Update Country Report Maldives 20 Jun 2022

What's happened?

On June 17th the World Trade Organisation (WTO) agreed on new rules spanning fishing subsidies, covid-19 vaccine patents, digital services, food security and WTO reform. Although the agreements reinforce the WTO's role as an international forum for trade multilateralism, they will not reverse the more pressing challenges of rising global protectionism.

Why does it matter?

The new deals are a symbolic victory for the WTO, which, having struggled to produce meaningful agreements in recent years, has faced growing questions regarding its importance. The package of deals signals an important multilateral commitment among countries to continue engaging in consensus-building. In practice, however, the developments will not reverse the ongoing slide into global protectionism, which we now believe will be a permanent fixture of the international trade landscape.

The economic frictions between the US and China are the best example of this trend, with regard to both their bilateral trade war and the protectionist supply-chain reshoring plans that both governments have promulgated in recent years. These dynamics are not solely restricted to US-China competition; in early 2021 vaccine scarcity concerns prompted de-facto export restrictions in the US, India and the UK, while food security concerns in early 2022 have prompted the imposition of agricultural export bans in India, Indonesia and Malaysia. Although these manoeuvres on paper violate broad WTO rules, national governments have sidestepped these obligations by citing carve-outs tied to security or healthcare concerns. This illustrates how ill-equipped the WTO is to respond to new forms of trade protectionism that were imposed in response to severe cross-border economic (and social) challenges.

In addition, the latest WTO agreements come with important caveats. The agreed waivers to covid-19 patents will enable many more countries (particularly in the developing world) to manufacture effective vaccines. However, we do not expect this to meaningfully raise vaccination rates, even in low-income countries, with impediments now stemming less from supply shortages than from vaccine hesitancy or difficulties in delivery. The new rules on fishing subsidies, which come after more than 20 years of negotiations, will also be difficult to implement, probably fuelling the emergence of new, unresolved WTO cases in the future.

What next?

One of the main issues surrounding the normal functioning of the WTO revolves around restoring its dispute settlement mechanism, which collapsed in 2019 following the dissolution of the WTO appellate body. Slow reform progress in this area will keep the WTO marginalised as an effective arbiter of international trade disputes, particularly as global economic fragmentation (between US-led and China-leaning camps) deepens over the next decade.