Trading Environment," WT/TPR/OV/12, November 18, 2009, p. 4. |
21. |
WTO, "Anti-dumping, subsidies, safeguards: contingencies, etc." https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm8_e.htm. |
22. |
For example, see "The Doha round finally dies a merciful death," Financial Times, December 21, 2015. |
23. |
See, for example, CRS Report RL32060, World Trade Organization Negotiations: The Doha Development Agenda, by Ian F. Fergusson; and CRS Report RS22927, WTO Doha Round: Implications for U.S. Agriculture, by Randy Schnepf. |
24. |
This stronger DS system was created, in part, as a result of demands from Congress based on concerns that the GATT approach was ineffective in eliminating barriers to U.S. exports. In fact, it was first principal trade negotiating objective set out in the Omnibus Trade and Competitiveness Act of 1988, P.L. 100-418, §1101(b)(1), 19 U.S.C. 2901(b)(1). |
25. |
See CRS Report R43491, Trade Promotion Authority (TPA): Frequently Asked Questions, by Ian F. Fergusson and Christopher M. Davis. |
26. |
For the 2000 and 2005 resolutions, see https://www.congress.gov/bill/106th-congress/house-joint-resolution/90/actions and https://www.congress.gov/bill/109th-congress/house-joint-resolution/27/actions. |
27. |
TBT refers to technical regulations, standards and certification and conformity assessment procedures; while SPS refers to food safety and animal and plant health measures. |
28. |
WTO, "Agriculture: fairer markets for farmers," https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm3_e.htm. |
29. |
The United States committed to spend no more than $19.1 billion annually on amber box programs. For more detail, see CRS Report R45305, Agriculture in the WTO: Rules and Limits on U.S. Domestic Support, by Randy Schnepf. |
30. |
For more analysis, see CRS Report R43291, U.S. Trade in Services: Trends and Policy Issues, by Rachel F. Fefer. |
31. |
Within U.S. FTAs, the United States has sought a more comprehensive negative list approach, in which obligations are to apply to all types of services, unless explicitly excluded by a country in its list of nonconforming measures. |
32. |
See CRS In Focus IF10311, Trade in Services Agreement (TiSA) Negotiations, by Rachel F. Fefer. |
33. |
For more detail, see CRS Report RL34292, Intellectual Property Rights and International Trade, by Shayerah Ilias Akhtar and Ian F. Fergusson. |
34. |
WTO, "Intellectual property: protection and enforcement," https://www.wto.org/english/thewto_e/whatis_e/tif_e/agrm7_e.htm. |
35. |
Declaration on the TRIPS Agreement and Public Health, (WT/MIN(01)/DEC/2), November 14, 2001, http://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_trips_e.htm. For more on TRIPS, see CRS Report RL34292, Intellectual Property Rights and International Trade, by Shayerah Ilias Akhtar and Ian F. Fergusson. |
36. |
WTO, "WTO IP rules amended to ease poor countries' access to affordable medicines," January 23, 2017, https://www.wto.org/english/news_e/news17_e/trip_23jan17_e.htm. |
37. |
Notably, this marked the first time that a WTO agreement was amended since the WTO's inception (WTO 2017). |
38. |
For more detail, see CRS In Focus IF10018, Trade Remedies: Antidumping and Countervailing Duties, by Vivian C. Jones, and CRS In Focus IF10786, Safeguards: Section 201 of the Trade Act of 1974, by Vivian C. Jones. |
39. |
WTO, "The Place of the WTO in the International Legal Order," Speeches—DG Pascal Lamy, June 15, 2008, https://www.wto.org/english/news_e/sppl_e/sppl94_e.htm. |
40. |
For more information, see CRS In Focus IF10436, Dispute Settlement in the World Trade Organization: Key Legal Concepts, by Brandon J. Murrill. |
41. |
WTO, "Dispute settlement activity—some figures," https://www.wto.org/english/tratop_e/dispu_e/dispustats_e.htm. |
42. |
WTO, "WTO disputes reach 500 mark," November 10, 2015, https://www.wto.org/english/news_e/news15_e/ds500rfc_10nov15_e.htm. |
43. |
Dispute count as of mid-February 2019. WTO, https://www.wto.org/english/tratop_e/dispu_e/find_dispu_cases_e.htm. |
