WTO flops, USA shrugs

Last week’s World Trade Organization summit was almost a complete bust, and the Biden administration seems perfectly fine with that.

The 166 member countries walked away from the five-day gathering in Abu Dhabi without any new commercially meaningful trade agreements. They also failed to resolve an impasse over how to mediate trade disputes, five years after the Trump administration effectively killed the existing dispute settlement system.

Politically, however, that may have been the best outcome President Joe Biden could have hoped for.

While U.S. officials note they were actively engaged in all of the WTO negotiations both before and during the biennial summit, the Biden administration has also made clear that they believe the global trade body is badly broken. And there is little political upside in forging new market-opening deals, given that the president’s “worker-centered” trade agenda is a response to the pro-globalization forces that drove the WTO’s creation.

So while the latest gathering in Abu Dhabi represented another low point for the world trade body, it also validated, in many ways, the administration’s campaign pitch to workers and industry that it’s time to forge a new global consensus on trade — one that prioritizes labor rights and national security rather than breaking down barriers to global commerce.

Even so, the Biden administration did not make much of a push on either of those fronts at the meeting.

“The U.S. wasn't very active at MC13 overall because they were not asking for much,” a Geneva-based trade official said, using the WTO’s shorthand for its 13th Ministerial Conference in Abu Dhabi. “They were quite passive, but didn't obstruct.”

U.S. Ambassador to the WTO María Luisa Pagán brushed off criticism over the U.S. role. “I think when we are trying to fix certain things at the WTO, we get accused of trying to break the system. But we’re not. We’re trying to fix it,” she said in an interview.

But Simon Evenett, a professor of international trade and economic development at the University of St. Gallen in Switzerland, said “the United States has de facto retreated” from its traditional role as guardian of the rules-based international system over the past eight years.

That began under former President Donald Trump, who freely busted many WTO norms. And though the Biden administration has used different rhetoric on trade, they have maintained many of the same policies — from Trump’s blockade of the WTO’s Appellate Body for resolving disputes to the many of the tariffs that Trump imposed on exports from China and elsewhere — while continuing to avoid new deals that would require the United States to open its market to more imported goods.

The Biden administration has been particularly cautious about engaging in any trade discussions that would alienate U.S. workers, handing former Trump an issue in the November presidential election.

In keeping with that, there was little on the table at last week’s WTO meeting that could cause a union worker in Michigan to vote for Trump instead of Biden if it went the wrong way.

In the face of U.S. resistance to new dispute settlement proposals, all that members could accomplish was to reaffirm a goal to decide the Appellate Body issue by the end of 2024, effectively delaying a decision until after U.S. voters go to the polls on Nov. 5.

WTO Director General Ngozi Okonjo-Iweala acknowledged election year politics were a factor in Abu Dhabi, even as she defended U.S. engagement at the WTO.

“Of course, we have the reality facing us that we have elections in the U.S.,” she told reporters during a closing press conference. “Nevertheless, I think we have a strong basis now to continue work” on dispute settlement reform.

The U.S. isn’t the only country that was hemmed in by domestic political considerations, either.

Angela Ellard, deputy director of the WTO, told members of the Washington International Trade Association earlier this week that she believed the turbulent geopolitical backdrop, including elections in approximately 60 countries this year, contributed to the inability of trade ministers to finalize key agreements in areas like fisheries and agriculture.

“Many of our members are under a very intense political microscope right now,” which complicated decision making at the ministerial meeting, she said.

Overlaying that is a broader shift toward more nationalistic politics, increasing big power competition and a race to transition to more climate-friendly fuels and technologies. Evenett said those trends have put many countries in an inward-looking mood, in contrast to the WTO’s creation in the mid-1990s after the demise of the Soviet Union and before the rise of China as a major economic power.

“Governments are preserving their room for maneuver and are reluctant to tie their hands with new rules. The European Union, I think, would love to engage [at the WTO] but has no one to dance with at the party,” Evenett added.

Indeed, in the final hours of the five-day ministerial conference, a senior EU official told reporters they feared no major agreements would be reached because members were mainly looking out for their own narrow interests, instead of making the compromises that were needed to support the system as a whole.

That sweeping criticism included the United States, which the EU official said seemed indifferent to whether any deals were struck on any of the items under discussion.

In the end, the Biden administration did bring home one win for business groups on an obscure issue that is unlikely to sway many voters in either direction.

That was securing a two-year renewal of a 26-year-old moratorium against collecting tariffs on digitally traded goods like music, movies and software that cross borders, as well as other “electronic transmissions.”

Business leaders warned that letting the moratorium expire could open up a Pandora’s box that would make it much more costly and complicated to do business over the internet and even impede social media posts and emails that cross from one country to another.

In another area, WTO members failed to reach agreement on a new pact to curb harmful fishing subsidies, an initiative that only a small number of advocacy groups passionately care about, despite its potential for replenishing depleted fish stocks.

The WTO also failed to launch a new round of agricultural trade talks. But farm groups were relieved that the Biden administration did not support India’s demand that WTO members agree to permanent rule changes that would allow New Delhi to continue to operate its anti-hunger public stockholding programs in a way that distorts international trade.

In a statement, U.S. Trade Representative Katherine Tai did express "disappointment" with the failure to reach deals on fisheries and agriculture, but said "the United States will continue to engage with other Members to achieve meaningful outcomes on these important issues."

In one sign of life for the WTO, midsize players have been active in pushing for new “plurilateral” agreements among smaller groups of WTO members, said Alan Wolff, an American who was a WTO deputy director general during the Trump administration.

Those include Japan, Australia and Singapore, who have spearheaded e-commerce talks, and New Zealand, who has pushed for negotiations to curb fossil fuel subsidies, he said.

Still both India and South Africa oppose such plurilateral pacts at the WTO on philosophical grounds and blocked the formal adoption last week of one aimed at facilitating investment flows between developed and developing countries.

Unless the WTO’s biggest players agree on a common set of priorities, the institution is not going to be able to produce big results, said Rufus Yerxa, another American, who served as a WTO deputy director from 2005 to 2013.

“The answer to whether the WTO is going to be able to make any progress going forward … lies in Washington, Beijing, Brussels, Delhi and other major capitals. And that has always been the case,” Yerxa said in an interview ahead of the Abu Dhabi meeting.

Camille Gijs in Brussels contributed to this report.