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The WTO can do more for world trade by trying to do less
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The WTO can do more for world trade by trying to do less

In late February, 4,000 delegates from 164 countries gathered in Abu Dhabi for the World Trade Organization’s most important decision-making meeting. The international body is grappling with a long list of difficult issues: some are longstanding, such as dispute settlement mechanisms and agricultural subsidies, and some are new, such as AI and data governance in global trade.

Ministers met for four days and then gave themselves a two-day extension. There were some meaningful achievements, such as an agreement to facilitate foreign direct investment in developing countries. But ministers largely agreed to keep talking, ahead of future meetings. Unfortunately, there was no discussion of AI or how to use data, two of the hottest topics of the day.

The outcome of the 13th Ministerial Conference (MC-13) was far from the comprehensive reform package that WTO watchers like myself believe the trade organization desperately needs to continue to function and respond to the urgent needs of today’s global marketplace. And it is a disappointing outcome after two years of hard work since the last Ministerial Conference in June 2022, and months of intense negotiations in the run-up to Abu Dhabi.

Trade officials can shrug their shoulders and start planning for the next ministerial conference in Cameroon in two years. But that would be wrong. The failure of MC-13 shows that the WTO is slowly becoming detached from the real world of trade.

Negotiations to adopt new standards for the digital economy have reached an impasse. Guidelines on cross-border data transfers and server localization remain vague. The assessment of the implications of generative AI has not even begun.

Take the global restructuring of the supply chain, as countries pursue ‘friendshoring’ and ‘onshoring’ agendas. It has become a major agenda item for many governments, pursuing both legitimate and questionable policy objectives.

And yet the WTO has remained silent on this fundamental issue of global trade, despite the fact that it goes to the heart of the organization: the long-cherished principle of non-discrimination. Governments are confident enough to admit publicly that they want to change the rules of global trade.

However, the WTO remains cautious.

The 1994 Uruguay Round established the WTO as a global governing body with binding legal standards and a strong dispute settlement mechanism. However, its early successes have gradually been overshadowed by its inability to resolve complex and sensitive disputes. It is fighting a losing battle against sovereign states unwilling to cede their regulatory authority, leading to endless talks and negotiations as AI, bitcoin and other digital technologies threaten to transform the global economy.

Unfortunately, the WTO in its current form cannot meet the demands of the new world community. Leaving it is not an option; more chaos and confusion will ensue.

The value of the WTO is in providing an arena where countries can come together and talk about trade. So how can we make the WTOs method to protect that?

Some trade issues, such as customs procedures, health regulations, enforcement of anti-dumping measures, and so on, can still be handled under the current WTO model, which enforces international rules with a strong dispute settlement process.

Yet these are long-resolved and long-understood issues. The WTO will take a different approach method for the emerging issues of the digital economy, such as AI regulation, subsidy policy, supply chain reform and the scope of national security.

In this case, the WTO should take a step back and assume the role of a mediator rather than an organization that actively brings about change.

This is unlikely to lead to far-reaching global agreements, but instead to plurilateral agreements where states form their own blocs with like-minded countries. The WTO can then monitor and oversee these various agreements, facilitate negotiations on future agreements and offer its dispute settlement mechanism to states participating in these blocs.

It is no coincidence that two of the three agreements the WTO has adopted since its inception have “facilitation” in their title: the Trade Facilitation Agreement of 2013 and the Investment Facilitation for Development Agreement of 2024. Perhaps “facilitation,” rather than “action,” is all an increasingly polarized global trading community can agree on.

Alternative dispute resolution can offer new ways to resolve complex, politically charged trade disputes, such as the US-China semiconductor dispute or the EU-China electric vehicle feud. Mediation can prove useful because it helps countries move away from strict binding legal norms and towards something more flexible and creative. This solution-oriented dispute resolution has proven useful in resolving complex disputes between states where legal norms were outdated, vague or simply absent, such as when the Gulf Cooperation Council facilitated reconciliation between Qatar and Saudi Arabia in 2021.

Becoming an advisory body would not mean abandoning the WTO’s ambition to shape global policy. Consider the OECD’s recent success in adopting global rules on digital taxation. The international body managed to reach an agreement on digital taxation in October 2021, with a whopping 137 countries joining. Crucially, the US and China both agreed to the framework, which is remarkable given their confrontations in the global economy.

Why is the OECD successful, while the WTO has not even begun the discussion? Perhaps the OECD, as a consultative body, has created a space where states can discuss sensitive and complex issues in a more open, honest and creative way.

A less ambitious, more consultative WTO could provide meaningful leadership in addressing emerging global problems. Sometimes less is more.

The opinions expressed in the comments on Fortune.com are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.

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