25.2.1 WTO, G7/G8, and G20: Role, Significance, Strengths, and Weaknesses

World Trade Organisation

Creation and Reinforcement of Global Trade Rules:

• The WTO is responsible for the creation and enforcement of global trade rules, ensuring that international trade flows as smoothly, predictably, and freely as possible.

Historical Background:

• The WTO was established in 1995, succeeding the General Agreement on Tariffs and Trade (GATT), which was one of the institutions created at the Bretton Woods Conference. GATT was initially established in 1947, and over time it evolved into the WTO to address the complexities of modern global trade.

Membership and Coverage:

• The WTO consists of 164 member states, which together account for 97% of world trade, making it a nearly universal organization in the context of global trade.

Trade Dispute Resolution:

• The WTO adjudicates trade disputes among member states, enforcing its rules through penalties such as regulatory tariffs. Since its inception, the WTO has handled hundreds of disputes, with a compliance rate of nearly 90%, as governments typically either accept penalties or cease unlawful activities.

Tariff Reduction:

• The WTO has been instrumental in reducing average global tariffs, which have fallen from 20% in 1947 to under 3% today. This reduction has facilitated the increase in global trade.

Challenges in Modern Issues:

• Despite its successes, the WTO has faced difficulties in passing new rules on modern issues, including digital trade, e-commerce, and public health standards for genetically modified foods.

Monitoring and Research:

• The WTO not only facilitates the reduction of tariff barriers but also ensures that states adhere to trade agreements, conducts research on global trade and economic policy, and assists in resolving trade disputes.

Decision-Making Body:

• The top-most decision-making body of the WTO is the Ministerial Conference, which meets every two years. Decisions made at this conference are by consensus and are legally binding.

Negotiation Rounds:

• The WTO operates through rounds of negotiations, where all members must agree for the round to be successful. There have been nine major negotiating rounds, with the most recent being the Doha Round, which began in 2001 and remains unresolved. There have also been the Kennedy Round in 1962 to 1967 and the Uruguay Round from 1986 to 1993.

Positives and Negatives of the WTO

Positives	Negatives
Very successful in reducing barriers to trade; in 1947, average tariffs were 40% of value, by 2000 this had fallen to 3%.	DOHA Round: Liberalizing agriculture was the top of the agenda with many of the world's poorest nations dependent on exporting basic agricultural products but striving to compete against richer nations that support their farmers with subsidies.
SEZ creation in LICs to maximize their trade, attract TNC investment, and compete on the international stage. e.g., Xiamen in China.	The Organisation for Economic Co-operation and Development (OECD) estimates that these subsidies total nearly $300 billion annually. Agricultural lobbies in the US, EU, and Japan have exercised their political influence to convince lawmakers to maintain these subsidies, which keep the price of agricultural goods low.
Anti-discrimination with all states treated equally unlike the unfair voter share in IMF and WB.	The failure of the DOHA Round to reach agreement questions the effectiveness and productivity of the WTO—unable to make fast decisions due to the consensus required at infrequent ministerial conferences.
More beneficial for less developed countries as they are more open to free trade, lowering trade barriers.	Political power resides with Western powers as they tend to gain most deals as well as decision-making being biased towards countries with a large representation in Geneva.
Predictable, transparent, competitive, and more protective of the environment.	Worker's rights and environmental protection are disregarded.
Many new countries have been admitted into the WTO with now 164 members which agree on common rules and represent over 97% of international trade.	Scope for protectionism is high (policy of protecting domestic industries against foreign competition by means of tariffs, subsidies, import quotas, or other restrictions or handicaps placed on the imports of foreign competitors). Critics say that powerful nations, including the USA and EU, are blocking less developed nations and attempting to preserve the status quo for protection.

The G7/8

Founding and Membership:

• The G7 was founded in 1975 after a successful ad hoc gathering in Paris of the six wealthiest economies. It includes the United States, Canada, France, Germany, Italy, Japan, and the United Kingdom. Russia was part of the forum from 1997 until it was suspended in 2014 due to the annexation of Crimea, returning the group to the G7.

Significance:

• The G7 has been described as a steering group for the West, playing a critical role in shaping global economic and security policies. Its influence is primarily derived from the economic and political power of its members, who are among the world's largest and most advanced economies.

Features:

• The presidency of the G7 rotates among member states, which are responsible for setting the agenda for each year's summit and arranging the logistics.
• The G7's GDP accounts for 45% of the global economy, down from nearly 70% three decades ago, reflecting both its economic significance and its declining share of global economic output.
• The forum's small and homogenous relationships promote collective decision-making and, although it has no legal status, it relies more on a sense of influence.

Functions:

• The G7 functions as an informal bloc of industrialized democracies that meet annually to discuss global economic governance, international security, and energy policies. Unlike more formal international organizations, the G7 operates without a headquarters, formal rules, or legal status, relying instead on influence and consensus among its members.
• It was founded to facilitate the macroeconomic initiatives responding to contemporary problems (e.g., 1970s energy crisis).
• The recent UK summit covered topics around COVID, showing the amount of flexibility on the agenda.

How is the G7/8 Different from Other IGOs?

• More informal with no legal precedence.
• Unlike NATO or UN, they have no funding, headquarters, or military as they are not expected to be a force of intervention.
• No formal rules unlike the UN, which has the UN Charter that sets out purpose and proceedings.
• You can invite any states, NGOs, or IGOs to their meetings.
• You can choose to remove members from their meetings if the presidency has not invited them.
• Group of allies to mutual agreements on consensus is easy, even if this is not the case.
• There is an equal vote, which differs from the UNSC where the P5 have a veto.

Agenda for 2016 Meeting in Japan:

• Countering terrorism and violent extremism: G7 action plan agreed.
• Trade: Reconfirmed the importance of free trade with their commitment to fight against protectionism—agreed to strengthen the WTO and promote plurilateral negotiations.
• Refugee crisis: Expressed unity and solidarity with Europe as it encountered a massive inflow of refugees, agreed on the importance of short-term humanitarian assistance and efforts to address the root cause.
• Russia and Ukraine: Confirmed their intent to call for full implementation of the Minsk agreements and encourage Ukraine to conduct comprehensive democratic reform which they will support.

Are the G7/8 Better Than Other IGOs?

Yes, it is better than other IGOs…	No, it is worse than other IGOs…
The G7 has value as all members are grappling with similar issues, so it can serve as a powerful platform for pre-negotiation so members can hash out disagreements before taking topics to G20 or other forums.	The power and prestige of the G20 has surpassed the effectiveness of the G7 as it is more inclusive and allows for various perspectives and opinions.
The informal nature means they can expel members as they wish (e.g., Russia in 2014). It also allows them to focus on any issue they wish.	The expelling of Russia meant there was no opportunity for negotiation or persuasion.
They can shake the agenda by sending signals with strong backing from all powerful members.	The scope for G7/8 to make major breakthroughs is limited as the issues at the time tend to dominate summits. There is a view that the G7/8 responds to events rather than shapes them.
Good for realists as they have little effect on state sovereignty and the forum never forces states to do things they don't agree with.	The flexible, informal nature is inconsistent with the world's greatest issues like poverty, climate change, migration, and security and lacks mandate.