44. |
The three countries announced a joint monitoring and consultation system to replace the tariffs. See https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/may/united-states-announces-deal-canada-and. |
45. |
USTR, "United States Challenges Five WTO Members Imposing Illegal Tariffs Against U.S. Products," press release, July 2018, https://go.usa.gov/xPftA. |
46. |
For the text of the report, see https://www.wto.org/english/tratop_e/tpr_e/tp475_e.htm. |
47. |
WTO, "Trade Policy Review: China: Concluding remarks by the Chairperson," July 11 and 13, 2018, https://www.wto.org/english/tratop_e/tpr_e/tp475_crc_e.htm. |
48. | |
49. |
|
50. |
"Concluding Remarks of the Chairperson, Ambassador Sunanta Kangvalkulkij" Trade Policy Review Body, December 19, 2018. https://www.wto.org/english/tratop_e/tpr_e/tp482_crc_e.htm. |
51. |
"U.S. Criticized at WTO," Washington Trade Daily, December 18, 2018. |
52. |
One example is the Agreement on Trade in Civil Aircraft, which entered into force in 1980 between 32 WTO members, including the United States. The agreement eliminates import duties on all aircraft, other than military aircraft, and other specified products. See https://www.wto.org/english/tratop_e/civair_e/civair_e.htm. |
53. |
Peter Sutherland et al., "The Future of the WTO: Addressing institutional challenges in the new millennium," World Trade Organization, 2004, p. 64. |
54. |
In November 2018, WTO members approved in principle the UK's market access offer to continue GPA membership as a separate member, following its pending withdrawal from the EU. See WTO, https://www.wto.org/english/news_e/news18_e/gpro_28nov18_e.htm. |
55. |
For more information on the GPA, see https://www.wto.org/english/tratop_e/gproc_e/gp_gpa_e.htm. |
56. |
For the U.S. GPA schedule, see https://e-gpa.wto.org/en/Annex/Details?Agreement=GPA113&Party=United States&AnnexNo=1&ContentCulture=en. |
57. |
U.S. GAO, United States Reported Opening More Opportunities to Foreign Firms Than Other Countries, but Better Data Are Needed, GAO-17-168, February 9, 2017, p. 10. |
58. |
For more information on the ITA, see https://www.wto.org/english/tratop_e/inftec_e/inftec_e.htm and https://www.wto.org/english/tratop_e/inftec_e/itaintro_e.htm. |
59. |
USTR, "U.S. and WTO Partners Announce Final Agreement on Landmark Expansion of Information Technology Agreement," December 2015, https://go.usa.gov/xPftt. |
60. |
See CRS Report R44777, WTO Trade Facilitation Agreement, by Rachel F. Fefer and Vivian C. Jones. |
61. |
For the current status of accessions, see https://www.wto.org/english/thewto_e/acc_e/status_e.htm. |
62. |
Uri Dadush and Chiedu Osakwe, ed., WTO Accessions and Trade Multilateralism: Case Studies and Lessons from the WTO at Twenty, Cambridge University Press and the World Trade Organization, 2015. |
63. |
For more information on WTO accessions, see https://www.wto.org/english/thewto_e/acc_e/acces_e.htm and https://www.wto.org/english/thewto_e/acc_e/cbt_course_e/c4s1p1_e.htm. |
64. |
Iran's prospective WTO membership is complicated by U.S. economic sanctions, which restrict trade and investment. Iran's accession to the WTO would require the United States and other members to extend MFN treatment to Iran. |
65. |
For more information, see CRS Report RL33536, China-U.S. Trade Issues, by Wayne M. Morrison. |
66. |
CRS Report RL33536, China-U.S. Trade Issues, by Wayne M. Morrison. |
67. |
|
68. |
For more detail on the terms, see CRS Report RL33536, China-U.S. Trade Issues, by Wayne M. Morrison. |
69. |
Adapted from CRS Report RL33536, China-U.S. Trade Issues, by Wayne M. Morrison. |
70. |
See USTR, 2016 Report to Congress on China's WTO Compliance, January 2017, and the annual USTR National Trade Estimate Reports for specific examples. |
71. |
