General

In addition to appointing the new President of the General Council and the heads of various negotiating bodies, an important topic for the first General Council of the World Trade Organization in 2023 is to discuss World Trade Organization reform. The European Union has submitted a new proposal on the reform of the World Trade Organization, mainly aimed at strengthening the review and supervision functions of the World Trade Organization to address global trade policy challenges. When all parties were preparing for the 13th Ministerial Conference of the World Trade Organization (MC13) to be held at the end of February 2024, the EU took the lead in selecting review and supervision functions that enhance the relevance of the World Trade Organization (WTO) between trade negotiations, dispute resolution, and review and supervision, aiming to solve the reform problem and open the door for discussion on WTO reform issues. The EU proposal covers a wide range of topics, including old issues in traditional multilateral fields and emerging new ones, depicting the new direction of WTO reform and attracting attention from all parties.

WTO reform should keep pace with the times

The EU proposal points out that over the past 75 years, the World Trade Organization and its predecessor, the General Agreement on Tariffs and Trade, have provided a rule-based international trading system, which has been an important driving force for global economic prosperity and poverty reduction. In recent years, due to the paralysis of dispute resolution mechanisms, limited progress has been made in the functions of trade negotiations and rulemaking, as well as insufficient capacity to address new urgent issues such as global challenges and erosion of the effectiveness of the World Trade Organization. The EU believes that MC13 will be an important milestone in the process of improving these three major functions and providing a balanced and meaningful package of specific outcomes. In addition to carrying out important work in dispute resolution and new rulemaking, the World Trade Organization must redefine its responsibilities and become a more meaningful policy review forum in areas that affect global trade and policy formulation.

The review and supervision function of the World Trade Organization belongs more to the soft law field of rulemaking and enforcement. Members have made various reform efforts to revitalize the review and supervision function, including the ongoing bottom-up efforts to improve the transparency and efficiency of various negotiation bodies, as well as the improvement of the actual operation of the Council for Trade in Goods, one of the three major committees of the World Trade Organization. In addition, members are evaluating the trade policy review mechanism with the aim of improving the efficiency of WTO's trade review and trade policy monitoring, which is a necessary part of the reform of WTO's review and supervision function.

Revitalizing the review and supervision function is not only an important process for improving the World Trade Organization, but also helps to showcase its relevance and restore its position as a key international forum for global trade governance. The WTO can also serve as a bridge to future rulemaking, and once the review and supervision function becomes the best way for WTO members to identify and address issues, members will consider it an appropriate way forward. Due to various reasons, the WTO's review and supervision function has performed poorly in recent years, unable to effectively supervise members' compliance with rules and obligations, and members are also unable to effectively participate in relevant multilateral activities. Revitalizing the review and supervision function focuses on the following tasks: firstly, improving the ability to respond to new trade policy challenges by sharing information, including background analysis and research by the WTO Secretariat; Secondly, by making more use of informal meetings, thematic meetings, strengthening cross negotiation agency coordination, and joint meetings, we can utilize the internal expertise of the World Trade Organization to identify best practices and share beneficial experiences with members; Thirdly, formulate non binding principles, guidelines, and recommendations to promote the implementation and implementation of existing multilateral trade agreements, assist developing members in implementing these agreements or addressing new global trade policy challenges; The fourth is to find the maximum common divisor of unresolved issues among WTO members and consider solutions, including the possibility of formulating multilateral trade rules as appropriate.

Rules and regulations and improvements

Many WTO members believe that state intervention in the economy, including in the form of subsidies, is a necessary component of policy responses to achieve legitimate priority goals. However, certain subsidies may have adverse effects on trade and environmental protection. The WTO rules are not effective enough in addressing the negative external spillover effects of state intervention in the economy. The lack of transparency in some interventions exacerbates the problem. Due to these negative spillover effects, international trade tensions are increasingly intensifying.

The subsidy research report jointly released by the four major international organizations, including the World Trade Organization, International Monetary Fund, World Bank, and OECD in April 2022, proposes that strengthening international cooperation can be a way to solve international trade tensions. WTO members should follow up on this useful subsidy report and explore the feasibility of strengthening the review and supervision function on the interaction between trade and state intervention in the economy. The improvement of the review and supervision function will be based on the opinions submitted by members, and opinions from international organizations, academia, enterprises, non-governmental organizations, and think tanks will be listened to.

The World Trade Organization can promote discussions among its members on subsidies and other behaviors, in order to establish international consensus on the acceptable parameters of intervention measures in support of industrial sectors by countries and their impact on trade. In the long run, WTO rulemaking and improvement are functions of concern to all parties, with a focus on better understanding the interrelationship between trade and state intervention in supporting industrial sectors, and identifying potential gaps in existing rules. The World Trade Organization can enhance the transparency of government expenditure plans, state-owned enterprises, and other forms of state intervention, rather than just judging whether specific measures such as subsidies violate WTO rules from a legal perspective. The World Trade Organization should strengthen its design review and supervision measures to minimize negative spillover effects on its members. Special attention should be paid to the development of the green economy, monitoring the positive and negative effects of industrial subsidies on trade and the environment, as well as the role of supporting industries in promoting development, as well as their positive and negative effects on developing countries. The World Trade Organization should review and supervise measures to support industries, making them an effective supplement to the second phase of negotiations on further reducing trade distorting agricultural and fishery subsidies.

