The European Union and the World Trade Organization
The World Trade Organization (WTO) works to guarantee a rules-based international trading system. Despite the impasse in trade negotiations, ways to modernise WTO rules and address new global challenges are being explored. Under the Lisbon Treaty, Parliament legislates jointly with the Council, has to approve any changes or new WTO agreements and has an important scrutiny role on international trade policy.
In the early decades of the 20th century, trade issues prompted countries to engage in increasingly complex interactions, creating the need for a platform to facilitate and regulate trade relations. The resulting 1947 General Agreement on Tariffs and Trade (GATT) not only provided a round-table discussion forum, creating a multilateral approach to trade, but also established a system of internationally recognised rules on trade. The underlying idea was to create a level playing field for all members through the ‘substantial reduction of tariffs and other barriers to trade and the elimination of discriminatory treatment in international commerce’[1].
As international trade moved beyond the exchange of tangible goods to include services and ideas, the GATT was transformed and institutionalised as the World Trade Organization (WTO). It was established in 1995 as a result of the Uruguay Round of trade negotiations and it incorporated earlier trade agreements, such as the GATT itself, the Agreement on Agriculture and the Agreement on Textile and Clothing, as well as other general agreements. The most significant new agreements were the General Agreement on Trade in Services (GATS) and the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS). In February 2017, the Trade Facilitation Agreement – the first multilateral agreement completed since the WTO was created – entered into force. In 2022, after having been postponed twice due to the restrictions resulting from the COVID-19 pandemic, an agreement on fisheries subsidies and an amendment to TRIPS for COVID-19 vaccines was reached at the 12th Ministerial Conference in Geneva. However, in order to keep up with recent developments in a rapidly changing trade environment, many members, the EU included, believe that a fundamental reform of the WTO is still needed, for example in the areas of trade and health, energy, e-commerce, facilitating investments, and industrial subsidies.
The WTO works to promote free trade, namely by ensuring that countries keep up the momentum in dismantling barriers to trade in trade talks. Currently, two thirds of the WTO’s members are developing countries, which enables transition economies and least developed countries (LDCs) to use open trade to advance their development efforts.
The trade dispute settlement mechanism
One of the WTO’s most important achievements has been to consolidate its Dispute Settlement Body, which has the power to rule on trade disputes and to enforce its decisions. This dispute settlement mechanism works on the basis of predefined rules enabling WTO members, regardless of their political weight or economic clout, to lodge complaints over alleged breaches of WTO rules and to seek reparation. This mechanism has led to a reduction in unilateral defence measures, to which countries previously resorted and which often provoked retaliation by the countries targeted, at times leading to fully fledged trade wars.
So far, the WTO dispute settlement system has served to guarantee that stronger members do not prevail over weaker ones and has provided clear rules on retaliatory measures. However, the Appellate Body is now effectively defunct as its members have reached the end of their mandates and vacant positions have not been filled. To overcome this situation, the EU and its Member States, together with 25 other WTO members, has started an initiative for an alternative mechanism called the multi-party interim appeal arrangement (MPIA), consisting of 10 arbitrators who will hear appeals of WTO panel reports under the MPIA.
Since the creation of the WTO, the EU has been one of the biggest users of its dispute settlement system. Between 1995 and 2022, the Union has been involved in 203 dispute settlement cases, 110 as complainant and 93 as defendant[2]. In 216 other cases, it has requested third-party status, which allows WTO members to monitor disputes involving other parties. The EU, which is represented by the European Commission, has also often sought to improve and clarify WTO agreements by requesting rulings from its panels and its Appellate Body.
The European Parliament closely monitors the evolution of disputes involving the EU. Parliament’s Committee on International Trade presents its views on trade disputes through reports, public hearings, and oral questions to the Commission and the Council.
The Doha Round and beyond
Since 2001, the WTO’s members have been engaged in a broad round of multilateral trade negotiations known as the Doha Round, or Doha Development Agenda (DDA), the main goal of which is to place development at the heart of the world trade system. The Doha talks seek to give developing countries an increasing role and to strengthen their capacity to benefit from international trade and help them combat poverty.
The DDA was based at the outset on the principle of a ‘single undertaking’[3], and is still open.
However, the talks have stalled over major issues, mainly related to market access. The most significant differences are between the positions of major emerging countries and those of industrialised countries or blocs concerning the way the international trading system should be reshaped.
The EU supported the launch of a broad and ambitious round. It saw this as the best way to deliver economic growth and development gains for all participants and to allow for the necessary trade-offs. Yet, despite the considerable efforts of a number of participants (notably the EU), the successful conclusion of the negotiations as a whole does not seem to be within reach. At the 11th Ministerial Conference in December 2017, like-minded groups of WTO members issued joint statements on advancing discussions on e-commerce, on developing a multilateral framework on investment facilitation, on launching a working group on micro, small and medium-sized enterprises (MSMEs) and on advancing ongoing talks on domestic regulation of trade in services. These plurilateral negotiations of the joint statement initiative are open to all WTO members.
