Reforming the World Trade Organization: Practitioner Perspectives from China, the EU, and the US

• Published date: 01 July 2021
• Author: Bernard Hoekman,Robert Wolfe
• Date: 01 July 2021
• DOI: http://doi.org/10.1111/cwe.12378

Legal statement - This is an open access article under the terms of the Creative Commons Attribution License, which permits use,

distribution and reproduction in any medium, provided the original work is properly cited.

China & World Economy / 1–34, Vol. 29, No. 4, 2021 1

© 2021 The Authors. China & World Economy published by John Wiley & Sons Australia,

Ltd on behalf of Institute of World Economics and Politics, Chinese Academy of Social Sciences.

*Bernard Hoekman (corresponding author), Professor, European University Institute and the Centre for Economic

Policy Research, Italy. Email: bernard.hoekman@eui.eu; Robert Wolfe, Professor, Queen’s University, Canada.

Email: robert.wolfe@queensu.ca. The authors are greatly indebted to Matteo Fiorini for his assistance with estimation

of the ordered probit models used in this paper and processing the underlying survey data, and thank two anonymous

reviewers and Alice Tipping for helpful suggestions. This paper draws on joint research with Matteo Fiorini, Petros

Mavroidis, and Douglas Nelson and was supported by a European Union Horizon 2020 research and innovation

project “Realizing European soft power in external cooperation and trade” (No. 770680) and a Bertelsmann Stiftung-

funded research project on WTO reform.

Reforming the World Trade Organization:

Practitioner Perspectives from China,

the EU, and the US

Bernard Hoekman, Robert Wolfe*

Abstract

China, the European Union, and the United States are the world’s largest traders. They

have a big stake in a multilateral system of rules to manage the inevitable frictions

among interdependent economies organized on different principles. This paper discusses

elements of the WTO reform agenda through the lens of positions taken by these

three WTO members, identifying the extent of alignment on key subjects, including

transparency, dispute settlement, and plurilateral negotiations. We draw on fi ndings of a

recent research project on WTO reform and use responses to an expert survey to assess

the prospects for actions that all three trade powers might support. Our premise is that

reforming WTO is a necessary condition for the organization to be a more salient forum

for the three large economies to address trade tensions, and that agreement among these

three trade powers, in turn, is necessary to resolve the problems of the WTO.

Key words: China, plurilateral cooperation, trade agreements, trade confl ict, WTO

JEL codes: F13, F15, F53

I. Introduction

After 26 years since its establishment in 1995, the World Trade Organization (WTO)

undoubtedly needs to renovate both its rules and working practices. Structural weaknesses

and gaps in WTO rules were evident right from the start. Over 20 years ago, Sylvia Ostry

(1999), one of the architects of the WTO, provided a compelling case for institutional

Bernard Hoekman, Robert Wolfe / 1–34, Vol. 29, No. 4, 2021

2

Legal statement - This is an open access article under the terms of the Creative Commons Attribution License, which permits use,

distribution and reproduction in any medium, provided the original work is properly cited.

© 2021 The Authors. China & World Economy published by John Wiley & Sons Australia,

Ltd on behalf of Institute of World Economics and Politics, Chinese Academy of Social Sciences.

reform. Although much was done by WTO members to improve some features of the

operation of the WTO, notably as regards internal and external transparency of WTO

activities, structural reforms to the organization were not seriously considered. That has

changed. While WTO reform pressures in part refl ect increasing dissatisfaction by many

WTO members with the operation of the organization, especially its negotiation function,

a major trigger for the rising prominence of calls and proposals for WTO reform is the

impact of China on the trading system (F. Ismail, 2020).

Initial positive perceptions regarding China’s reintegration into the world trade

order have transformed into acrimony (Mavroidis and Sapir, 2021; Winters, 2021). The

US especially has raised a series of complaints before the WTO, mostly dealing with

the role of the state in the workings of the economy, compounded with unhappiness

with Appellate Body rulings on disputes centering on US antidumping actions against

imports and specifi c features of China’s trade regime. Lurking behind the US push for

WTO reform is its frustration that integration of China into the trading system has not

changed it into a liberal market economy. Many other WTO members, including the

EU, share some of the US’ concerns but disagree on others. There are also signifi cant

differences in views between the EU and the US on some elements of the functioning of

the WTO, notably its dispute-settlement mechanism, and among WTO members on the

question of how to revitalize the negotiation function and refl ect differences in levels of

economic development and capacity across countries.

