Rambod Behboodi:
This is Rambod Behboodi, Senior Counsel at Borden Ladner Gervais in Ottawa. I'm here with Stephen de Boer, former Canadian Ambassador to the World Trade Organization. And this is The Tariff Home Companion, a new podcast to shed light, not heat, on trade and tariff issues affecting Canada and Canadians.
We're back, to talk trade. Last time it was about CUSMA and the path forward. In this episode, we are going to zoom out and look at the global landscape. The WTO.
Stephen and I will, as usual, provide a bit of background. We are then joined by a stellar figure, in not just Canada's trade law firmament, but globally, to provide some perspective.
In a different context, under different circumstances, 2025 would be a landmark year in global trade law and policy – indeed in global economic relations.
Only last week, the WTO Agreement on Fisheries Subsidies entered into force.
It's a remarkable achievement – an agreement that seeks to control and reduce subsidies that contribute to overfishing. It's an important crossover between trade and the environment, and a key compromise between developing and developed economies.
And even more remarkable that it happened this year, the 30th anniversary of the WTO itself.
And yet, neither has made it to the headlines of major media in North America.
What does it all mean? Why should we care? What is the WTO?
And if an agreement enters into force and Canadian journalists are not there to hear it, did it ever happen?
Let's take a step back. Last time we started in 1854. This time we go back only eight decades.
To the end of the last global war.
The victorious powers, in order to avoid the economic and trade circumstances that had contributed to the outbreak of World War II, established multilateral institutions to cover trade currency, stability, and economic development.
The General Agreement on Tariffs and Trade, which entered into force provisionally in 1947, was not a free trade agreement. It required though that signatories agree to ceilings to tariffs, and established a framework for periodic multilateral negotiations to progressively reduce those tariffs. A truly reciprocal arrangement, if you will.
It was wildly successful in those rounds of negotiations.
Naturally, the parties – having got significant tariff reductions all around – got more ambitious.
In successive rounds, they negotiated a series of codes covering trade remedies, subsidies, and non-tariff barriers.
And they developed increasingly sophisticated dispute settlement mechanisms.
Eventually, they agreed to the establishment of the World Trade Organization. The WTO started working in 1995 – with 128 members and covering 90% of global trade.
Stephen de Boer:
So as of August 30th, 2024, the WTO has 166 members. Areas of coverage include, but are not limited to, agriculture, textiles, and clothing, banking, telecommunications, industrial standards and product safety, food sanitation regulations, and IP.
There are also core fundamental governing principles. Trade without discrimination. Freer trade, gradually, through negotiation. Predictability, through binding and transparency provisions. Promoting fair competition and encouraging development and economic reform.
The WTO's mandate to ensure that trade is as fair as possible and is open, as is practical, is fueled by negotiations.
As noted above, a long history of negotiations by signing countries led to the creation of the WTO. The organization's agreements thus are the result of negotiations. Notable negotiations include liberalizing telecommunication services in 1997. A 2001 work program that included rules on anti-dumping and subsidies and IP. A multilateral accord, the first of its kind reached at the WTO, in 2013 to cut trade costs and lift global exports by as much as $1 trillion US dollars per year, which is referred to as the Trade Facilitation Agreement. Expansion of the Information Technology Agreement in 2015 to eliminate tariffs on IT products valued at over $1.3 US trillion per year. Amending the WTO IP Agreement, easing poorer countries access to medicines. The Ministerial Conference in 2022 adopted the landmark Fisheries Subsidies Agreement responses to the food crisis and COVID-19 pandemic, and endorsed further liberalization for services domestic regulation.
The WTO and its members will continue to facilitate negotiations to establish reform agreements and regulations.
And this list does not undermine the notion that this is a dysfunctional organization. It is obviously working, albeit at a slow pace.
Another fundamental provision is with respect to Trade Policy Review Mechanism. Surveillance of national trade policies is a fundamental activity of the WTO and is controlled by the trade review mechanism.
These reviews take place in the Trade Policy Review Body, and its main goal is to enhance transparency of members trade policies. All Members are subject to review, and Members with the four largest shares of world trade are mandated to be reviewed every two years. The next 16 biggest trading Members are to be reviewed every four years and others are to be reviewed every six years.
