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WTO DG’s silence on Trump assault on multilateral trade system causing concern

The lack of response by the WTO head to the new US government’s apparent turn away from multilateral trade liberalization has sparked concern among some trade envoys.

by D. Ravi Kanth

GENEVA: In the face of a sustained assault on multilateral trade rules, including the WTO, by the Donald Trump administration, the continued deafening silence of the WTO Director-General Roberto Azevedo is a serious cause for concern, several trade envoys told the South-North Development Monitor (SUNS).

At a time when he is seeking a second term as DG and is also the only candidate in the race, WTO members are puzzled as to why Azevedo is choosing to remain silent to defend the organization which he wants to lead for another four years from a steady barrage of tirades from the Trump administration denouncing multilateral trade liberalization and the WTO, said a trade envoy who asked not to be quoted.

“It is unusual for the WTO’s DG, who is also known as the ‘custodian’ of global trade rules, to remain silent when the multilateral trade order is being torn apart and turned upside down by the Trump administration,” the envoy said.

During a press conference in November, Azevedo was asked whether he would comment about the protectionist threat posed by Trump after the latter was inaugurated as US President. The Director-General said he would make his assessment based on “facts” and that he would not like to comment on what was going to happen.

But since coming into power, the Trump administration has wasted no time in turning to trade matters. On his first full day in office, President Trump signed an executive order pulling the US out of the 12-country Trans-Pacific Partnership (TPP) agreement. He said his trade deals would be “one-on-one” accords and “that will be better” as they would be easier to enforce. Trump also said that he would punish companies that shut down factories in the US and move jobs abroad by imposing a “very major” border tax.

Explaining Trump’s decisions, White House spokesperson Sean Spicer said they “usher in a new era in US trade policy”, based on bilateral deals that would take precedence over multilateral agreements. He argued that multilateral deals are not beneficial to US interests because they end up catering to the “lowest common denominator”, as was the case with the TPP that put small countries on the same footing as the US. Bilateral deals, on the other hand, offer a stronger bargaining position to the world’s largest economy and could be more easily updated or renegotiated, he said.

Subsequently, the decisions announced by the Trump administration have become much shriller in tone and tenor, and risk vitiating an orderly conduct of global trade relations.

Decisions such as the building of a wall on the Mexican border, the threat to impose  20%  customs duty on all Mexican products if Mexico refused to finance the wall’s construction, the decision to renegotiate the North American Free Trade  Agreement (NAFTA), the proposed  aggressive  reform on H-1B visas to ensure  that outsourcing of IT services is increasingly discontinued, and other measures in the offing point towards a grave quake on the trade Richter scale.

“These decisions,” said the trade envoy, “would be tantamount to a definite retreat from multilateral trade liberalization.”

During his keynote speech at the National Press Club in Washington on 7 October 2016, Azevedo was asked for his view on the TPP and whether it was justified to dismantle the agreement as called for by the then candidate Trump on the election campaign trail. The Director-General said that he would welcome any agreement – whether the TPP or other regional agreements – that would contribute to trade liberalization.

Azevedo was consistently supported by the previous Barack Obama administration and was praised for his leadership role in delivering the Trade Facilitation Agreement as well as the outcomes at the WTO’s 2015 Ministerial Conference in Nairobi, Kenya. Immediately after the Bali Ministerial Conference in December 2013, Azevedo had called on President Obama in the Oval Office, according to people familiar with the development.

The former US Trade Representative Michael Froman had, in his lecture at Geneva’s Graduate Institute on 17 October 2016, praised Azevedo and Kenya’s Foreign Affairs Cabinet Secretary Amina Mohamed for “shepherding [the] process” at the Nairobi conference, which he said “represented a critical turning point in the history of the WTO”.

In a similar vein, Azevedo had warned the British electorate that Brexit was a bad idea. He had also consistently advised the African countries on what they must do to accelerate trade reform and liberalization. Azevedo never minced his words in speaking out against threats posed by “protectionism” and tectonic events such as Brexit.

The WTO issues timely reports on the state of play in global trade as well as on trade restrictions (including legitimate safeguard measures) imposed by governments. Commenting on the last trade monitoring report, issued on 10 November 2016, two days after Trump was elected, Azevedo said “the continued introduction of trade-restrictive measures is a real and persistent concern.”

“Tangible evidence of G20 [grouping of the world’s major economies] progress in eliminating existing measures remains elusive,” he added. “It is clear that the financial crisis has had a long tail and that the world economy remains in a precarious state. Many people are struggling with unemployment or low paying jobs and are concerned about broader changes in the economy. These concerns demand a concerted response from governments and the international community. One step will be for G20 members to deliver on their commitment to refrain from imposing new trade-restrictive measures and roll back existing ones.”

During his address at an informal trade ministerial meeting hosted by Switzerland on 20 January this year, hours before the Trump inauguration in Washington, Azevedo had said: “Clearly trade is very high on the political agenda at the moment. I recognize the concerns about globalization – and the need to respond. The net positive effect of trade means nothing if you’ve lost your job. So we need better domestic policies to support people and get them back to work. But attacking trade won’t help here. I have heard a lot of talk about protectionism and trade wars this week. That would destroy jobs, not create them. I am urging everyone to show caution and leadership. We must avoid talking ourselves into a crisis.

“Of course there is a lot of uncertainty ahead of us. But my message is: don’t be paralyzed by that uncertainty. Instead we need to work even harder. Ministers agreed today to increase their engagement throughout 2017. This will be essential to keep strengthening and improving the trading system.”

Attacks

But these remarks from Azevedo are neither here nor there, as they fail to send a message to the country that is unleashing attacks against the WTO.

In an interview with the Financial Times, Peter Navarro, the head of a new White House National Trade Council, said unambiguously that the Trump administration wants to unwind and repatriate the international supply chains that are critical for the day-to-day business of US multinational companies. “It does the American economy no long-term good to only keep the big box factories where we are now assembling ‘American’ products that are composed primarily of foreign components,” he told the FT.

“The unequal treatment of the US income tax system under biased WTO rules is a grossly unfair subsidy to foreigners exporting to the US and a backdoor tariff on American exports to the world that kills American jobs and drives American factories offshore,” Navarro said.

Even in the face of such mounting attacks against the WTO from the world’s largest economy, the DG prefers to turn a deaf ear, according to an industrialized-country trade envoy who asked not to be cited.

“[W]hen the boss of the global hegemon attacks the institution he [Azevedo] is responsible for upholding, he has nothing to say,” the trade envoy said. (SUNS8393)                                   

Third World Economics, Issue No. 632, 1-15 January 2017, pp2-3


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