The WTO is Facing Calls for Reform: What Would this Mean for International Business?

The World Trade Organisation (WTO) is a multilateral, rules-based trading system that was set up in the mid-1990s. It has been instrumental in helping countries cooperate, go global and trade effectively, as well as encouraging investment for development.

However, in recent years the WTO has found itself at a crossroads. The world’s economies have changed enormously in the WTO’s lifetime, with new, complex challenges making its workload even more pressing and complicated. Increasingly, there is growing chorus of voices who insist that the WTO must be reformed to better deal with this changing trade landscape. Chief among these is the US Trump administration, which is blocking new appointments to the WTO’s Appellate Body.

The WTO’s Appellate Body is critical for resolving disputes among WTO members. It hears appeals from reports issued by panels in disputes brought by WTO Members. It can uphold, change or reverse a panel’s legal findings and conclusions.

However, without new appointments the Appellate Body could stop functioning effectively. Anna Cecilia Malmström, European Commissioner for Trade, says the body is now ‘moving towards a cliff’s edge’, and there is a general feeling that it must be resolved soon, otherwise the whole WTO system will become at-risk.

Without the body, which is at the core of the workings of the WTO, countries around the world would lose out on a system that has helped maintain stability for international trade and mediate countless international disputes. It has played a pivotal role in maintaining the security of trade, which would not work effectively without such enforcement.

Last month, the EU and other members of the WTO, including Australia, Canada, China, Iceland, India, Korea, Mexico, New Zealand, Norway, Singapore and Switzerland, proposed the most concrete changes yet aimed at solving the current deadlock in the WTO Appellate Body.

The proposed reforms seek to introduce new rules for outgoing Appellate Body members, clarifying in which cases they can stay on to complete appeal proceedings. They also seek to ensure that appeal proceedings are finished on time – there is a 90-day timeframe, according to WTO rules – and making it clear that the body should only address the issues needed to resolve the dispute.

The proposals also ask for annual meetings between WTO members and the Appellate Body to discuss relevant issues and trends. The EU also seeks to reinforce the body’s independence and impartiality, and improve its efficiency.

In order for the WTO to remain relevant, functioning, respected and trusted – as well as to maintain the support of the public and of governments and businesses – in the years to come, experts argue that it needs to produce tangible results through negotiations, which mounting pressures have left it unable to do effectively in recent years.

This is one small piece of the puzzle. Beyond the Appellate Body, experts have called for system-wide reforms, including the introduction of a Business Advisory Council and improvements to leadership.

However, these proposed reforms are important because they will send an outward signal to the world that the WTO is, or is not, capable of the reforms needed to keep up to date with an ever-changing globalised world. For international business, this could end up being the difference between a functioning, modern WTO that fits the needs of today, and an organisation unable to resolve their disputes.

If you’re looking at expanding your business abroad, you may want to consider getting advice and support from experts at Galvin International, who can help you through every step of the process. Contact us for advice and support.

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