For example, see Written testimony by the U.S.-China Business Council, "China's Implementation of its World Trade Organization Commitments," Submitted in response to the Office of the U.S. Trade Representative's Request for Comments and Notice of Public Hearing Concerning China's Compliance with WTO Commitments, September 21, 2016; and Atkinson et al., Stopping China's Mercantilism: A Doctrine of Constructive, Alliance-Backed Confrontation, Information Technology and Innovation Foundation, March 16, 2017. |
72. |
James Bacchus, Simon Lester, and Huan Zhu, "Disciplining China at the WTO," CATO Institute, Policy Analysis No. 856, November 15, 2018. |
73. |
"U.S. Trade Policy Priorities: Robert Lighthizer, United States Trade Representative," September 18, 2017, Center for Strategic and International Studies, https://www.csis.org/events/us-trade-policy-priorities-robert-lighthizer-united-states-trade-representative. |
74. |
See USTR, 2018 Report to Congress on China's WTO Compliance, February 2019. |
75. |
Ibid, p. 23. |
76. |
See "U.S. Statement at the Trade Policy Review of the People's Republic of China," Statement as delivered by Ambassador Dennis C. Shea on Behalf of the United States of America, July 11, 2018, Geneva. |
77. |
In its June 2018 white paper "China and the World Trade Organization," which reflects on its compliance with WTO obligations and support for the multilateral trading system, China called itself the "largest developing country in the world." See http://www.xinhuanet.com/english/2018-06/28/c_137286993.htm. |
78. |
|
79. |
"China remains largest developing country: economist," Xinhua, April 15, 2018. As per the World Bank, China is considered a developed country, though it is often distinguished as an "emerging market." However, based on World Bank classifications of countries by income groupings, using gross national income (GNI) per capita, China is considered an upper-middle income economy. See World Bank, https://www.worldbank.org/en/country/china/overview and https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groups. |
80. |
See CRS In Focus IF10708, Enforcing U.S. Trade Laws: Section 301 and China, by Wayne M. Morrison. |
81. |
Chad P. Bown, "Rogue 301: Trump to Dust Off Another Outdated US Trade Laws," Peterson Institute for International Economics, August 3, 2017, https://piie.com/blogs/trade-investment-policy-watch/rogue-301-trump-dust-another-outdated-us-trade-law. |
82. |
Some experts suggest that the United States should pursue a comprehensive, multilateral case at the WTO with a broad coalition of countries sharing concerns about certain Chinese practices that either violate one or more specific WTO commitments or that "nullify or impair" a benefit provided to WTO members (known as a non-violation claim under Article XXIII of the GATT). See U.S.-China Economic and Security Review Commission, Hearing on U.S. Tools to Address Chinese Market Distortions, written testimony of Jennifer Hillman, June 8, 2018. |
83. |
USTR, "Joint Statement by the United States, European Union and Japan at MC11," December 11, 2017. |
84. |
USTR, "Joint Statement on Trilateral Meeting of the Trade Ministers of the United States, Japan, and the European Union," press release, May 31, 2018; and "Joint Statement of the Trilateral Meeting of the Trade Ministers," press release, January 9, 2019 and May 23, 2019. |
85. |
Section 301 through 310 of the Trade Act of 1974, commonly called "Section 301," is one of the principal statutory means by which the United States addresses "unfair" foreign trade barriers to U.S. exports and enforces U.S. rights under trade agreements. Section 301 applies to foreign acts, policies, and practices that USTR determines either violates, or is inconsistent with, a trade agreement; or is "unjustifiable" and burdens or restricts U.S. trade. For more detail, see CRS In Focus IF10385, China's Status as a Nonmarket Economy (NME), by Wayne M. Morrison. |
86. |
David Lawder, "U.S. formally opposes China market economy status at the WTO," Reuters, November 30, 2017. |
87. |
Chad P. Bown, "Should the United States Recognize China as a Market Economy?" Peterson Institute for International Economics, December 2016. |
