A Geneva Showdown on the WTO's Future

♠ Posted by Emmanuel in , at 5/08/2018 06:54:00 PM
The WTO's future is being decided right now at its Geneva headquarters as the US and China duke it out.
The World Trade Organization has often been derided as an instrument for the world's most advanced nations to advance their interests at the expense of others. This is especially so for the United States, which has largely been responsible for setting up the world trade system as we know it. The election of Donald Trump has upended this narrative in a number of ways--so much so that some commentators question the institution's viability going forward absent American support. What will become of the WTO is especially important to ponder while a meeting is underway at its Geneva headquarters. Without much surprise, US-China fisticuffs were front and center.

Similar to what Trump's minions have done at other international organizations--the International Atomic Energy Agency, the UN Framework Convention on Climate Change and so on--his WTO representative is reneging on multilateralism in the hopes of undermining the concept's practical viability. The way America has tried to do this is to gum up the WTO's legal mechanism. By sabotaging it as a forum for solving trade grievances, the world returns to a pre-WTO or even a pre-GATT world where might makes right, and the US is presumably still strong enough to get its way:
U.S. Ambassador Dennis Shea, addressing the WTO’s General Council for the first time, began by attacking the judges of the WTO’s Appellate Body, whom he blamed for a “steadily worsening rupture of trust”. “Something has gone terribly wrong in this system when those charged with adjudicating the rules are so consistently disregarding those very rules,” Shea said, according to a copy of his remarks provided to Reuters.

The United States has vetoed new appointments to the Appellate Body, causing a crisis at what is effectively the supreme court of world trade. Shea said the judges had over-stepped their authority and had broken the rules by failing to observe a 90-day timetable for judging appeals. Many experts say the delays are caused by ever-more complicated disputes piling up in a congested system.
Having created thought up the legal mechanism in the first place, the reality is that the United States wins a majority of the cases it is involved with at the WTO. Instead of it being "unfair" to America, there must be a more plausible reason for American obstructionism in not appointing enough judges for it to perform its functions. China obviously takes exception to what the Americans are doing:
Chinese Ambassador Zhang Xiangchen, who had put the issue on the agenda, began by warmly welcoming “our new colleagues, especially Dennis”. But the cordial opening gave way to criticism of the “dangerous and devastating” U.S. actions. “By taking the selection process as a hostage, the U.S. is abusing the decision-making mechanism of consensus,” Zhang said.

The U.S. veto, along with steel and aluminum tariffs and a threat to put $50 billion of tariffs on Chinese goods for alleged intellectual property theft, had systematically challenged the WTO’s fundamental principles, he said.

“Any one of these, if left untreated, will fatally undermine the functioning of the WTO. But the reality is that the WTO is currently confronted with ‘three hard blows’,” Zhang said. The United States was reportedly seeking export limits from countries in return for exemptions from its steel tariff, which was “explicitly prohibited” by the WTO rules, he added.
Others also notice the ongoing sabotage:
WTO spokesman Keith Rockwell said many WTO members joined the debate, many expressing concern that the U.S. actions could make the system dysfunctional, and prepared to discuss its views while rejecting any linkage between judicial appointments and reforming the WTO. “It was extraordinary in its intensity,” Rockwell said. “It was unusual to see these two very prominent members laying it all on the line in terms of what they think ... This was a discussion that we had to have.”
That the Trump administrations other trade actions contravene the spirit of the WTO is evident enough. These actions are consistent with wanting to return the world to a pre-WTO or even pre-GATT era. Trump's appointment of the Reagan-era fossil Robert Lighthizer as US trade representative is part of that:
President Ronald Reagan tapped Lighthizer to be deputy U.S. trade representative in 1983. One of his accomplishments in that position was to persuade Japan, South Korea, Mexico and the United Kingdom to limit their exports of cheap steel to the United States. That action was later found to be in violation of World Trade Organization regulations.
The Trump administration would like nothing better than to render the WTO insignificant and return us to the mid-Eighties of Lighthizer's prime replete with Section 301s and other WTO-illegal measures.. The question for the rest of us is, who will take the lead in upholding this institution (if any)? Just as the other signatories of the Trans-Pacific Partnership went ahead anyway without the US, is there still a "coalition of the willing" that sees value in keeping the WTO functional? US obstructionism can be overcome, but there is a collective action problem that needs solving first.

Will it be China, the EU, or some other folks? Supposing that others do see value in it, there may be a combination of countries willing to champion the WTO at this point in time. Otherwise, the best its proponents can do may be to wait for a more trade-friendly US leadership. The danger though is that the WTO may become too irrelevant by then if others do not come to the WTO's aid in its time of need.