The objectives of the reviews are to increase the transparency and understanding of countries trade policies and practices through regular monitoring, improve the quality of public and intergovernmental debate on the issues, and enable a multilateral assessment of the effects of the policies on the world trading system.
The reviews focus on Members' own trade policies and practices, while taking into account the countries' wider economic and developmental needs, their policies and objectives and the external economic environment that they face. These reviews are seemingly meant to encourage governments to abide by WTO rules and fulfill their commitments.
Another one of the WTO's key activities is to promote developing countries' participation in the global trading system. Thus, building trade capacity is essential. The WTO provides assurance to building trade capacity through a variety of ways, but mainly by instructing developing country delegates on how their countries can gain through the trading system.
Thus, the vast bulk of the WTO's technical assistance spending is dedicated towards helping officials better understand complex WTO rules so that they can implement WTO agreements in positive ways.
It also comes in other ways, and mainly through WTO cooperation with other organizations to help build more efficient ports and roads, educate entrepreneurs, provide customs officials with automated equipment, for example.
As some WTO Members do not have the human, institutional, and infrastructural capacity to participate effectively, the WTO strives to accelerate and contribute to development.
The Doha Declaration of 2001 has played a huge part in this mandate. It was seen as a new commitment from the WTO Members on technical cooperation and capacity building. The Doha Declaration spurred on a major round - the so-called development round - of negotiations, and this round has largely been declared dead, but remains arguably a stumbling block to further liberalization efforts and continues to animate development discussions at the WTO.
Rambod Behboodi:
The WTO was also established to serve as a platform for the settlement of trade disputes between its Members.
What's a trade dispute?
A dispute arises when a Member considers that another Member is violating an obligation that it has negotiated and agreed to under the WTO Agreement, and where bilateral diplomatic attempts to resolve it are not successful. Instead of attacking each other with unilateral measures, the WTO Agreement requires its Members to bring those disputes to something like an international court.
The Dispute Settlement Body of the WTO is the highest diplomatic body overseeing the rules-based settlement of trade disputes in the WTO. But the real work takes place in the panels and, when it was still functioning, the Appellate Body.
Panels consist of international trade law or policy experts. The Members and only the Members, these are the governments of the WTO – governments of the Members of the WTO – may bring legal arguments backed up by evidence and expert testimony before impartial arbiters, who will then decide whether a claim or violation has been made out. After that, in principle, there's an appellate procedure.
The Appellate Body of the WTO was a Canadian innovation. It was established in 1995 to bring a measure of security and predictability to dispute settlement between Member governments and, in particular, to ensure that – and strengthen – the legitimacy of arbitral findings and recommendations by panels.
The Appellate Body was conceived initially as a mechanism to correct for egregious errors; the prospect of an appeal, of correcting panel findings – in fact of a second bite at the apple proved too tempting – however. Starting with the first case under the WTO, appeals became routine.
And the Appellate Body proved, as an international judicial mechanism, successful beyond anything imagined in 1995.
That success, that routine use of the appellate procedures, in the end grated against key interests in the United States. The US eventually refused to allow Members of the WTO, to appoint, Appellate Body Members. And, the term of the last sitting appellate body Member expired on November 30th, 2020. This plunged the dispute settlement mechanism of the WTO into a crisis that it has not yet been able to recover from as an organization.
Nature – and multilateral organizations – hate a vacuum. And so it was that Canada, the European Union, and other like-minded countries established an interim appellate mechanism, the Multi-party Interim Appeal Arbitration Arrangement or the MPIA for short.
We are exceptionally fortunate today to have with us Canada's first nominated member of the MPIA, Ms. Valerie Hughes. Valerie has had an incredible career, and I have been particularly fortunate to work for her, and with her, and alongside her, across these past thirty years. Her journey has taken her to the International Court of Justice, two senior positions in the WTO, head of the Trade Law Bureau of the Government of Canada, and Counsel to the Department of Finance. In addition to teaching and private practice.
And now she can talk to us, not just, about the WTO, but the rules-based framework governing trade more, more generally. Val thank you so much for coming here. Let me start by asking a softball question.
Is the WTO relevant still?
Valerie Hughes:
Well, first of all, thank you Rambod for inviting me to join you and Stephen on this podcast today.