88. |
The expectation back in 2001 was that China would transition to a market economy within 15 years. |
89. |
WTO, "DS516: European Union – Measures Related to Price Comparison Methodologies," https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds516_e.htm. |
90. |
Some speculate that this action was in anticipation of some findings that were not favorable to China. Tom Miles, "China pulls WTO suit over claim to be a market economy," Reuters, June 17, 2019. |
91. |
WTO, "DG Azevêdo details process for MC11 as preparations enter final stages," November 28, 2017, https://www.wto.org/english/news_e/spra_e/spra201_e.htm. |
92. |
"MC11 expected to end without Ministerial declaration as U.S., India clash over language on development," Inside U.S. Trade, December 13, 2017. |
93. |
Communication from India, "Possible Elements of a Trade Facilitation in Services Agreement," WTO S/WPDR/W/57, November 14, 2016. |
94. |
The proposal proved controversial for several members. See WTO, "Goods Council discusses US proposal to enhance transparency," November 10, 2017, https://www.wto.org/english/news_e/news17_e/good_16nov17_e.htm. |
95. |
WTO, "New initiatives on electronic commerce, investment facilitation and MSMEs," December 13, 2017, https://www.wto.org/english/news_e/news17_e/minis_13dec17_e.htm. |
96. |
European Commission, "EU Statement at the Heads of Delegations meeting," Buenos Aires, Argentina, December 13, 2017, http://trade.ec.europa.eu/doclib/docs/2017/december/tradoc_156464.pdf. |
97. |
Megan Cassella, "It's the end of the WTO as we know it – and Trump feels fine," Politico, December 14, 2017; and "U.S. role in WTO talks unclear as others prep for Ministerial outcomes," Inside U.S. Trade, July 28, 2017. |
98. |
David Lawder and Tom Miles, "Trump's trade chief gets his chance to confront WTO nemesis," Reuters, December 8, 2017. |
99. |
USTR, "USTR Robert Lighthizer Statement on the Conclusion of the WTO Ministerial Conference," press release, December 2017. |
100. |
U.S. Department of Agriculture, Foreign Agriculture Service, "What's Next for Agriculture in the WTO?" January 5, 2018, https://www.fas.usda.gov/newsroom/what-s-next-agriculture-wto. |
101. |
" New fisheries subsidies proposals considered ahead of December target for agreement," WTO Press Release, September 13, 2019, https://www.wto.org/english/news_e/news19_e/fish_13sep19_e.htm. |
102. |
"WTO Members remain divided on fisheries talks as deadline looms," Inside U.S. Trade, September 13, 2019. |
103. |
"India Seeks Exemptions for Developing Nations in Fisheries Talks, Bloomberg Law, June 14, 2019. |
104. |
"U.S.: WTO fisheries talks not on track to finish by end of 2019," Inside U.S. Trade, July 19, 2019. |
105. |
WTO, "Electronic Commerce," https://www.wto.org/english/tratop_e/ecom_e/ecom_e.htm. |
106. |
WTO Work Programme on Electronic Commerce, "Draft Ministerial Decision," December 13, 2017. |
107. |
Joint Statement on Electronic Commerce, WTO WT/MIN(17).60, December 13, 2017. |
108. |
Joint Statement on Electronic Commerce, WTO WT/L/1056, January 25, 2019. |
109. |
All proposals can be found on the WTO online documents portal: https://docs.wto.org/dol2fe/Pages/FE_Search/FE_S_S001.aspx. |
110. |
United States, Joint Statement on Electronic Commerce, WTO INF/ECOM/23, April 26, 2019. |
111. |
China, Joint Statement on Electronic Commerce, WTO INF/ECOM/19, April 23, 2019. |
112. |
"EU blames China for WTO environmental trade talks collapse," Reuters, December 4, 2016; "Key Lawmaker, EU and industry all blame China for torpedoing EGA deal," Inside U.S. Trade, December 7, 2016. |
113. |
"U.S. remains silent as WTO members look for ways to resume EGA talks," Inside U.S. Trade, June 22, 2017. |
114. |
Following the conclusion of the ministerial, on December 13, 2017, the official USTR twitter account proclaimed that "the new direction of the WTO is set: improving trade through sectoral agreements by like-minded countries." |
115. |
