The WTO is facing a historical crisis. Its main functions ‒ namely, providing a negotiating forum, administrating WTO trade agreements and monitoring national trade policies, and resolving trade disputes ‒ are significantly paralyzed. The WTO launched the Doha Development Round in 2001, but failed to produce meaningful outcomes to this day. Further, China’s entry into the WTO has neither opened up its economy, nor created a level playing field when it comes to potentially market-distorting subsidies. The surveillance of trade policies based on the Trade Policy Review Mechanism (TPRM), a fundamentally important activity running throughout the work of the WTO aimed at fostering transparency, is criticized for its lack of effectiveness. The Dispute Settlement Mechanism (DSM), once praised as the WTO’s “crown jewel,” is now on the verge of collapse due to the absence of an appeal court.

   Although the cause of the crisis is partly institutional, higher uncertainty is also a considerable problem aggravating the fate of the multilateral trading system. Such uncertainty comes from two factors: rising protectionism, and trade frictions between developed and developing countries including those between the United States and China. Meanwhile, the WTO also needs to respond to rapid structural changes in global trade. The center of the world’s trade is shifting towards trade in services. The development and spread of information and communication technology (ICT) are making it easier to supply services across borders. Global Value Chains’ (GVCs) regionalization or localization is deepening and GVCs are shifting towards knowledge-based goods. 

   The future of the WTO’s negotiating function can be predicted under three scenarios: i) continued functional paralysis of the WTO negotiation system, ii) emergence of an alternative for the WTO, and iii) restoration of the WTO system. As China and the U.S. are on the extremes, it is unlikely that the WTO can revitalize its negotiating function anytime soon. To promote WTO’s accountability, predictability, and transparency, and thereby contribute to the smoother functioning of the multilateral trading system, the key issue will be to reinforce WTO’s monitoring role, including the strengthening of notification requirements. However, opposing positions between developed and developing countries concerning how to strengthen notification requirements will pose a significant challenge. Restoring the Appellate Body (AB) depends largely on the decision of the United States. Without the U.S.’ support, it is highly likely that the current paralysis of the WTO AB will continue over a long period of time. Thus WTO Members should first identify requests raised by the United States. While the incoming Biden administration is expected to be friendlier towards the multilateral trading system, its position on the AB may not differ from that of the Trump administration, given that its veto on the appointment of new AB members was first witnessed during the Obama administration. In that case the AB would be able to restore its function only if a formal amendment of the DSU is successfully finalized – which will take a longer period of time. 

   Korea’s negotiating position under the WTO has changed significantly starting last year since the Korean government decided not to demand for special and differential treatments as a developing country. The decision is momentous as it could in effect imply graduating from the developing country status in the long run. Such a decision applies to future negotiations, however it is possible that it affects ongoing agricultural negotiations as well. It is thus recommended to be prepared, for instance by securing flexibility regarding sensitive agricultural products like rice. For Korea no longer claims for preferential treatments as a developing country, it could take firm negotiating positions at the WTO concerning market expansion and improved access towards foreign markets. Moreover, Korea could contribute as a mediator to speak for the interests of both developed and developing countries on conflicting issues, such as the developing country status. Korea needs to establish a more precise give-and-take negotiation strategy in future WTO negotiations on agriculture, non-agriculture, and service sectors to maximize its national interests.

   The main conclusion of this study can be summarized as follows. First, Korea should put stress on services and TRIPs negotiations to ensure its international competitiveness on those sectors. Second, Korea should focus on how to raise the efficiency and stability of the East-Asian regional value chains by strengthening its cooperation with China, Japan, and Southeast Asia. At the same time, Korea needs to consider ways to become the bridgehead connecting East-Asia’s value chains to either North America’s value chains or EU’s value chains utilizing given FTAs with those economies. Third, Korea should prepare for the emergence of various forms of plurilateral negotiations and where appropriate, take lead and reflect its national interests on the final outcome. Fourth, Korea should put more attention on the possibility of the WTO introducing new norms in order to reduce greenhouse gas emissions. Finally, since it is unlikely that WTO negotiations will make rapid progress, Korea needs to keep a strategic approach, including mid- to long-term perspectives in the WTO negotiations.