Is the WTO relevant? You bet it is. This is the only place where you have 166 members developed, and developing, and least developed that are working together on a lot of issues. You just told us that they, this year agreed, came into force the fisheries agreement on something extremely important to the world, the declining fish stocks.
So this agreement will support governments in eliminating subsidies that, that support overfishing. So there we have a very key, a key example of how it is relevant. We also have the dispute settlement mechanism that you were talking about. It is, it has been, I think, the most incredible and important and successful international dispute settlement mechanism in history. You compare what the ICJ did you to what was able to be done in the WTO over 600 cases filed.
And many, many, successful, very complex disputes, dealt with. And they're still bringing disputes. Governments are still bringing disputes, many disputes to the WTO to be resolved. Even though the Appellate Body is no longer functioning, the panel system is still working. And where else in the world, if you have a dispute against China, are you going to bring it about trade?
Nowhere else. It's the only place to go.
Stephen de Boer:
So I, I understand all of that, but we've got one significant Member of the WTO, the United States who, has undermined the Appellate Body process, is now engaging in activities that does violence to one of the fundamental principles of the WTO. So how does the WTO move forward or how should they be engaging with the United States in that forum?
And I would also, I would note there's nothing right now from the United States that suggests that they would leave the WTO. There's been no threats from them, but, but how, how would members engage, or what is the role for the United States? What is the role of the membership in, in moving forward?
Valerie Hughes:
Well, the United States was of course, one of the principal crafters of the organization and one of the drivers of the organization, their leadership was invaluable to the organization. And it started to pull away, even during President Obama's term when there were concerns about how the Appellate Body was resolving disputes. So it has come now a long way, away from what the United States used to be to the WTO.
And indeed, they've not even paid their annual contribution for this year, which is about 11% of the WTO budget. So that's significant and it's having an effect. I was there just last week and there's a lot of contracts that are not being renewed. There's, technical assistance that is being limited, so there's a lot of impact just because of the United States not paying their contribution. But more importantly, I think is the lack of their leadership. They are not the, the leading discussions on important issues like the environment, like e-commerce, like digital trade. The, the places where the WTO needs to move forward to, to really have an impact on, on, on trade as it goes forward.
And also regrettably, the United States is not, not at all, concerned about violating their, their obligations under the Agreement. Things that we've seen lately about imposing different tariffs on different countries is nothing like the non-discrimination rules that the WTO calls for. So we do have a problem, but there are 165 others that are still working there and are still bringing their interests forward.
And I do believe that the United States will continue to participate, just not in a leadership role. And I, and I think the United States, like you say, it hasn't said it's going to leave. They did threaten that when President Trump had his first term. It didn't happen. We haven't heard it this time. And also, interestingly, they appointed a reasonably, recently, a new ambassador to the WTO, who has, got a good reputation in the field. And they also have a new, what they call the Deputy Director General. An American that is apparently from the, you know, Trump Circle, someone who is respected by, and who respects, President Trump. So by putting these two people in place, it suggests to me that they're going to be there, perhaps not the leadership role, but they won't undermine it. And we have 165 others. The European Union, Japan, India. We have Brazil. We have a lot of countries that are very powerful and, and doing a lot of, of good work, and I suspect it will continue.
Rambod Behboodi:
I think, one, one thing that is, obviously distracting from the bigger picture is that the question of tariffs is dominating the conversation. And the, this differential imposition of tariffs, obviously they're important because, the United States is violating Articles I and II of the GATT, I mean, the two foundational principles. At the same time, I think, what is getting lost, in the, in the conversation is that the WTO Agreement covers a whole lot of other disciplines, other areas.
And they, those continue to be respected. We have not yet heard from the United States or elsewhere, that for example, countries are going to go ahead and impose sanitary and phytosanitary measures, food safety measures without a scientific assessment, for example, or that they're going to have discriminatory technical regulations.
So I'm, in a sense confirming, your observation about, about the WTO, continuing to be relevant. The question I have though is that, do you think that will continue or is it likely that this opening of the door by the United States of the, the violations, key violations of the two foundational principles of the organization will encourage others to take a perhaps more cavalier attitude towards, towards their obligations. And not, not to renounce the WTO, but rather to, to start picking and choosing which obligations they're going to, they're going to, honour.
