WTO MC13 Should Take Inspiration From UAE Success – International Trade & Investment

At the end of last year, World Trade Organization (WTO) members
agreed that the 13th Ministerial Conference (MC13) of the WTO will
take place in Abu Dhabi, the capital of the United Arab Emirates
(UAE), in February 2024. There is no doubt that the WTO is facing
headwinds and is in need of a vigorous push forward. The UAE’s
success in transforming itself into a global trade and digital hub
and a leader in services trade could serve to drive a successful
outcome at MC13.

The UAE has opted to pursue open trade and investment policies
to promote economic growth, diversification and competitiveness.
The vast majority of the UAE’s most favored nation (MFN)
tariffs are at 5 percent or duty-free,¹ and it is
currently engaged in an ambitious strategy to reduce these tariffs
even further through bilateral and plurilateral trade agreements.
The UAE has concluded bilateral trade agreements with India,
Indonesia and Israel and is negotiating with Cambodia, Colombia,
Chile, Georgia and Türkiye. These trade agreements are in
addition to those concluded earlier, through the Gulf Cooperation
Council (GCC), with the European Free Trade Association and
Singapore.

As the WTO Secretariat has noted, “attracting foreign
investment is an essential element of the UAE’s strategy to
diversify its economy and consolidate the country’s position as
a regional trade and investment hub.”² With this in
mind, the UAE undertook a significant overhaul of its Commercial
Companies Law to allow 100 percent foreign ownership in a large
number of sectors outside of free zones.³ Inflows of
foreign direct investments (FDI) into the UAE were expected to
reach $22 billion in 2022, having grown 116 percent over the past
10 years.⁴ This inward FDI is flowing to high tech and
high growth sectors, such as health care, pharmaceuticals and life
sciences, ecommerce, space and space tourism, agritech, education
and its associated technologies, hydro-technology, smart mobility,
information and communications technology (ICT) and artificial
intelligence.⁵

The UAE also has been aggressively taking advantage of the
opportunities offered by the Digital Economy and the shift to the
Green Economy.⁶ Thanks to these and other efforts to
diversify its economy, the non-oil sectors have grown considerably
and represent more than 70 percent of the UAE’s gross domestic
product (GDP).

Refocusing on promoting openness to trade and investment and
enabling WTO Members to take advantage of the opportunities created
by the Digital Economy and the shift to the Green Economy are
precisely the type of initiatives that would reinvigorate the
WTO.

Most of us recognize that MC12 was a success in that, despite
mostly pessimistic predictions, WTO members were able to reach
consensus on a package of agreements. However, as important as that
consensus was politically, the reality is that those agreements did
little to advance the core objective of the WTO, which is to
promote economic welfare through increased trade and
investment.

Reports from Davos indicate that an ever growing list of
concerns and new requests for flexibilities are being put forward
as potential issues for MC13. MC13 provides an opportunity to
refocus the WTO on its fundamental objectives: reducing tariffs and
other market access barriers for trade in goods and services and
facilitating cross-border trade flows. In today’s world, this
must necessarily include digital trade and leveraging trade
instruments in support of climate change mitigation efforts and
greener policies.

Continuing to reduce tariffs on information technology products
should be one of the priorities for MC13. Lowering costs on the
products that underlie the digital economy will provide a boost to
digital trade and the global economy. The Information Technology
Agreement (“ITA I”) and its successor, the ITA II,
provide a flexible template allowing a core group of countries to
push forward while extending the benefits to all WTO members. A
2021 study estimated that an ITA III could increase global GDP by
almost $800 billion over 10 years.⁷ More developing
countries should be encouraged to join, even if it is on flexible
terms. They would benefit most from lowering tariffs on these
products as it would enable entrepreneurs in these countries to
participate more fully in the digital economy.

The ITA I and II also provide a template for negotiations to
reduce tariffs on environmental goods. There is no better way to
encourage people to take up more environmentally friendly products
than lowering their cost. Calls for the WTO to have an
environmental agenda are now common. Most agree that trade and the
protection of the environment must be mutually supportive and that
the WTO has a role to play in helping members respond to current
environmental challenges. Lowering tariffs on environmental goods
is perhaps the policy option that falls most clearly within the
WTO’s mission and expertise.

There are challenges to agreeing on a list of products that will
benefit from the tariff reductions. Yet, the ITA I and II show that
it can be done. And, like the ITA I and II, WTO members could agree
on an initial list and later agree to expand the list in successive
negotiations. Indeed, this approach seems the most reasonable
taking into account that new products will be created through
innovation and technological improvement.

There is also great potential to promote environment services
through sectoral negotiations. Other sectors with significant
positive externalities, such as courier services, may also be ripe
for sectoral negotiations.

Reducing barriers to digital trade must be another priority of
MC13 if the WTO is going to remain relevant. There are signs of
cautious optimism emerging from the Joint Initiative on E-Commerce
discussions. Participating WTO members must press ahead. It is
imperative that one or two countries do not block an outcome in
this area considering its potential significance.

Technology and innovation are key to promoting economic growth
and responding to today’s challenges, including climate change.
Since 1995, the WTO has promoted the diffusion of
innovation-friendly policies with the implementation of the TRIPS
Agreement. WTO members must resist the temptation to weaken
intellectual property (IP) rules. A robust IP regime provides the
incentives and legal certainty required to stimulate the large
investments needed to develop technologies to respond to
today’s challenges.

Lastly, MC13 must address WTO reform, including the current
challenges facing the dispute settlement mechanism.

WTO delegates are returning to Geneva this week from Davos to
resume discussions on the various issues that are on the WTO
agenda. Although MC13 will take place in 2024, it is crucial that
discussions make substantial progress in 2023. Input and outreach
from the private sector is also key. The private sector can help
make the case for these initiatives more robust.

With its open and innovative policies and its strong tradition
of internal decision-making by consensus, the UAE is an ideal venue
for MC13. There may not be a better opportunity to reinvigorate the
WTO.

Footnotes

1. UAE Trade Policy Review, Secretariat Report,
WT/TPR/S/423/Rev.1, 19 September 2022, para. 13.

2. Ibid., para. 11.

3. Ibid, para. 11.

4.
https://www.gulftoday.ae/business/2022/11/20/uae-top-choice-of-investors-as-fdi-inflows-to-hit-$22b-this-year.

5. UAE Trade Policy Review, Government Report,
WT/TPR/G/423/Rev.1, 19 September 2022, para. 2.12.

6. Ibid., paras. 3.3-3.14.

7. S. Ezell and L. Dascoli, “How an Information
Technology Agreement 3.0 Would Bolster Global Economic Growth and
Opportunity”, 16 September 2021, available at:
https://itif.org/publications/2021/09/16/how-an-information-technology-agreement-3-0-would-bolster-global-economic-growth-and-opportunity/.

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