WTO RTA database, https://rtais.wto.org/UI/PublicMaintainRTAHome.aspx. |
116. |
CRS In Focus IF10997, Proposed U.S.-Mexico-Canada (USMCA) Trade Agreement, by Ian F. Fergusson and M. Angeles Villarreal. |
117. |
|
118. |
"Analysts question WTO compliance of U.S.-Japan deal," Inside U.S. Trade, September 17, 2019. In addition, the GATS includes a similar provision. |
119. |
White House, "Joint Statement of the United States and Japan," September 25, 2019. U.S. negotiating objectives, released at the outset of the talks in December 2018, suggested a broad range of issues beyond tariffs and digital trade would be covered. See https://ustr.gov/countries-regions/japan-korea-apec/japan/us-japan-trade-agreement-negotiations. |
120. |
Petros C. Mavroidis, "If I Don't Do It, Somebody Else Will (or Won't)," Journal of World Trade, vol. 40, no. 1 (February 2006): 187-214. |
121. |
For example, see World Economic Forum, Regional Trade Agreements: Game Changers or Costly Distractions for the World Trading System, July 2014. |
122. |
For more on the debate, see CRS Report R45198, U.S. and Global Trade Agreements: Issues for Congress, by Brock R. Williams. |
123. |
WTO, "Regional trade agreements 'cannot substitute' the multilateral trading system," September 25, 2014, https://www.wto.org/english/news_e/spra_e/spra33_e.htm. |
124. |
See CRS Report R44489, The Trans-Pacific Partnership (TPP): Key Provisions and Issues for Congress, coordinated by Ian F. Fergusson and Brock R. Williams. |
125. |
For example, see Chad P. Bown, Mega-Regional Trade Agreements and the Future of the WTO, Council on Foreign Relations, Part of Discussion Paper Series on Global and Regional Governance, September 2016. |
126. |
Gary Clyde Hufbauer, "Liberalization of Services Trade," in Trans-Pacific Partnership: An Assessment, ed. Cathleen Cimino-Isaacs and Jeffrey J. Schott, (Washington, DC: Peterson Institute of International Economics, 2016). |
127. |
U.S. FTAs use a negative list approach, and the proposed TiSA negotiations use a hybrid approach to apply a negative list to national treatment commitments and a positive list for market access. |
128. |
International Centre for Trade and Sustainable Development (ICTSD), "Negotiating Disciplines on Domestic Regulations in Services," June 2018, https://www.ictsd.org/themes/services-and-digital-economy/research/negotiating-disciplines-on-domestic-regulations-in. |
129. |
|
130. |
WTO, "Technical Information on State Trading Enterprises," https://www.wto.org/english/tratop_e/statra_e/statra_info_e.htm. |
131. |
European Commission, WTO Modernization, Concept Paper, September 2018, pp. 4-5; and USTR, Statement by the U.S. to the Dispute Settlement Body, March 2011, https://ustr.gov/sites/default/files/uploads/Mar25%20Stmt%20US%20AD-CVD%20fin.pdf. |
132. |
"Joint Statement on Trilateral Meeting of the Trade Ministers of the United States, Japan, and the European Union," September 2018, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2018/september/joint-statement-trilateral. |
133. |
"Joint Statement of the Trilateral Meeting of the Trade Ministers of the European Union, Japan, and the United States," May 2019, https://ustr.gov/about-us/policy-offices/press-office/press-releases/2019/may/joint-statement-trilateral-meeting. |
134. |
CRS In Focus IF10052, U.S. International Investment Agreements (IIAs), by Martin A. Weiss and Shayerah Ilias Akhtar, and CRS Report R43052, U.S. International Investment Agreements: Issues for Congress, by Shayerah Ilias Akhtar and Martin A. Weiss. |
135. |
The United States has pursued ISDS in most of its FTAs. In the proposed USMCA, the Trump Administration restricted recourse to ISDS in the case of Mexico and ended the application of ISDS with Canada. Recent EU agreements contain an investment court model with a standing body replacing ad hoc tribunals common to ISDS. |
136. |
"Joint Ministerial Statement on Investment Facilitation for Development," WT/MIN(17)/59, December 13, 2017. |
137. |
