World Trade Organization: a failed dream of full and concerted economic liberalization

September 18, 2023

The objective of the World Trade Organization, never achieved, was the complete and concerted liberalization of trade in goods and services. Today it continues to lose relevance. Analysis.

The results of trade management by the multilateral entity were meager in the boom period of world trade 1995-2008. Subsequently, it has lost even more dynamism and its impact is marginal.

World Trade Organization: an optimistic start

With its 164 members, the World Trade Organization is the world’s largest multilateral organization after the UN, which has 193.

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Since its creation in 1995, the World Trade Organization has held 12 rounds of negotiations. The last of these was held in Geneva in 2022.

The negotiation rounds, led by ministerial summits, make decisions by consensus. Each round brings together hundreds of people from all countries, supported by the organization’s 700-plus staff.

Continuing difficulties in liberalization

From the outset, the World Trade Organization has had many difficulties in achieving its objectives.

This international organization has been confronted with the fact that developed countries, while demanding complete liberalization from less developed countries, maintain the protection of their agriculture and other productive and service sectors.

On the other hand, the inclusion of the issue of investment liberalization in the quest for the elimination of restrictions on capital flows was a failure from the outset, since many countries opposed eliminating the role of the State in controlling these flows.

On issues such as trade-related services and intellectual property, which seeks to ensure patent protection, there were initial agreements, but there are few new developments.

In addition, technological realities such as the emergence of large technology companies have posed new challenges that have not been resolved.

Other mechanisms for the promotion of exchanges

The limits that the World Trade Organization has proved to have led to the signing of trade agreements outside it.

In fact, in order to promote more radical liberalization, several dozen bilateral free trade agreements have been signed outside the World Trade Organization. These treaties deepen the elimination of tariffs and restrict administrative controls on imports.

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These treaties have also incorporated clauses related to issues such as investment, the elimination of agricultural subsidies and the extension of patents, on which there has been no consensus in the World Trade Organization.

These free trade agreements have diminished the capacity of the World Trade Organization to reach multilateral and concerted agreements, so that in the governance of the world economy the World Trade Organization is playing a practically irrelevant role.

Moreover, the organization has been generating discontent among social organizations and segments of the population for decades.

Many of the negotiation rounds of the World Trade Organization failed to make any substantial progress because of multiple disagreements, but also because of the massive protests that led to their hasty termination without progress.

This was the case of the rounds held in Seattle (1999), Hong Kong (1995), Cancun (2003) and Buenos Aires (2017).

In this context, the latest negotiation rounds have been held in remote and difficult to access locations, such as Bali (2013), Nairobi (2015) and Geneva (2022).

The next meeting will be held in Abu Dhabi, capital of the United Arab Emirates, in February 2024.

World Trade Organization: a guarded prognosis

The World Trade Organization’s most recent agreements concern trade facilitation, fisheries subsidies, the international body’s responses to pandemics, food insecurity and e-commerce.

One of the WTO’s main functions has been to handle disputes arising among its members through a dispute settlement body whose decisions are reviewed by an appellate body.

However, this body has been blocked by the United States since 2016. Despite intense negotiations, it has been unable to function since that year, rendering the World Trade Organization practically inoperative in the settlement of major disputes.

In practice, the definition of the major issues of trade and the global economy have been fracturing, with different organizations and forums taking center stage.

In the Western Hemisphere, led by the United States and the European Union, the central role is played by the Group of 7 (G7), although the BRICS are gaining new prominence.

The U.S. trade war against China, the war in Ukraine and the pandemic are changing the scenario of international trade agreements, with the result that intra-regional exchanges have been accentuated and protectionist measures have deepened.

It is quite possible that in the complex world scenario that is taking place, the World Trade Organization will continue to lose its leading role and will be concerned with specific issues without global scope, and will be replaced by agreements closely linked to geopolitical conflicts.