Economic Tidbits

World Trade Organization in Crisis

Come December, the world may be losing its forum for resolving trade disputes with the collapse of the World Trade Organization’s (WTO) dispute settlement system. Next month, two appellant judges will fulfill their terms on the appellant body and must retire.

Unless replacement judges are appointed, the number necessary for the dispute system to work will fall under the minimum necessary. The United States, though, is refusing to join a consensus to appoint appellant judges due to concerns it has with the WTO, a strategy which began under the Obama administration and later was adopted by President Trump. The U.S. has several procedural concerns and concerns with the growth in authority and jurisdiction of the appellant body, many of which agriculture shares. But some observers also suspect the U.S. is stalling on the appointments because it doesn’t want cases against it moving forward over the unilateral actions it’s taken regarding tariffs over the past two years.

The WTO was launched in 1995. Its main function is to ensure trade flows as smoothly, predictably, and freely as possible. Settling trade disputes between countries is an important part of this function. In its 25 years of existence, nearly 600 consultations have been filed and the body has an 80 percent compliance rate with its decisions. The U.S. has been the largest user of the dispute settlement system accounting for 40 percent of the disputes filed. And, the U.S. has been very successful with its challenges, achieving a 91 percent success rate.

Absent the WTO dispute system, the world could go back to pre-WTO system where rules exist, but enforcement is optional, and violations are accepted. Or the system might continue down the path towards more regional free trade agreements with no formal global body in place. U.S. agriculture, because of the importance of international markets to its bottom line, will be keenly affected by the collapse of the dispute mechanism. Many of the disputes filed by the U.S. have been due to other countries’ agricultural trade barriers. As such, agriculture needs the U.S. and other participating WTO countries to reach a consensus on moving forward.         

You may also like