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.
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/.