   Lastly, as short-term objectives, this study suggests that the Korean government take into account the following points for the MC12.

   . Agriculture: The agricultural negotiations in the MC12 are highly expected to end without a specific deal. However, there is a possibility of compromise with respect to domestic subsidies and export restrictions. Korea needs to lead discussions on strengthening agricultural subsidy notifications, pointing out the increase in subsidies of member countries such as China, India, and the U.S. Also Korea needs to put stress on the fact that export restrictions under COVID-19 would threaten the food security of food-importing members.

   . Fishery subsidies: It is still uncertain if negotiations will successfully conclude at the MC12. However, the level of fishery subsidy regulation is clearly expected to be lower than that of the CPTPP or the USMCA. Therefore, Korea needs to decide whether it will accept and prepare for CPTPP’s reduction level of fisheries subsidies or not. Based on that decision, Korea would need to build negotiation strategies and domestic reform policies for its fishery sector. 

   . E–commerce: WTO Members agree on the need of establishing norms on e-commerce. However, wide gaps between major countries still remain in major issues such as free flow of data and localization of data servers. While it is necessary to prepare for prolonged WTO e-commerce negotiations, Korea needs to actively reflect its position by strengthening ties with like-minded countries and by leading discussions on issues such as transparency and development cooperation.

   . Development issues: Although Korea no longer seeks for its preferential treatment as a developing country, a sudden change of stance is not desirable when it comes to negotiating the developing country status and preferential treatments for developing members, considering the trust relationship with many developing countries. However, Korea needs to clearly state that all developing countries should be willing to take up commitments commensurate with their level of development and economic capability. It is also recommended to negotiate the benefits of developing countries on a case-by-case basis rather than taking a dichotomous approach to allow progress in negotiations.

   . Industrial subsidies: A review on WTO subsidy rules is required in order to maintain effectiveness and relevance to the WTO system. For this purpose the 6th Joint Statement of 14 January 2020 made by the U.S., EU, and Japan, and the draft General Council decision of 20 February 2020 by the U.S. require particular attention. The problem lies in the fact that the directions for reform of WTO subsidy rules are completely opposite between these three Members and China. In order to deliver meaningful outcomes, it is necessary to broaden the scope of negotiation as wide as possible to put all cards on the table; to take more flexible approaches than the “single undertaking”; to induce as many Members as possible to be involved in the negotiation; and to approach the matter on a sector-by-sector basis to discuss it in various relevant international fora. Furthermore, as there remains a possibility that the plurilateral approach is taken by the U.S., EU, and Japan to strengthen subsidy rules within the WTO, and its major trading partners including Korea are requested to join the discussion, the Korean government needs to closely monitor any further developments in order to set its position and effectively respond to such requests.

   . Dispute settlement: Firstly, one could seek for ways so that all WTO Members including the U.S., EU, China can put all their needs on the table and negotiate simultaneously for a “grand bargain.” Given that the AB crisis comes from deep-rooted distrust of the U.S. towards WTO appellate reviews, it would be strategically desirable to prioritize elements relatively easily agreeable to the U.S in future negotiations. In the short term, the U.S. would likely focus more on how to ensure WTO organs abide by current rules rather than formally revising the DSU, and for that purpose an institutional mechanism to put a “self-restraint” on the AB functioning might be required. Secondly, it is worthwhile to review WTO’s decision-making practices. One can think of options such as giving effect to voting rules or introducing a flexible approach where consensus is maintained in principle but other decision-making method is also made available at some point, in certain circumstances, or under certain WTO agreements.  Thirdly, an examination would be required on future prospects of plurilateral approaches such as the MPIA and possible long-term impacts of such mechanisms on the WTO dispute settlement system as a whole. Fourthly, one needs to pay particular attention to recent tendencies of Korea’s major trading partners including the United States of bilaterally solving trade concerns through FTA dispute settlement mechanisms. In preparation for such cases becoming more aggressive and frequent in the future, the Korean government needs to maintain close collaboration and communication with its FTA trading partners, and needs to establish or reinforce its domestic compliance mechanism to effectively implement its FTA obligations, both in terms of its WTO- and WTO-plus standards, FTAs being a relatively attractive forum for trade disputes compared to the paralyzed WTO dispute settlement system.