Valerie Hughes:
Unfortunately, it probably will encourage some to be less vigilant. We were, Canada was not, absent in doing that when the tariffs were put on before.
And Canada retaliated with its tariffs, obviously would, they would probably, the Canadian government would argue that they had, justification for that under the rules. But in any event, you're going to see others. And yesterday, only yesterday we saw someone be, an EU official when they were discussing the, raising of tariffs on steel, saying, well we're not going to impose rules on ourselves that no one else is committed to and no one else is complying with.
The trouble is that there's a lot of, there's a lot of, for us to lose as a middle power and for various countries to lose as, as not the United States in quitting that system and, and, and violating the rules. Like you talked about, food safety, like you, the variety of services, agreements and, and rules that are in play the intellectual property rules, the protection of intellectual property. So have a lot to lose as a Canadian, the Canadian government, the Canadian people, and in countries like ours. So yes, there will be violations. The tariffs area in particular, I'm sure we will all see retaliation and counter tariffs and things that have happened before.
But I think the, the core fundamentals will still continue. And what the WTO allows is something called a specific trade concern. So you don't have to bring a full fledged dispute, but you can air your disputes. And this is happening more and more often. And so you're having opportunity to have this transparent airing of concerns.
And so I think it will. Yes, there will be some holes and yes, we, people will poke at some of the rules, but overall I think it's in the benefit of the 165 others to keep doing what they've always been doing, which is generally complying with the rules.
Stephen de Boer:
So what next for the WTO? You've made a pretty compelling case as to why, countries should continue to, engage, why they should be following the rules.
But what's on the horizon for, and I, I'm going to park just dispute settlement because that one doesn't seem like it's, doable in the, in the short term. But what should the WTO be thinking about? They're coming back from, from the summer holidays. What's, what's the work? What, what should it look like?
Valerie Hughes:
Well, they, they keep telling us that they are working on reforms and, there are a variety of things that they want to reform. Dispute settlement, let's put that aside. But it's the way they work and the deliberative function. What the WTO requires in the rules is that things are done by consensus. And that means that one "no" stops everything.
And that had its benefits, as the WTO was created in 1995 and you know, there was a lot of, buy-in by developing countries, especially because they had, you know, they had a vote just like the economies. And so what we need to understand is that reform is difficult when you have a consensus-based system.
And what we're seeing is something that probably is what they need to do going forward is have more of these plurilateral and not a hundred percent consensus agreements. And working towards things that are important to a number of Members, if not a hundred percent of Members. And have them come to agreements on things like digital trade, on e-commerce, on environmental goods, on fisheries subsidies because they have to continue work there. So if we can have countries work in these plurilateral negotiations, that are eventually open to anyone else that wants to be a party to that, this is where the WTO has to, has to, you know, put, put its emphasis.
Now, there is more to do and the, we've seen when we had the pandemic, how this disrupted, trade flows. How, there were, export restrictions on medical equipment. All of these things the WTO was, was very much involved in trying to work through those problems. And I think these are the kinds of things we have to be ready for that kind of, disruption. We have to be ready to address supply and demand, and these supply chains that, that get disrupted by, these pandemics or, or world events.
So there's lots to do. I don't think that, pens will go down. And what happens in the WTO every day of the week is they meet and discuss the various issues and make sure that the agreements are being addressed. It'll continue perhaps more slowly because you won't have the leadership of the United States, but it will continue.
Rambod Behboodi:
So about 20 years ago when we first worked together in Geneva, the concept that was in vogue was "variable geometry". Are we, I mean, not the, the name, doesn't seem to be in play anymore, but that's, that's what you are, that's what you're suggesting will, is likely to happen. In the same way that we now have a patchwork of trade agreements around the globe, variable geometry, in terms of trade liberalization within the WTO, there will be variable geometry in terms of rights and obligations.
That could go, that could allow the WTO to continue. But what does that do to the, to the core bargain at the heart of the WTO? Which is essentially the thing that we've always heard, "nothing is agreed until everything is agreed." That developing and less developed countries agreed to, a certain set of demanding obligations in areas that they really didn't, weren't interested in. In return for getting the kind of access that now they're, they're being denied. If we bring that patchwork in, how will the ethos of the WTO continue to work?
