Governances, Risk & Compliance.

Governances, Risk & Compliance 1
Governances, Risk & Compliance
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Governances, Risk & Compliance 2
Question 1
Part a
The World Trade Organization (WTO) is a community of global importance and
addressing the challenges of trade liberalization and trade policies of member states. Although
WTO has special role in development of both developed and developing nations, it’s process of
meeting its goals are hampered by governance issues. The lack of success of the WTO is
reversing a virtuous cycle. The failure of the WTO has turned countries' attention to regional
trade agreements (RTAs) and mega-RTAs. The global business community is completely giving
up the WTO as a means of liberalization and rulemaking. No longer is the point at which all
nations ignore the WTO as a result of the WTO's "pretend to extend and end" tactics.
Second, the inability to end the round means the WTO has no ability to rewrite the
rulebook. As a result, WTO panelists and senior members will judge 21st century conflicts with
20th century rules. The last rulebook revision was made in 1994, but its agenda was agreed in
1986. With international trade fundamentally changing, the rules of the WTO have basically
remained the same.
The success of the WTO's dispute resolution function lies in its "legitimacy", and the
basis for legitimacy lies in consensus. The Doha Round, which is virtually frozen, jeopardizes
the long-term soundness of the dispute settlement system, given the political difficulties of
consensus-changing rules outside of the larger packages such as the Doha Round. WTO panelists
and others have responded with "advanced legal interpretation," but it is impossible for a long-
term "judicial judgment without legal legitimacy" to continue.

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Over time, it is expected that panelists will either avoid decisions on new deals or reject
the Panel's decision based on text agreed by Member States in 1994. The latter would undermine
common interest in the code of good conduct, the WTO, and if the former occurred, the great
power would rely on unilateralism, as in the United States in the 1980s (Handley and Limão,
2015).
In any case, by 2020, governance of international commerce will undergo a major
transformation. The recognition that the WTO has played a leading role in international trade
governance will need to be replaced by a multipolar system or the WTO itself will need to
change. Looking at the current situation, the former is likely to be the case, unless the Member
States change their policy direction. If the situation continues, mega-RTAs will create 21st
century trade rules, but mega-RTAs will be negotiated in an environment that reflects a large
power imbalance. This is not really a global solution. This is because the framework excludes
growth countries such as China, India, and Brazil. Each of these countries has its own regional
response or follows the rules created by others. In any case, this situation severely undermines
support for multilateral cooperation.
Part b
One of the proposed solutions is having a representative leadership. WTO should have
leaders from both developed and developing nations. This will ensure proper articulation of
needs of both types of nations and reduce conflict of interest. Currently, there is poor
representation of the WTO team. The current situation with the selection of new judges to the
WTO Appeal Body also caused intense discussion during the meetings. Earlier, the United States
blocked the start of the process of appointing new judges, with three of the seven seats of the
Appeals Body remaining vacant. If the fourth vacancy arises in September this year, this will

Governances, Risk & Compliance 4
lead to the fact that the Appeals Body will have the minimum number of judges needed to make
decisions on trade disputes (Elsig, 2016). The United States criticized a number of aspects of
how the Appeals Body functions, for example, how some judges whose term has expired
continue to work on cases that they began to consider as judges. This practice is long-standing,
as described in the working procedures of the Appeals Body. Nevertheless, various WTO
members argue that the United States is not sufficiently engaged in discussions to resolve the
problem and did not specify what changes they would like to see in order to unlock the selection
process. China put the issue of the Appeals Body on the agenda of the General Council and
called for the United States to draw attention to some aspects of how the dispute resolution
system depends on the actual selection of new judges. EU Ambassador to the WTO Mark
Vanheikelen was among representatives of WTO members who agreed that the situation with the
Appeals Body is approaching a critical level and needs to be resolved as soon as possible. “We
are ready to talk about the problems regarding the Appeals Body, but first we need clarity in
understanding the problems. And we also need to be clear that this will lead to the unblocking of
appointments, ”he said at the KTP meeting (Hoekman and Mavroidis 2017).
Question 2
The activities referred to in the scenario posses a lot of risk to survival of WTO. When
there is no cooperation, coordination and communication between different parties making up
WTO, the probability of achieving the set objectives is always at its lowest. That is why although
John have ideas, the inability of the organization to give him a chance will finally makes his
ideas disappear.
This is exactly what happened in WTO. In fact, most of the disputes occurs when all
member states are not included in any key decision-making activity. In 1992, based on the