TWN Info Service on WTO and Trade Issues (Jun18/06)
4 June 2018
Third World Network

US refuses to discuss trade and investment at OECD
Published in SUNS #8693 dated 4 June 2018

Paris, 1 Jun (D. Ravi Kanth) - The United States on Thursday (31 May) struck a body blow to the Organization for Economic Cooperation and Development (OECD) that it had created in 1961 by refusing to engage in the discussion on "international trade and investment for strong and inclusive growth," sever al participants present at the OECD meeting told SUNS.

"The US, which had played a central role in creating the OECD from the Mars hall Plan, did not even take the floor on a vital issue confronting the global trading system," said a deputy trade minister from a OECD member-country.

The ministerial participants at the meeting, including the EU trade commissioner and Japan's trade minister, expressed concern over the conspicuous silence of the US at the OECD ministerial meeting's important thematic session on global trade.

But all the participants at the meeting pressed for global solutions and strengthening the multilateral trade framework, and an immediate resolution to the impasse at the Appellate Body (AB) of the WTO's dispute settlement system.

The OECD's Secretary-General Jose Angel Gurria admitted that the US did not speak at the meeting on issues concerning trade and investment along with some other countries.

Gurria said the US decision to impose additional duties on steel and aluminum are regrettable but the OECD will continue to work on the substantial issues such as the overcapacity in the steel sectors and other initiatives, including in the digital economy.

Ministers and senior trade officials said the US did not engage in any substantive discussions at the meeting, including the joint concluding statement.

More important, the US blocked the OECD's final concluding statement because it could not agree on the need to keep the multilateral trading system open and to resist protectionism.

Gurria said the US joined discussions on all other issues barring the issue s on trade and climate change.

The United States Trade Representative Ambassador Robert Lighthizer also ignored concerns raised by the European Union and Japan at a trilateral meeting on Washington's additional duties on steel and aluminum as well as investigations into autos and automotive parts under Section 232 provisions.

At a brief meeting of the three countries on the margins of the annual Organization for Economic Cooperation and Development (OECD) ministerial meeting, the European Union's trade commissioner Ms Cecilia Malmstrom and Japan's trade minister Hiroshige Seko expressed sharp concern over the additional duty of 25% on steel and 10% on aluminum as well as the investigations into autos and automotive parts, said senior trade officials from the EU and Jap an, preferring anonymity.

In response, the US Trade Representative Ambassador Lighthizer defended the additional duties on steel and aluminum, maintaining that the actions were launched by the US Commerce Secretary Wilbur Ross.

Ambassador Lighthizer remained evasive on the specific concerns raised by the EU and Japan, officials from the two countries said.

The three countries, however, issued a strong statement on "the non-market-oriented policies of third countries and discussed actions being taken and possible measures that could be undertaken in the near future."

Without naming China, the three countries "confirmed their shared objective to address non market-oriented policies and practices that lead to severe overcapacity, create unfair competitive conditions for our workers and businesses, hinder the development and use of innovative technologies, and undermine the proper functioning of international trade, including where existing rules are not effective," according to one of the officials familiar with the Trilateral discussions.

The US, the EU and Japan insisted that "market-oriented conditions are fundamental to a fair, mutually advantageous global trading system and discussed various elements or indications that signal that non-market oriented policies and practices exist for businesses and industries."

The three countries said they "concurred on the need to deepen and accelerate discussions regarding possible new rules on industrial subsidies and SOEs [state-owned enterprises] so as to promote a more level playing field for o ur workers and businesses."

Further, they elaborated on their joint scoping paper "defining the basis f or the development of stronger rules on industrial subsidies and SOEs."

"On that basis, they agreed to deepen that work, and expressed their intent ion to begin their respective internal steps before the end of 2018 with the aim of initiating a negotiation soon thereafter. The Ministers emphasized the need to ensure the participation of key trading partners in these future negotiations," the three ministers said in their joint statement.

On technology transfer, the US, the EU and Japan said that "no country should require or pressure technology transfer from foreign companies to domestic companies, including, for example, through the use of joint venture requirements, foreign equity limitations, administrative review and licensing processes, or other means."

The three members of the Trilateral commission "agreed to deepen cooperation and exchange of information, including with other like-minded partners, to find effective means to address trade-distorting policies of third countries, including harmful forced technology transfer policies and practices, and where appropriate, to pursue dispute settlement proceedings at the WTO."

They also said "non-compliance by some governments with their WTO transparency obligations is a priority in the work for improving the effectiveness and efficiency of the WTO monitoring function. They agreed to continue cooperation in the WTO to achieve full implementation of existing WTO rules ."

Despite the trilateral meeting in the morning, tensions between the three came into the open by evening at the OECD ministerial meeting when the EU announced that it will press ahead with a trade dispute against the United States at the World Trade Organization in a tit-for-tat measure against the United States' decision to impose additional duties of 25% on steel and 10% on aluminium from the EU.

The EU's trade commissioner Cecilia Malmstrom described the US decision for imposing additional duties on steel and aluminum permanently as a "bad day for world trade."

"We did everything to avoid this outcome," she said, suggesting that "the very last couple of months I have spoken at numerous occasions with the US Secretary of Commerce."

"I have argued for the EU and the US to engage in a positive transatlantic trade agenda, and for the EU to be fully, permanently and unconditionally exempted from these tariffs," she said.

"This is also what EU leaders have asked for," Commissioner Malmstrom said, suggesting that "throughout these talks, the US has sought to use the threat of trade restrictions as leverage to obtain concessions from the EU."

"This is not the way we do business, and certainly not between longstanding partners, friends and allies. Now that we have clarity, the EU's response will be proportionate and in accordance with WTO rules," she maintained.

"We will now trigger a dispute settlement case at the WTO, since these US measures clearly go against agreed international rules."

The EU will initiate a safeguard dispute, and impose immediate retaliatory measures to the tune of several billions of dollars as part of the "rebalancing measures and take any necessary steps to protect the EU market from trade diversion caused by these US restrictions."

The EU has already published a list of tariffs for more than one billion dollars on a range of American goods on May 18.

The EU's list of targeted American products include additional duties of 10 %, 25%, 35%, and 50% on selected products originating from the US.

The EU's list of targeted American products include sweet corn, maize, semi-milled rice of different categories, orange juice, cranberry, Bourbon whiskey, tobacco, T-shirts, flat rolled iron and stainless steel products among others.

The EU intends to impose US$1.6 billion of additional duties because of the US additional duties on steel and aluminium.