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TWN
Info Service on UN Sustainable Development (Mar22/02) Geneva, 2 Mar (D. Ravi Kanth) – The World Trade Organization seems to be facing a new unforeseen crisis over its continued relevance in the global trading system, as several trade policy initiatives being considered by the United States separately against Russia and China could pose serious problems for the trade body ahead of the WTO’s 12th ministerial conference (MC12), say people familiar with the development. Following Russia’s “special military operation” against Ukraine that began almost seven days ago, US lawmakers are now considering a move to deny permanent normal trade relations (PNTR) status with Russia. Essentially, the denial of PNTR status implies that Russia will not be able to avail of MFN (most-favored-nation) status for Russian goods exported to the United States. It allows the US to impose tariffs on Russian goods on its own terms. Moreover, the proposed denial of MFN status to Russia seems akin to a body blow to the WTO’s fundamental principle of non-discrimination among WTO members. Article 1 of the General Agreement on Tariffs and Trade (GATT) requires that any favourable treatment provided by a contracting party (WTO member) to any other country must immediately and unconditionally be provided to all other contracting parties (WTO members). The concept is also reflected in Article II of the General Agreement on Trade in Services (GATS) and Article 4 of the TRIPS Agreement, said a former WTO trade official. On 1 March, the chair of the powerful US Senate Finance Committee Mr Ron Wyden said that “his panel will consider taking away Russia’s PNTR status,” a move that would increase tariffs on Russian goods, according to a report in the Washington Trade Daily (WTD) of 2 March. “We need to make sure (unequal) tariff treatment reflects its (Russia’s) pariah status,” the senator said while laying out a series of actions that the Senate Finance Committee could take in response to Russia’s invasion of Ukraine. He apparently said “removing normal trade relations will raise tariffs on Russia’s goods and send a message that unprovoked invasions of foreign nations will not be tolerated in any area,” according to the WTD report. Citing Russia’s actions to stifle internet access and censor online content as a barrier to trade, Mr Wyden said that “we must consider how trade tools can be used to address such digital authoritarianism by any actor.” It remains to be seen whether the European Union, Canada, Japan, the United Kingdom, Australia, and Norway among others will also take such a step to deny MFN status to Russia. For example, the US and its allies on 28 February inveighed against Russia, for the second time, during a Dispute Settlement Body (DSB) meeting, over what they said was Moscow’s violation of Ukraine’s sovereignty and international law. Russia, however, urged the six members to eschew bringing issues and events that are outside the scope of the WTO, and are the focus of other international organizations and diplomatic agencies, according to people familiar with the development. In short, Russia could be compelled to raise trade disputes against countries that are likely to deny it MFN status. It is highly unlikely that such disputes centering on the denial of MFN status would be resolved any time soon, particularly given the dysfunctional status of the Appellate Body (AB). It is also clear from the DSB meeting on 28 February that the US will not allow any move to revive the Appellate Body given its unilateral rejection, for the 51st time, of a joint proposal from 123 members calling for the filling of seven vacancies at the AB as soon as possible. In short, the continued relevance of the WTO, which has often been claimed as being the custodian of the global trade rules, is being severely tested with powerful countries considering unilaterally terminating the MFN status accorded to Russia, said a person, who asked not to be quoted. Interestingly, such moves were apparently not considered in the WTO since its establishment in 1995, when the trade body replaced the GATT. However, the US and its Western allies seem ready to use any trade tool to target Russia at this juncture. US MOVES AGAINST CHINA Meanwhile, in a separate development, pronouncements made by the US President Joe Biden in his second State of the Union address on 1 March appear to go against the fundamental principles undergirding the WTO. In his speech, President Biden zeroed in on the competitiveness legislation that will “level the playing field with China and other competitors,” according to a WTD report on 2 March. He touted the Bipartisan Innovation Act that will make record investments in emerging technologies and American manufacturing. The President’s trade agenda is apparently based on a worker-centric trade policy and an inclusive trade agenda. “We are standing up for workers’ rights – but it is more than that,” it said, adding that “we are promoting a broader agenda of fair competition to ensure that workers are competing on the basis of skills and creativity, not exploitative cost advantages.” The aggressive US trade agenda suggests that it “is laser focused on working with partners and allies to chart new trade rules that do more to advance decarbonization and other critical environment standards, support US farmers, promote sustainable and resilient supply chains and combat COVID-19 pandemic.” Further, the new US trade policy agenda reckons China as its priority target. It suggested that “we must recognize that China, a large non-market economy, has uniquely distorted global trade through its economic policies and practices – it is an advantage that puts others out of business and violates any notion of fair competition.” The US also pointed a finger at the apparent weaknesses in the Chinese system and the need for urgent reform of workers’ and environmental regimes and anti-competitive subsidies. “We are clear-eyed about China’s doubling down on its harmful trade and economic abuses,” the Office of the United States Trade Representative said in a report. China, however, tried to play down the US concerns, saying that “it is hoped that the US adopt reasonable and practical China trade policies … And push China-US relations back onto the correct track of sound and stable development,” according to a report in the Wall Street Journal on 2 March. ADVERSE IMPACT ON DEVELOPING COUNTRIES The latest bout of moves by the US and its allies against Russia, as well as Washington’s new trade policy initiatives against China could have serious ramifications for developing countries at the WTO. Already, the European Union along with several other countries have upped the ante on the trade and environmental sustainability initiative to discuss trade-related climate measures and policies, fossil fuel subsidy reform, and plastics pollution and environmentally sustainable plastics trade, and so on. The US has already introduced the issue of forced labour in the fisheries subsidies negotiations, which is being opposed by China, several South East Asian countries, as well as some African countries. Against the backdrop of the ongoing COVID-19 pandemic, the sudden eruption of the Russia-Ukraine military conflict, and moves to contain China for its meteoric rise in the global trading system, the Group of Seven (G7) countries – the US, Canada, Italy, France, the United Kingdom, Japan, and Germany – as well as the European Union seem pretty determined to push their seemingly hegemonic trade agenda that would bring about new trade rules that appear to be inimical to the interests of the developing countries, said people familiar with the discussions. On some of these issues, the WTO Director-General Ms Ngozi Okonjo-Iweala has already spoken her mind in favour of trade measures related to climate change, digitalization, disciplines for micro, small and medium enterprises (MSMEs), and trade and gender among others.
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