TWN Info Service on UN Sustainable Development (Jun18/02)
4 June 2018
Third World Network

As US strikes trade turmoil, others embrace WTO-MTS
Published in SUNS #8693 dated 4 June 2018

Paris, 1 Jun (D. Ravi Kanth) - As the United States struck turmoil in the global trading system on Thursday by unilaterally imposing additional duties on steel and aluminum, several developed and developing countries vowed, at an informal trade ministerial summit in Paris on 31 May, to embrace the rules-based multilateral trade order, trade ministers told SUNS.

Participants at the informal trade ministerial summit, organized and hosted by Australia's trade minister Steven Ciobo, on the margins of the Organization for Economic Cooperation and Development (OECD) meeting on 31 May, said the first priority for members of the World Trade Organization (WTO) is to break the impasse at the Appellate Body.

The United States, which has caused the impasse by repeatedly blocking an expeditious selection process for filling the three vacancies at the Appellate Body (AB), was severely criticized by many participants at the meeting.

The participants remained sharply divided on the so-called plurilateral trade initiatives on electronic commerce, disciplines for micro, small, and medium enterprises, and domestic regulation.

India, South Africa, and a large majority of developing countries unequivocally opposed the joint ministerial statements for launching negotiations on these initiatives on grounds that they not only eroded the "consensus" principle but severely undermined the multilateral trading system.

India's trade minister Suresh Prabhu said the plurilateral initiatives "weaken the multilateral trading system and undermine the inclusive institutional structure of the WTO."

South Africa's trade envoy Ambassador Xavier Carim, who spoke on behalf of his trade minister Rob Davies, said "many of us are also concerned at the day-to-day erosion of the consensus decision-making in the WTO brought on by the Joint Initiatives."

"The claim that these initiatives are transparent, open-ended and that (benefits of any) accords will be extended to all does not bridge the substantive policy divergences amongst members that was evident throughout 2017, and underscored politically at MC11 [eleventh ministerial conference]," Ambassador Carim reminded the participants.

Although trade ministers did not pointedly cite the additional duties on steel and aluminum, made permanent (from June 1) on national security grounds by the Trump administration, almost all participants spoke against unilateral trade measures.

During the three-hour ministerial meeting, trade ministers and officials fr om Argentina, Brazil, Canada, Central African Republic, Chile, Colombia, Costa Rica, the European Union, Hong Kong, China, India, Indonesia, Israel, Japan, Kenya, Korea, Malawi, Mexico, New Zealand, Norway, Russia, Saudi Arabia, Singapore, South Africa, Switzerland, Thailand, and Turkey emphasized the impasse at the AB as the immediate priority to be addressed.

Australia posed two questions for the participants to address. They are "how to take forward the WTO negotiations," and "how do we build resilience in the system".

On the issue of building resilience, trade ministers overwhelmingly said the multilateral trading system is facing a grave crisis because of the mounting unilateral actions as well as escalating efforts to undermine the Appellate Body.

Without naming the United States, Norway's foreign minister Marie Eriksen Soreide cautioned that "might is right is not right" in the face of unilateral trade measures being imposed by some powerful countries. She said "arm twisting" will cause irreparable damage to the global trading system.

Many countries said unilateral trade measures will strike a deadly blow to the multilateral trading system that was built over the past 70 years.

The European Union's trade commissioner Cecilia Malmstrom said that Brussels would renew its efforts to strengthen multilateralism despite the current threats posed by the unilateral trade measures.

New Zealand's trade minister David Parker said that members must strive towards building resilience in the multilateral trading system.

India's trade minister Suresh Prabhu said the WTO "is facing the worst crisis in its history and unless we act together - and quickly - this system will collapse."

"For us this means maintaining and strengthening the basic principles of inclusiveness, decision-making based on consensus and the centrality of development in the negotiations and processes," he said.

China said it is important to address the crisis at the AB while according primacy to developmental aspects of the trading system.

Without naming the US, South Africa said "the recent trade action that has bypassed the WTO" has undermined the security and stability that the WTO is supposed to provide. Further, the unilateral trade action "has inflicted severe trade damage on some members and has had a detrimental knock-on effect on another cornerstone of the system - the MFN principle," South Africa said.

"Further actions will deepen and extend the damage," Ambassador Carim maintained. "At the top of the list of priorities," said South Africa, "are the impasse in the Appellate Body and the matter of an impending reappointment [of Shree Baboo Chekitan Servansing who will complete his first term in September]."

"In the absence of a resolution here, the Appellate Body, a cornerstone in the WTO enforcement function, will soon be entirely disabled," South Africa warned.

In the face of overwhelming demands for addressing the impasse at the AB, the US Trade Representative Ambassador Robert Lighthizer said he would disagree with the assessments offered by several participants.

Ambassador Lighthizer said contrary to the gloom and doom in the global trading system as echoed by several participants, trade actually grew in 2017. He said last year was a good year for global trade.

Ambassador Lighthizer said the crown jewel of the WTO is not the Appellate Body but negotiations and the negotiating pillar. The problem with the WTO, said Ambassador Lighthizer, is that it became a "litigation-based organization." There are too many problems at the WTO's cost which have not been properly tackled.

Coming to the agriculture negotiations, the USTR said that negotiations must result in reducing trade-distorting subsidies and increasing market access. The second big issue in negotiations, particularly in fisheries subsidies, must result in drastically reducing the subsidies provided by the biggest subsidizers.

Without mentioning China, the USTR said the fisheries subsidies must target the biggest subsidizers, said a participant present at the meeting.

Ambassador Lighthizer also said that two-thirds of the WTO members are seeking derogations from their commitments on the grounds of special and differential flexibilities.

He mocked the dispute settlement system, including the AB, saying that there are trade disputes that take more than 14 years to be resolved. Ambassador Lighthizer severely criticized the AB for not following rules.

The WTO director-general Roberto Azevedo presented a downbeat assessment about the escalating problems in the multilateral trading system. He said impatience is growing because of the current trade frictions. Azevedo said business-as-usual approach will not work.

Commenting on the state of the negotiations, many trade ministers said fisheries subsidies is the core priority.

While a large majority of developing countries - India, South Africa, the African Group (barring Nigeria), and the least-developed countries - opposed the plurilateral initiatives for electronic commerce and other issues, the sponsors of the joint statements on electronic commerce, disciplines for micro, small, and medium enterprises, and domestic regulation said they will intensify their negotiations.