One labor-related provision, GATT Article XX(e) provides an exception to trade obligations for measures "relating to products of prison labor." |
138. |
For example, in the view of Thea Lee of the Economic Policy Institute, WTO rules are currently "lopsided" and do not adequately protect the interests of workers, consumers, and the environment; in particular, the WTO should recognize that "violation of internationally recognized workers' rights is as much an unfair trade policy as the violation of patents or copyrights." Senate Foreign Relations Committee, Hearing on Multilateral Economic Institutions and U.S. Foreign Policy, written testimony by Thea M. Lee, November 27, 2018. |
139. |
The ILO reports that less than a third of trade agreements have labor-related provisions (as of 2016). Of those, nearly half are U.S., EU or Canadian agreements, while about a quarter are between South-South trading partners. See ILO, Labour-related provisions in trade agreements, GB.328/POL/3, September 2016. |
140. |
|
141. |
European Commission, "EU proposals on WTO modernization," WK8329/2018 INIT, July 5, 2018; and "European Commission presents comprehensive approach for the modernization of the World Trade Organization," press release, September 18, 2018, http://europa.eu/rapid/press-release_IP-18-5786_en.htm. |
142. |
"U.S., Japan, EU continue talks on Chinese trade practices," Inside U.S. Trade, August 23, 2018. |
143. |
"Strengthening and Modernizing the WTO," Discussion Paper, September 21, 2018, http://international.gc.ca/gac-amc/campaign-campagne/wto-omc/discussion_paper-document_travail.aspx?lang=eng. |
144. |
Janyce McGregor, "Global trade reform must include China, U.S., Jim Carr says after hosting WTO meeting," CBC News, October 25, 2018. |
145. |
"Joint Communiqué of the Ottawa Ministerial on WTO Reform," October 15, 2018, https://www.canada.ca/en/global-affairs/news/2018/10/joint-communique-of-the-ottawa-ministerial-on-wto-reform.html. |
146. |
Government of Canada, "Summary of Ottawa Group Meeting in Paris, May 2019," May 23, 2019, https://www.canada.ca/en/global-affairs/news/2019/05/summary-of-ottawa-group-meeting-in-paris-may-2019.html. |
147. |
|
148. |
"At mini-ministerial, WTO members call for resuming Appellate Body nominations," Inside U.S. Trade, November 5, 2019. |
149. |
Peter Sutherland et al., The Future of the WTO: Addressing institutional challenges in the new millennium, World Trade Organization, 2004, p. 64. |
150. |
European Commission, "WTO modernization," Concept Paper, September 2018. |
151. |
"Procedures to enhance transparency and strengthen notification requirements under WTO agreements," Communications from the United States, JOB/GC/148, October 30, 2017; under this proposal, inactive members would have access to most training and technical assistance, and would be referred to as such in General Council meetings. |
152. |
European Commission, "EU proposals on WTO modernization," WK8329/2018 INIT, July 5, 2018. |
153. |
"Procedures to Enhance Transparency and Strengthen Notification Requirements Under WTO Agreements," JOB/GC/204, November 1, 2018. |
154. |
The WTO does not specify criteria for "developing" or "developed" country status, but least-developed countries are defined under U.N. criteria. |
155. |
For examples of types of the SDT provisions in WTO agreements, see https://www.wto.org/english/tratop_e/devel_e/teccop_e/s_and_d_eg_e.htm. |
156. |
"Understanding the WTO: The Organization," https://www.wto.org/english/thewto_e/whatis_e/tif_e/org7_e.htm. |
157. |
"An undifferentiated WTO: Self-declared development status risk institutional irrelevance," Communications from the United States, WT/GC/W/757, January 16, 2019. |
158. |
|
159. |
Ministry of Foreign Affairs of the PRC, "Foreign Ministry Spokesperson Hua Chunying's Regular Press Conference," July 29, 2019, https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/2511_665403/t1684227.shtml. |
160. |