Pay attention to the correlation between trade and environment

The EU proposal points out that WTO members are increasingly hoping that environment and climate will occupy a more prominent position on the WTO agenda. Members are increasingly strengthening the implementation of national policies and measures to address climate change and other global environmental challenges, such as climate change, biodiversity loss, and environmental pollution. It is necessary to raise awareness of the design methods of these measures and their impact on international trade. Given the scale and urgency of this issue, the World Trade Organization should encourage members to increase transparency, engage in dialogue, and strengthen inclusive cooperation in trade-related environmental measures, which can help prevent trade conflicts.

The EU proposal emphasizes the importance of trade and environmental issues and proposes to strengthen the consideration of trade and global environmental challenges in the WTO Committee on Trade and Environment (CTE), making it the main global forum for transparency, coordination, and policy dialogue on trade-related environmental measures. Topics can include traditional environmental measures related to e-commerce The relationship between trade and the implementation of multilateral environmental agreements, as well as promoting sustainable development through trade.

The first goal of trade and environment issues is for WTO members to exchange information on their environmental measures that have an impact on trade in an early and voluntary manner, focusing on policy objectives and measure design options to maximize climate and environmental benefits while minimizing restrictive impacts. These exchanges can also cover the implementation of measures.

The second goal of trade and environment issues is to expand the role of the Commission on Trade and Environment in thematic deliberations. One is to review technical methods, including discussing how to measure the carbon emissions contained in international trade products, and determining methodologies to promote compliance among developing members. The second is the circular economy, which includes cross-border trade in reusable or repairable products, with the aim of identifying best practices. The third is to discuss topics related to deforestation, with a focus on a series of measures taken by members to determine best practices. The fourth is to discuss subsidy issues, and the World Trade Organization provides support for members to discuss trade policies, state intervention, support for industrial sectors, and environmental protection.

Given the interconnectedness between development and environmental challenges, it is necessary to strengthen the capacity of all members, including developing and least developed countries, to participate in discussions. Due to a lack of resources and technical expertise, developing countries often face challenges in participating in such discussions. The WTO Secretariat should identify methods for providing technical assistance and capacity building to strengthen their participation and ensure that their perspectives and needs are taken into account, supporting developing countries in addressing potential challenges in complying with trade related climate and environmental measures. Developing countries can introduce relevant technical assistance and capacity building activities under Aid for Trade at meetings such as the Committee on Trade and Environment and the Committee on Trade and Development, especially regarding assisting least developed countries in complying with product standards, and assisting developing countries in participating in WTO trade and environment work through capacity building and knowledge building.

Strengthening the inclusivity of the multilateral trading system

The World Trade Organization is facing increasing calls for a more inclusive multilateral trading system, which is crucial in supporting open trade. To this end, it is necessary to ensure that development issues are at the center of WTO reform, strengthen the review and supervision functions of the Trade and Development Commission, and more effectively integrate development related issues into different WTO committees. In order for trade to be seen as an equal means of addressing current economic and social challenges, it is necessary for the World Trade Organization to increase social awareness of trade inclusivity and trade liberalization, form more informed and inclusive policy outcomes, and expand trade opportunities for different members.

By strengthening cooperation with the World Bank and the International Labour Organization, the World Trade Organization can conduct background research and joint analysis on the impact of trade on employment, labor markets, different sectors, regions, and workers. The aim is to provide policy recommendations on how to expand trade opportunities, absorb developing countries into global sustainable supply chains, and achieve trade diversification. The World Trade Organization can collaborate with other international organizations to prepare reports and conduct thematic discussions on different aspects of the inclusive agenda. The WTO Trade Policy Review Mechanism can provide members with the opportunity to share their experiences in promoting corporate social responsibility, in order to spread the benefits of trade and promote inclusivity.

In addition, the World Trade Organization can strengthen cooperation with external stakeholders and enhance the inclusiveness of the trade decision-making process itself. The Marrakesh Agreement of the World Trade Organization clearly states that non-governmental organizations can play a role in their activities, but there is still room to strengthen their engagement with external stakeholders. At present, the level of contact between WTO negotiating bodies and external stakeholders varies. Based on the beneficial experience of stakeholders' participation in the thematic meetings of the technical barriers to trade Committee, structured discussions and the early stages of the Joint Statement Initiative (JSIs), it is suggested to expand contacts with external stakeholders and experts in informal seminars and workshops to help provide information for policy debate and support evidence-based discussions.

In June 2022, paragraph 3 of the outcome document of the 12th Ministerial Conference of the World Trade Organization (MC12) gave WTO members the negotiating authority to discuss WTO reform. The main content is that members should follow the basic principles of the WTO while promoting WTO reform through a member driven approach. At the same time, the footnote to this paragraph indicates that WTO members can convene discussions on WTO reform or submit proposals for consideration by the General Council or its affiliated negotiating body. From a preliminary perspective, revitalizing the World Trade Organization and maintaining the multilateral trading system is in line with the EU's economic and trade interests after Brexit, and is also an important platform for the EU to revitalize strategic autonomy and maintain smooth industrial and supply chains. The EU proposal has initially activated members' interest in participating in WTO reform discussions, and India, African countries, and others have recently raised demands for WTO reform from different perspectives such as policy space and development issues. At the same time, under the strong promotion of Director General Ivira, the WTO Secretariat is also advancing the internal reform process. Under the joint efforts of WTO members and the Secretariat, it is expected that member driven WTO reform will become an important negotiation content for MC13.