Forty-one members told the World Trade Organization’s General Council they are worried trade tensions could lead to increased protectionism, calling on governments to “resolve their differences through dialogue and cooperation.”
Forty-one members of the World Trade Organization say they are concerned about rising trade tensions and the potential for a resulting increase in protectionist policies.
The members, which include both developing and developed nations, told the organization’s General Council they “consider a well-functioning, rules-based multilateral trading system embodied in the WTO to be of key importance for our economies as well as for global economic stability, prosperity and development,” and called on fellow member governments to “resolve their differences through dialogue and cooperation, including through WTO bodies and, as appropriate, recourse to WTO dispute settlement.”
Although the group did not name any specific countries of concern, the statement was a clear reference to the steadily intensifying skirmish between the United States and various trading partners around the world.
President Donald Trump in March announced broad global tariffs on imports of steel and aluminum that were met with almost universal opposition from its allies abroad, as well as no small amount of skepticism at home. Several allies, including South Korea, Argentina, Australia and Brazil already have reached agreements with the United States to be exempted from these tariffs, and the European Union, Canada and Mexico are still in negotiations to do so, but in most cases these agreements will merely shift the focus from tariffs to quotas, a move that some argue will have similar negative effects on the U.S. market.
Richard Chriss, president and international counsel for the American Institute for International Steel, for example, said earlier this month that quotas “will have the same impact as tariffs by restricting access to, and raising the price of, steel and aluminum for U.S. manufacturers.”
The Trump administration followed that up later in the month with a raft of tariffs covering roughly $50 billion worth of products from China pursuant to a seven-month investigation into the unfair transfer of intellectual property.
China quickly retaliated, imposing duties on 128 different products from the United States worth about $3 billion in response to the steel and aluminum tariffs and another $50 billion in annual goods imports in response to the targeted intellectual property tariffs.
And amid all this, trade analysts have pointed out several issues within the WTO that have prevented the organization from fulfilling its intended function, specifically when it comes to settling disagreements between members.
Bruce Hirsh, founder of trade consulting firm Tailwind Global Strategies, even went as far as to say the WTO dispute settlement system was “in a crisis.”
“The United States is going to have to spell out not only its concerns but what it believes the solutions are, and there needs to be engagement from those who disagree so that we can reach a common ground,” he said during an April Washington International Trade Association event.
According to Hirsh, specific issues facing the WTO Appellate Body for dispute settlement include a massive and constantly growing caseload that has resulted in slow adjudications and the lack of a review mechanism, adding that clear goals for the panel and its dwindling members must be defined in order for it to remain effective.
“We consider that action is needed to address major challenges facing the WTO,” the 41 member countries said in their joint statement to the General Council. “We particularly note difficulties in concluding negotiations and divergent positions on trade and development.”
“With respect to the WTO’s dispute settlement mechanism, we emphasize the importance of filling all current and future vacancies on the Appellate Body without delay,” they added. “We underline the necessity for members to contribute to keeping the WTO effective, relevant and responsive to all members’ needs, and we commit to continue working with all members to improve the WTO.”
Signatories to the statement included Argentina, Australia, Bangladesh, Benin, Brazil, Canada, Chile, Colombia, Costa Rica, Côte d’Ivoire, Dominican Republic, El Salvador, Guatemala, Hong Kong China, Iceland, Kazakhstan, Kenya, Republic of Korea, Lao People’s Democratic Republic, Liechtenstein, Malaysia, Mali, Mexico, Republic of Moldova, Myanmar, New Zealand, Nigeria, Norway, Pakistan, Panama, Paraguay, Peru, Qatar, Singapore, Switzerland, Thailand, the former Yugoslav Republic of Macedonia, Turkey, Ukraine, Uruguay, and Vietnam.
WTO Director-General Roberto Azevêdo said the concerns about rising trade tensions and a lack of movement on appointments to the Appellate Body are “very widely shared among the membership.”
“As long as tensions persist between major trading partners, the risk of a serious escalation remains very real,” he said. “We must do all we can to avoid going down this path and taking measures that are difficult to reverse.
“When trade restrictions are pursued in this way it can threaten growth and job creation everywhere,” he added. “Today two-thirds of global trade takes place through global value chains, and this clearly illustrates the potential for knock-on effects. And in these situations it is often the smaller players and the poorest communities that stand to lose the most. Resolving these issues is in everyone’s urgent interest.”
Azevêdo said he would continue to speak with members about these issues, but also encouraged them to continue bilateral negotiations to “complement multilateral processes.”
“The important thing is that conversations are taking place, and that members are trying to find solutions,” he said.
The WTO in April released its latest quarterly forecast for global merchandise trade, in which it predicted a 4.4 percent increase in volume for 2018, down slightly from the 4.7 percent growth rate seen last year and the average of 4.8 percent yearly growth since 1990, but still well above the 3.0 percent average yearly growth since the financial crisis.
The organization warned, however, that continued expansion of trade “depends on robust global economic growth and governments pursuing appropriate monetary, fiscal and especially trade policies.”
WTO members anxious about rising trade tensions