China, the EU, and the US, as the WTO members with the largest shares in global

trade, play a critical role in updating and bolstering the WTO to keep it fi t in a rapidly

changing world economy. No two of them can provide the public good of an open

liberal multilateral trading system on their own. The WTO reform is, to a large extent,

a triangular challenge. In the present paper we discuss elements of the WTO reform

agenda through the lens of positions that have been taken by the three major trading

powers. Our aim is to shed some light on areas of alignment, or absence of alignment,

across these three players on the main subjects associated with reform debates, including

WTO working practices, notably consensus and special and differential treatment (SDT)

for developing countries, transparency of trade policy, deliberation in committees and

other WTO bodies, and dispute-settlement procedures. We do not discuss all these areas

in depth but refer the reader to the recent literature on this subject.1

We draw throughout on an original survey of the expert trade policy community

conducted in June 2020 (Fiorini et al., 2021). The survey suggests that respondents from

1Recent research on WTO reform includes Liu (2019), Bronckers (2020), Charnovitz (2020), Evenett and

Baldwin (2020), Fitzgerald (2020), Hoekman and Mavroidis (2021), and Wolfe (2020, 2021). See also https://

globalgovernanceprogramme.eui.eu/research-project/revitalizing-multilateral-governance-at-the-wto-2-0/.

Reforming the World Trade Organization 3

Legal statement - This is an open access article under the terms of the Creative Commons Attribution License, which permits use,

distribution and reproduction in any medium, provided the original work is properly cited.

© 2021 The Authors. China & World Economy published by John Wiley & Sons Australia,

Ltd on behalf of Institute of World Economics and Politics, Chinese Academy of Social Sciences.

the EU and the US are broadly aligned on the WTO reform agenda, while respondents

from China often diverge in the priorities accorded to these subjects. Our premise is that

reforming the WTO is a necessary condition for the organization to be a more salient

forum for the large economies to address trade tensions, which in turn would help to

resolve the problems of the WTO.

The paper is organized as follows. We begin in Section II with a brief discussion

of the systemic context of WTO reform. Section III introduces the survey data and the

methods used, which form the basis for the analysis in the rest of the paper. Section IV

focuses on the negotiation function of the WTO and the initiative to launch plurilateral

negotiations among groups of WTO members as a response to the problems created

by the WTO consensus working practice. Section V discusses the approach taken to

recognizing economic development differences, which has been an important negotiation

obstacle and thus a prominent subject in WTO reform debates. Section VI discusses the

challenge of improving transparency, another key area of WTO reform, as a common

understanding of prevailing policies that is a necessary condition for cooperation. Section

VII considers reforms to WTO working practices to enhance the use of WTO bodies for

joint deliberation on the operation of the WTO – which is salient for transparency as well

as preparing the ground for negotiations. Section VIII turns to a fi nal area where action by

WTO members is needed: addressing the Appellate Body crisis and improving dispute-

settlement processes. Section IX discusses implications of our analysis for fostering

cooperation between the three major trade powers in the WTO. Section X concludes.

II. The systemic context of WTO reform

Many of the WTO’s problems are due to a general malaise in multilateralism and to

structural changes in the world economy. Power matters, it has shifted, and the system

has not caught up. Whether or not the US ever was a “hegemon” (Snidal, 1985), it

manifestly is not one now. It is uncomfortable in this new situation and is especially

uncomfortable with the rise of China. One might normally expect a rising power to

respond to shifting power by demanding institutional change (Goddard, 2020), but it

is not clear that that is what China wants. Chinese scholars argue that “WTO members

need to engage with China in a more positive and constructive way, taking China’s

rise and ‘Chinese characteristics’ into consideration” (Li and Tu, 2018). Indeed, some

scholars think the challenge of rising powers in the WTO is not to its institutional

arrangements but to the dominance of the US (Hopewell, 2016). On the other hand,

sometimes it is the established or declining power that seeks institutional change (Kruck

and Zangl, 2020), which may be a better description of what we observe.