On 17 June 2022, the 12th Ministerial Conference of the WTO reached a historic agreement on ending unsustainable fisheries subsidies, after over 20 years of negotiations. This is the first ever multilateral agreement focused on sustainability and the first new WTO agreement since 2013. The agreement is a crucial step in ensuring that fisheries subsidies pursue sustainability as their core objective and avoid harming oceans and fish stocks, as these are indispensable for the livelihoods of coastal communities around the world.
In addition, specific next steps towards a reform of the WTO were agreed, including restoring a fully functioning dispute settlement role for the organisation. A ministerial declaration on the WTO response to the pandemic and preparedness for future pandemics was also adopted, together with a waiver of certain intellectual property obligations in relation to COVID-19 vaccines. In a joint response to the current dramatic food situation resulting from Russia’s war of aggression against Ukraine, WTO members agreed to exercise restraint on export restrictions and to exempt World Food Programme humanitarian purchases from such restrictions. Finally, an agreement was reached to extend the moratorium on customs duties on e-commerce until the next WTO Ministerial Conference.
Following the EU’s initiative, most members reiterated their solidarity with Ukraine. The EU also fostered further cooperation on addressing climate change. The Parliamentary Conference on the WTO, co-organised by the European Parliament and the Inter-Parliamentary Union, regularly offers an opportunity for constructive participation (see below for more information on this conference). On several occasions, Parliament has called for negotiations to resume, emphasising the importance of the Doha Round for world trade and economic development.
Parliament has also been closely associated with negotiations for more limited agreements, such as the ongoing negotiations on e-commerce. It attends the WTO Ministerial Conferences, as part of the EU Delegation. Parliament continues to follow developments in the WTO, notably the preparation for the 13th WTO Ministerial Conference (MC 13) to be held on 26-29 February 2024 in Abu Dhabi, United Arab Emirates.
The EU and the WTO
So far, the EU has played a central role in developing the international trading system since World War II. Currently, the EU is exploring the possibility of modernising the WTO[4].
Like the GATT (and later the WTO), the EU was itself originally designed to remove customs barriers and promote trade between its Member States. The EU single market was partly inspired by GATT principles and practices. The Union has always been among the main promoters of effective international trade based on the rule of law. Such a system helps ensure that its businesses enjoy fair market access abroad, and thus supports economic growth, both domestically and in third countries, particularly less developed ones.
The EU’s common commercial policy is one of the areas in which the Union as such has full and exclusive competency. In other words, the EU operates as a single actor at the WTO and is represented by the Commission rather than by the Member States. The Commission negotiates trade agreements and defends the EU’s interests before the WTO Dispute Settlement Body on behalf of all 27 Member States. The Commission regularly consults and reports to the Council and Parliament on the content and strategy for the multilateral discussions. Under the Lisbon Treaty, the Council and Parliament are co-legislators with an equal say on international trade matters.
Through the WTO, the EU has also sought to promote a multilateral framework for trade negotiations, intended to complement bilateral negotiations. However, the stalemate in the Doha Round and the fact that other trading partners have turned to bilateral agreements have compelled the EU to partly reconsider its long-standing strategy and return to regional and bilateral negotiations.
The current impasses at the WTO are also a sign that the international trading system has changed dramatically in the past 20 years. The system has evolved, with new actors – essentially transition and developing countries – playing a central role. The liberalisation of the international trading system has benefited some developing countries, which have experienced an unprecedented phase of sustained economic growth. The EU is well aware of these new dynamics. It has pointed to the need to move beyond the negotiation approach of the past years and try innovative approaches to address the increased importance of regulatory issues, as compared to tariffs. In February 2023, the EU proposed three key areas for focused deliberation[5] at MC 13, namely trade policy and state intervention to support industries, trade and global environmental challenges, and trade and inclusiveness.
The Parliamentary Conference on the WTO
The Parliamentary Conference on the WTO is jointly organised by the European Parliament and the Inter-Parliamentary Union (IPU) and is intended to strengthen democracy internationally by bringing a parliamentary dimension to multilateral trade cooperation.
The first formal meeting of parliamentarians at the WTO dates back to the December 1999 WTO Ministerial Conference held in Seattle. In 2001, Parliament and the IPU agreed to pool their efforts and sponsor a parliamentary meeting during the WTO Conference in Doha. This meeting laid the foundations of what has become the Parliamentary Conference on the WTO.
This conference provides a forum in which parliamentarians from all over the world exchange opinions, information and experiences on international trade issues. Participants monitor WTO activities; promote the effectiveness and fairness of the WTO; advocate transparency in WTO procedures; work to improve the dialogue between governments, parliaments and civil society; influence the direction of discussions within the WTO; and build up national parliaments’ capacity in international trade matters.
The Parliamentary Conference on the WTO meets during WTO Ministerial Conferences. However, as a result of the pandemic, it was not possible to meet in the limited framework of the 12th Ministerial Conference, but it will hopefully be possible at the upcoming MC 13.
Wolfgang Igler