Or is it that that ethos will now have to change?
Valerie Hughes:
Well, I think there's two things. One is that the WTO does provide for plurilateral agreements. It's in the system and there are a number of them. Government procurement is one, and probably the most active one. So that it doesn't really mean that the WTO is against or prohibits plurilateral approaches.
And we had this in, you know, Stephen mentioned the IT Products Agreement that's, not everyone was part of that at the beginning, but it covered a substantial amount of trade for those governments, those Members interested in reducing tariffs on IT products. Not everyone is interested in access to medicines, but for those countries that were interested, that amendment, went through.
So it goes, it doesn't go against WTO ethos to have plurilateral approaches. But by the same token, if you do have, you know, the smaller economies, the developing countries that don't feel they have the power or the ability to influence the system, influence what the WTO is going to study or negotiate that will of course undermine, the, the system more broadly. Because, it is because it covers 98% of the world trade that it is a, it is an organization that's going to continue that is not going to collapse because it just covers, it's, it's just too big to fail.
We've heard that in some language. So, but it, we do have a number of what the, a number of governments that are pushing forward with separate initiatives. And you mentioned one, which is the MPIA. It started with 19, 18 or 19 Members. Now there's 27. And it, and as you know, for example, Japan wasn't a part of the original MPIA group. And then it had a dispute that was going to go to appeal and it didn't want to have the appeal into the void because there was no appellate body to decide. And Japan joined.
And so I think that's what's going to happen with these various variable geometry approaches. It'll work.
Stephen de Boer:
My own, my own observation is that it, it is variable because the economies are variable. There, there's a lot of countries that are not engaged in certain segments of the international economy.
So why should they be subject to new rules or why should they engage? I mean, civil aviation is a great, a great example. So by, by definition there's a patchwork there already. But I, based on my experience, I would suggest that it, it also means that there are some Members, some fairly large significant Members of the WTO who are going to have to change the way that they operate and that the, and the way that they, think about, think about these things.
I mean, to the early, to your earlier point, it seems to me, if the US is breaking the rules and that may encourage others to break the rules. But hopefully they will come to their senses and realize if there ever was a case for rules and all of us following them, this is it. Because now we know the consequences.
So maybe a year from now if we have this conversation, we'll see a different situation. Trying to be optimistic here.
Rambod Behboodi:
You were just in, Geneva. You attended the public forum. What's the mood?
Valerie Hughes:
The mood is subdued. I talk to, of course, a lot of, of the members of the WTO Secretariat staff.
They're, they're feeling, they're feeling that their jobs are not secure. They're, you know, they, they cannot do any sort of traveling or missions or go to conferences. Temporary contracts are, are being cut. So the staff itself is feeling a little bit under siege. The Membership as well is concerned because of the lack of leadership by anyone. United States being one. But there isn't really a lot of leadership amongst the Membership. You haven't, you've seen China seek to, take a, a lead on certain things. They've just announced that they won't claim developing country status going forward. You see them trying to be the, the big guy around in town. But you know, there's also China's, industrial policies that are bothering a lot of other members.
So you don't, I don't see them really being the lead that everyone is going to look to. There's not a, there, there's a vacuum. There's a bit of a problem. There's a bit of a feeling of, you know, now what? They are working on these reforms heading for a ministerial conference in, in the winter of, of 2026.
That will be where the core work is going to go. Are we going to get anything agreed then in terms of some of the reforms on the way we work. But I think it's subdued. It's, it's, there was some excitement that there was a US ambassador, that was named and, and put in place. There was excitement that there's this new Deputy Director General that seems to have the, the ear of, or at least, the, you know, high regard from the president.
So that would be something that people are going to hang on to, but it is subdued.
Stephen de Boer:
Is there a role for Canada here? You talked about a leadership void. Is there something Canada can be doing or showing leadership?
Valerie Hughes:
You know, perhaps in my naive way, I always, think that Canada, we were, you know, part of the quad in the old days.
Very, central role in developing policy, and as Rambod mentioned, you know, Canada was at the forefront of the creation of the Appellate Body. It was Canada that came up with the idea of having a, an international organization when, and the WTO became that. So I believe that Canada does have a role. One, because we aren't the United States, but we have a lot of the same sort of development as the United States has.
