The World Trade Organization: Reform and Renewal

Despite a number of challenges, the World Trade Organization (WTO) and the global rules-based trading system it embodies have benefited the entire world — but no country more than the United States. While the WTO was created in 1995, it built on the foundation of the 1947 General Agreement on Tariffs and Trade (GATT). Combined, the WTO and the GATT have revolutionized world trade. Eight successful multilateral negotiating rounds have helped increase world trade from $58 billion in 1948 to well above $25 trillion today. This 40-fold increase in real terms has brought a rising tide of commerce to nearly the entire world.

It isn’t just the tariff elimination brought about under the GATT and the WTO that benefits American companies and the workers they employ. The WTO guarantees that U.S. firms operating abroad will not face discriminatory treatment. If the U.S. Congress passed legislation withdrawing the United States from the WTO, the other 163 WTO member states–representing 99% of the world economy—would be free to raise their tariffs against U.S. exports as high as they liked, and Washington would have no legal recourse.

It’s become commonplace to say the WTO’s accomplishments are long in the past, but this isn’t so. The WTO’s Trade Facilitation Agreement, which entered into force in early 2017, is a cost-cutting, competition-enhancing, anti-corruption agreement of the first order. Once fully implemented, it has the potential to increase global merchandise trade by up to $1 trillion annually. The expansion of the Government Procurement Agreement (2014) and Information Technology Agreement (2017) also afford major benefits to American business.

However, the WTO does need reform. It must become more nimble as a forum for negotiations by making it easier for members to pursue new market-opening trade agreements. Achieving consensus in an organization of 164 member states is obviously challenging, but the absence of consensus cannot be permitted to block negotiations among those seeking to tear down trade barriers or update trade rules. The Chamber supports the move to seek new “plurilateral” agreements covering large numbers of WTO members but not necessarily all. One good example of such trade agreements is the aforementioned Government Procurement Agreement. Thanks to this agreement, U.S. firms can bid on foreign government contracts worth nearly $1 trillion every year on a level playing field. If the United States were to withdraw from the GPA, those governments would be free to discriminate against U.S. companies.

The WTO’s dispute settlement system is also high on the reform agenda. The United States has been a major beneficiary of WTO dispute settlement, bringing and winning more cases than any other WTO member. In fact, the United States has won or favorably settled about 90% of all of the more than 80 completed cases it has brought.

U.S. administrations have raised serious concerns about “overreach” in Appellate Body (AB) rulings for more than 15 years, noting rulings that it argues are not clearly supported in WTO agreements. In frustration, the United States in recent years upped the ante by blocking AB appointments. The United States has come under fire from other members for not offering concrete proposals to resolve its complaints. In December 2019, the AB was reduced to a single member and was thus left completely unable to function.

Reform is a priority, but shuttering the AB is not warranted. The Chamber supports efforts to translate the Walker Principles (articulated by New Zealand’s ambassador to the WTO) into a form that can address the concerns that U.S. administrations have identified relating to AB “overreach” and its slow and bureaucratic procedures.

Given these serious challenges, American companies fear that the U.S. stance will be taken by foreign governments as tacit encouragement for their own non-compliance with the WTO agreements. They are concerned that new trade barriers and discriminatory treatment will become even more common over time. Like the movement of a glacier, this trend may at first be imperceptible, but in the end it could prove unstoppable. For these reasons, the Biden-Harris administration and Congress must find practical solutions to these challenges.

ACTION: The Chamber will defend the benefits of U.S. membership in the WTO and press for reforms to make it more nimble as a negotiating forum, including greater use of plurilateral approaches, as well as reforms to restore its Appellate Body to a fully functional state.