"The Continued Relevance of Special and Differential Treatment in Favour of Developing Members to Promote Development and Ensure Inclusiveness," Communication from China, India, South Africa and the Bolivarian Republic of Venezuela, WT/GC/W/765, February 18, 2019. |
161. |
"Pursuing the Development Dimension in WTO Rule-making Efforts," Communication from Norway, Iceland, New Zealand, Singapore and Switzerland, WT/GC/W/770/Rev.2, May 6, 2019. |
162. |
"S. Korea Has 'Little to Gain' in Maintaining Developing-Nation Status," KBSWorld, September 5, 2019; "Singapore does not take advantage of WTO special provisions for developing nations in negotiating agreements: MTI," can, July 27, 2019; and Iana Dreyer, "Beyond Brussels: Brazil accepts to forego WTO developing country status," Borderlex, March 20, 2019. |
163. |
Joseph Yeh, "Taiwan will benefit from 'developed' country status in WTO: Deng," Focus Taiwan, October 14, 2018. |
164. |
For example, see European Commission, "EU proposals on WTO modernization," July 5, 2018. |
165. |
See WTO, "Special and differential treatment provisions," https://www.wto.org/english/tratop_e/devel_e/dev_special_differential_provisions_e.htm, and "Examples of provisions for differential and more favourable treatment of developing countries," https://www.wto.org/english/tratop_e/devel_e/teccop_e/s_and_d_eg_e.htm. |
166. |
WTO Committee on Trade and Development, Special and Differential Treatment Provisions in WTO Agreements and Decisions, Note by the Secretariat, WT/COMTD/W/219, September 22, 2016. |
167. |
USTR Robert Lighthizer, "Opening Plenary Statement," December 11, 2017. |
168. |
"Doha WTO Ministerial 2001: Ministerial Declaration," WT/MIN(01)/DEC/1, November 20, 2001, https://www.wto.org/english/thewto_e/minist_e/min01_e/mindecl_e.htm. |
169. |
There have been some cases of past DSU procedural reforms, such as the decisions to accept outside counsel and amicus curiae briefs in panel deliberations. See Craig VanGrasstek, The History and Future of the World Trade Organization, World Trade Organization, 2013. |
170. |
Robert McDougall, "Crisis in the WTO: Restoring the WTO Dispute Settlement Function," Centre for International Governance Innovation, CIGI Papers No. 194, October 2018. |
171. |
Jack Caporal et al., The WTO at a Crossroad, Center for Strategic and International Studies, September 2019. |
172. |
CIGI Expert Consultation on WTO Reform, Special Report: Spring 2019, Centre for International Governance Innovation (CIGI), September 12, 2019. |
173. |
Adam Behsudi, "The man getting ready to take on the WTO," Politico, February 15, 2017. |
174. |
The Obama Administration blocked the reappointment of a Korean AB jurist in May 2016. |
175. |
"America holds the World Trade Organisation hostage," The Economist, September 23, 2017. |
176. |
Megan Cassella, "WTO's Wolff: More trade wars coming if Appellate Body dies," Politico, October 16, 2018. |
177. |
Jack Caporal et al., The WTO at a Crossroad, Center for Strategic and International Studies, September 2019. |
178. |
Joint Statement by the European Union and Canada on an Interim Appeal Arbitration Arrangement, July 25, 2019, http://trade.ec.europa.eu/doclib/press/index.cfm?id=2053; and Interim Appeal Arbitration Pursuant to Article 25 of the DSU, July 25, 2019. |
179. |
"U.S.: EU-Canada interim plan would 'legitimize' bad Appellate Body practices," Inside U.S. Trade, September 30, 2019. |
180. |
CIGI Expert Consultation on WTO Reform, Special Report: Spring 2019, Centre for International Governance Innovation (CIGI), September 12, 2019, p. 18. |
181. |
USTR, 2018 Annual Report, March 2018, p. 23. |
182. |
WTO General Council, "Informal Process Related to the Functioning of the Appellate Body – Report by the Facilitator, H.E. David Walker (New Zealand), (Job /GC/222), Tuesday October 15, 2019. |
183. |
USTR indicates this plank requires immediate attention, noting "the United States is resolute in its view that Members need to resolve this issue before moving on to the issue of replacing Appellate Body Members." See USTR 2018 Annual Report, March 2018, p. 26. |