Our economy is, I don't know, 10th in the world or something – it's not the biggest, but it's not, it's not, you know, small enough to, to be irrelevant. I do think that Canada can play a role because I think we're trusted and I, I do see our current Prime Minister having an international face on things, being out and, and promoting multilateralism or at least, some sort of, international approach to trade.
I would think that there was, there was a lot of people calling for, a lot of Members calling for a multilateral group coming together to, to lead things and to have some, someone come forward. And I've heard 2, 3, 4 times that, you know, Canada could be a good leader of that group that is pushing forward as a sort of a collective action kind of group.
And I've heard Canada's name said a few times as a, you know, an ideal leader. We're not the United States, we're not China, we're not India, we're not Brazil, we're not the EU. It's a, you know, you have to distinguish yourselves from the kinds of interests that those other groups represent. And Canada seems to me the neutral, going back to the old days, honest broker and, and with our current Prime Minister being, sort of doing what he's doing I see, I see a role for Canada and I, I would hope that Canada steps forward.
Rambod Behboodi:
You mentioned Canada and, and China, and, there are, I, I suppose two, crosscurrents there.
The first one being that our hands are not clean either in some respects. we impose unilateral measures on Chinese EV vehicles. There, there, there may be any number of good industrial policy or, or security reasons for it. But, but as it happened, we had the option, last year of, referring the matter to the panoply of agencies and departments and investigative authorities that we have to do the, to do it properly. And then we decided that we're just going to go ahead and impose the measures. And that has had consequences. So just putting that out as a, as an asterisk on the, on the honest broker.
But then there is the other angle, and it is that, the, China, as you mentioned, has, said that it's not going to assert its developing country status on, in respect of a number of obligations. And yet, the core issue with China's industrial policy remains, remains unsolved and, one could argue in the context of the current rules and the current negotiating framework, unsolvable. And maybe – we don't want to impose too much on your time, but maybe, one of the final observations on your part – how, so the first one, the first issue being, can we really serve this honest broker function, if the perception is that, we continue to have to, abide by continental concerns? That's the first one. And second one being, how do we address reform in the WTO if the, the Chinese industrial policy, overcapacity across the board, isn't in some way addressed?
Very, very easy questions.
Valerie Hughes:
If I knew the answer to that last question, I'd be, running the WTO myself today, I think. But just to go back to whether or not we, you know, we don't have clean hands. Yeah. We, Canada and China, were the only ones who put countermeasures or tariffs on the United States, the only ones in the world.
But what I think we have to understand and why we put, you know, a hundred percent tariffs on EVs from China. Where are we located? Geography is going to compel us to do certain things. And we are going to be, perhaps like the EU says, we're not going to impose, certain things on ourselves, you know, that others wouldn't.
So yeah. Not clean hands completely. But you know, I think that when you look back and you see where Canada sits geographically there, I think people will give us a bit of a, a buy. And I do think that that's an important ... maybe they think we can bring the US along a bit. Maybe we can have an influence a bit on the United States because we work with them on EVs or on other policies.
How are we going to fix China's industrials policy? And I think most people would agree that the current rules at the WTO are insufficient to keep them in check and, and to, you know, state owned enterprises and the way they're acting in the, in commerce. We don't have the answers. But over time, you know, we just have, we have to be positive that they're, you know, we fix little things along the way.
I can't see us fixing that very quickly. But we can address other challenges and we can't let that get in the way of making progress on the second fisheries agreement. On how AI is going to, be dealt with. How digital trade will be dealt with and how we can do something about supply chains. I, why if we can't fix everything, it doesn't mean we don't try and fix some things.
Rambod Behboodi:
Well, we're, yet again, ending on a positive note. Qualified positive note, but still a positive note. This brings us to the end of our session. Stephen and I would like to thank Valerie Hughes for exceptional insight, today. As well, a project of this kind requires a lot of work to bring together.
In particular, honorable mention again is reserved for Alex Zoutis our articling student, and our producer Jason Chute. And of course the entire technical staff of BLG.
We'll be back, in three weeks to talk sectoral impacts of the current Canada US tariff spat.
