Circumstances appear to be difficult for the club responsible for promoting free trade worldwide, the World Trade Organization (WTO). In this time of major geopolitical confrontation – the Russian aggression in Ukraine, the ongoing Sino-US tensions – the global economy is in danger of breaking up into regional blocs, it is becoming increasingly common. It has been called “Geoeconomic fragmentation,” with one of the rifts being the one between the West on the one hand, and China and Russia on the other.
Add to that the global wave of protectionism during the pandemic – and it is a small miracle that the WTO, an organization that includes the US, Russia and China, managed to conclude a series of agreements late last week. For the first time, during a ministerial conference in Geneva, it was possible to reach agreements with all 164 WTO member states.
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It is not – as in previous WTO consultations – a matter of broad liberalization of world trade. That would be too much to ask at this juncture. Deals were made in several politically sensitive areas: patents on corona vaccines, fisheries subsidies, food safety, digital trade, and the functioning of the WTO itself. “Without precedent,” Ngozi Okonjo-Iweala, the Nigerian director-general of the WTO, called the package.
That may be a bit of an exaggeration – bigger steps have been taken in the past for free trade – but the outcome is a boost for the WTO, which has been in a bad way in recent years. In late 2019, then-US President Donald Trump plunged the organization into a deep crisis by blocking senior appointments to the so-called WTO Appellate Body, which settles trade disputes. For example, the WTO’s most important function – to resolve trade conflicts and prevent wars – was largely paralyzed. Gloom then dominated at Lake Geneva, where the WTO is located. More than once the question was asked what the WTO was actually good for. When Okonjo-Iweala, who had long worked for the World Bank, took office as WTO chief in early 2021, she said she was determined to break through the pessimism.
US blockade continues
It now seems to have succeeded, at least in part. While the US blockade on dispute settlement continues — including under President Biden — a US signature now reads that a new dispute settlement mechanism must be agreed “by 2024.” That will be quite a challenge, because the Americans are attaching the demand that the alleged favoritism of China within the WTO be ended. China, which joined the WTO in 2001, still benefits from developing country status, which allows the Chinese to export to the West with significant state subsidies. There is also discontent about this in Europe.
During nightly consultations in Geneva, India turned out to be the most difficult interlocutor
During the ministerial conference last week, which was decided on Friday at 4 a.m., India was not the biggest obstacle, but India. That country is acting increasingly assertively in international forums and is profiling itself as the leader of poorer and emerging countries. This was apparent in the two most important files on which a breakthrough was achieved: fisheries subsidies and patents on corona vaccines.
The fisheries deal aims to curb overfishing and illegal fishing by curbing subsidies to fisheries worldwide. This topic has been on the agenda since 2001. Until the last moment, India fought for subsidies for small fishermen. The fact that the deal is now in place is partly a victory for the European Union, which operates as one bloc in the trade organization. Europe wants more attention for sustainability in the WTO’s free trade agenda.
Letting go of patents
India also proved to be a difficult interlocutor in the discussion about the temporary release of patents on corona vaccines. This emotionally charged theme has been going on since October 2020, when India and South Africa demanded that patents on vaccines, and on other medicines and protective equipment against corona, be removed. In this way, poorer countries, which were short of everything, could better deal with the pandemic. Western countries, eager to see their own pharmaceutical industry protected, are vehemently opposing the suspension of patents, which are protected under the WTO treaty on intellectual property (TRIPS).
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More than a year ago, the US stole the show by unexpectedly announcing its willingness to suspend patents. Behind the scenes, they continued to resist. Finally, a compromise was reached in Geneva: developing countries may, for a period of five years, produce vaccines without regard for patents. That decision only includes corona vaccines and only poorer countries. Patent holders must be compensated. The step is insufficient and comes too late, according to organizations such as Doctors Without Borders. The “monopolies” of pharmaceutical giants would remain untouched. The European pharmaceutical industry does consider the deal harmful: innovation could now be be in dangerbecause patents will falter.
It was agreed in Geneva that digital trade will remain free of import and export tariffs. This means that international streaming services and data services, among other things, remain unburdened. Western countries had strongly urged this.
Praise for networker Okonjo
After the string of engagements, Okonjo-Iweala was widely acclaimed. She had recently networked intensively among the ministers who took the final decisions, and repeatedly suggested to delegations that compromises were necessary. Minister Liesje Schreinemacher (Foreign Trade, VVD) called Okonjo-Iweala “the driving force behind the negotiations”, according to ANP news agency. Okonjo-Iweala “gave us a push where we needed a push,” US ambassador to the WTO Maria Pagán said, according to Reuters news agency.