184. |
Shawn Donnan, "US accused of undermining WTO," Financial Times, May 30, 2016. |
185. |
European Commission, "EU proposals on WTO modernization," (WK8329/2018 INIT), July 5, 2018, p. 16. |
186. |
WTO, "Farewell Speech of Appellate Body Member Ricardo Ramirez-Hernandez, May 28, 2018, https://www.wto.org/english/tratop_e/dispu_e/ricardoramirezfarwellspeech_e.htm. |
187. |
See, for example, Joost Pauwelyn, Appeal without Remand: A Design Flaw in WTO Dispute Settlement and How to Fix It, International Centre for Trade and Sustainable Development, June 2007; Canada submission, JOB/GC/201, p. 3. |
188. |
Peter Sutherland et al., The Future of the WTO: Addressing institutional challenges in the new millennium, World Trade Organization, 2004, p. 55. |
189. |
Terence Stewart, "The Broken Multilateral Trade Dispute System," Asia Society Policy Institute, February 7, 2018. |
190. |
Sutherland, 2004, p. 52. |
191. |
|
192. |
"WTO officials approval provisional budget for 2020" Politico Pro Trade, December 5, 2019. |
193. |
Drawn from CRS Insight IN10945, The World Trade Organization (WTO): U.S. Participation at Risk?, by Cathleen D. Cimino-Isaacs. |
194. |
Meet the Press, Transcript, NBC News, July 24, 2016; "Trump threatens action on WTO after reports he wants to withdraw," Reuters, July 2, 2018; "Megan Henney, "Is the US leaving the WTO? Mnunchin says report is 'exaggeration,'" FoxBusiness, June 29, 2018; and John Micklethwait, Margaret Talev, and Jennifer Jacobs, "Trump Threatens to Pull U.S. Out of WTO If It Doesn't 'Shape Up'" Bloomberg, August 30, 2018. |
195. |
For a discussion of the debate, see Jack Caporal et al., The WTO at a Crossroad, Center for Strategic and International Studies, September 2019. |
196. |
Delegation of the European Union to China, "Joint statement of the 21st EU-China summit," April 10, 2019, https://eeas.europa.eu/delegations/china_en/60836/Joint%20statement%20of%20the%2021st%20EU-China%20summit; and Government of Canada, "Ottawa Group and WTO reform," https://www.canada.ca/en/global-affairs/news/2019/05/ottawa-group-and-wto-reform.html. |
197. |
CRS Report R45529, Trump Administration Tariff Actions (Sections 201, 232, and 301): Frequently Asked Questions, coordinated by Brock R. Williams. |
198. |
For more analysis, see CRS Report R45249, Section 232 Investigations: Overview and Issues for Congress, coordinated by Rachel F. Fefer, and CRS In Focus IF10708, Enforcing U.S. Trade Laws: Section 301 and China, by Wayne M. Morrison. |
199. |
In its latest monitoring report, the WTO noted that trade-restrictive measures imposed by G20 economies "hit a new high" between mid- and late 2018, compared to the previous reporting period, and was the largest recorded since 2012. "WTO report shows sharp rise in trade-restrictive measures from G20 economies," November 27, 2018, https://www.wto.org/english/news_e/news18_e/trdev_22nov18_e.htm. |
200. |
USTR, 2018 Trade Policy Agenda, March 2018, p. 3. |
201. |
For more information, see CRS Report R45249, Section 232 Investigations: Overview and Issues for Congress, coordinated by Rachel F. Fefer. |
202. |
WTO, "Members adopt national security ruling on Russian Federation's transit restrictions," April 26, 2019. |
203. |
Ibid, Paras. 2.1, 3.1. |
204. |
Ibid, Paras. 3.2, 7.4, 7.7, 7.8-7.9. |
205. |
Ibid, Para. 8.1(d)(i)-(iv). |
206. |
DS512: Russia—Measures Concerning Traffic in Transit, Report Adopted April 26, 2019, e.g., paras. 7.75-7.77. https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds512_e.htm. |
207. |
See, for example, President Xi Jinping's remarks at the World Economic Forum held in Davos in January 2017, http://www.china.org.cn/node_7247529/content_40569136.htm. |
208. |
China's State Council Information Office, "China and the World Trade Organization," white paper, June 2018, http://english.gov.cn/archive/white_paper/2018/06/28/content_281476201898696.htm. |
209. |
USTR, 2018 Trade Policy Agenda, March 2018. |