TWN Info Service on WTO and Trade Issues (Jul18/25)
31 July 2018
Third World Network
   
WTO DG urges everyone to speak up for trade
Published in SUNS #8731 dated  27 July 2018

Geneva, 26 Jul (Kanaga Raja) - The Director-General of the World Trade Organisation Roberto Azevedo on Wednesday called on everyone who believes that trade is a force for good to speak up, arguing that "silence is as damaging as any action that leads to a trade war."

At a media conference organised by the UN correspondent's association (ACANU) here, the DG said that in terms of ending the trade war, a lot of it is political and not technical.

"It's not something that a technical measure here or there is going to solve. This is a political situation. This has to be solved at the political level. So leaders have to talk to themselves."

In some opening remarks, he referred to the mid-year report, covering the period from mid-October 2017 and mid-May 2018, on trade-related developments that he presented to members at a meeting of the Trade Policy Review Body on Wednesday. The report, he said, offers a mixed picture, but it also sets off a few alarm bells.

The headline is that an increase in the number of trade-restrictive measures has been recorded compared to the previous report.

There has been an average of 11 trade-restrictive measures per month compared to the nine recorded previously.

In terms of coverage, the restrictive measures covered about $84.5 billion while the import facilitating measures covered $107 billion. He said that in the past this ratio was 2 to 1, and it has fallen to about 1.25-1.26.

"That is not good news. So the situation I think is serious not only because of the major impact that trade restriction brings, it threatens the recovery of the global economy, it threatens growth, it threatens jobs but also because of the systemic impact."

According to Azevedo, the systemic impact may have a prolonged impact. This dynamic of an eye for an eye or tit-for-tat or whatever you call it, may be perceived as the new normal, and countries begin to take this as a normal way of behaving.

"I don't think that should be the case and this is something that would be very harmful for the global economy down the road," he said. "In our view, this situation requires an urgent response and the WTO of course has a role to play here."

He said a lot of people expect the WTO to act as a soccer match referee. He however said that the WTO "gets the pitch, provides the uniforms and gets the rules in place which are negotiated by the players themselves and if somebody feels that the other side did something wrong, then they ask for the referee."

"If the referee is not called to do anything, we don't do anything. We just let the game flow. That is the way that it is in the WTO. The WTO is not going to b e there finger-pointing," he said, adding that he never finger-pointed before and he won't start now, despite the temptation. He also said that he has to preserve his impartiality as a facilitator (of deals).

"At the same time, I defend the system. And I defend trade liberalisation and the role that trade has in the global economy and in promoting growth and jobs, and job creation."

As to the role of the WTO, the DG said that one area of major activity for him is to engage with leaders and ministers and other constituencies as well, to explain to them what is happening, the consequences to the best of our judgement of what their actions will be.

He said that he had met recently with President Macron of France, Prime Minister May of Britain and Chancellor Merkel of Germany.

Asked if he had talked to President Trump, Azevedo said that he had not met him. "I don't talk to every leader in the world. Some I meet, some I talk, some I don't. But I do have very good channels of communications with the US administration. I am constantly in touch with my main interlocutor who is Bob Lighthizer, who is USTR. We talk quite frequently, actually."

"We are calling everyone who believes that trade is a force for good to speak up. At this moment that we live, silence is as damaging as any action that leads to a trade war," he said.

"So this is what we are trying to do at this point in time," he added. "We are seeing some positive effects."

"And we are beginning to talk about how to change this, how to mitigate the se tensions and the WTO is of course part of this conversation. We are talking about how to improve the WTO itself."

Referring to the talk about WTO reforms, he said that this is something that is coming out of this conversation. "I am listening. This is very early on. We don't know what this conversation is going to be about, whether it is going to lead to something or not I don't know frankly."

He said updating and reforming the system is something we have been trying to do for quite some time. In this context, he pointed to the Trade Facilitation Agreement, elimination of agricultural export subsidies and the expansion of the ITA (Information Technology Agreement).

"We are open-minded. I am there to help, to facilitate and see whether we can make progress not only in this conversation but also on the issues that are already on the table. So we have a lot of pending issues that come from previous negotiations that are still ongoing, that have not been resolved."

He also pointed to other areas where members are beginning to discuss and talk about which are new, and they are also advancing and making progress, and all that "I think is positive."

"A very challenging picture for everyone, for us for sure, but with opportunities ahead as well," he summed up.

Asked to comment on the fact that the US is going to submit at the General Council meeting on Thursday a document (WT/GC/W/745 and WT/GC/W/746) highlighting its views on China's economic model and whether the WTO is the appropriate forum to discuss a country's economic model, Azevedo said while he did not know what the document is, this is exactly what the WTO does.

Anything that is trade-related has a place in the WTO and that discussion is what happens all the time. That's the normal way of doing things, he said, pointing to the Trade Policy Review Mechanism which looks at a country and all the trade-related policies that are implemented in that country.

And the members of the WTO, Azevedo said, look at that and ask questions. Countries like the United Sates, the European Union, China and other big traders get close to a thousand questions in an exercise like that.

"So that's exactly where this conversation should happen in the WTO. It doesn't exclude other places but clearly anything that is trade-related could and should be discussed in the WTO," said the DG.

[Article II:1 of the WTO treaty sets out "the scope of the WTO", limiting it: "The WTO shall provide the common institutional framework for the conduct of trade relations among its Members IN MATTERS RELATED TO THE AGREEMENTS AND ASSOCIATED LEGAL INSTRUMENTS INCLUDED IN THE ANNEXES TO THIS AGREEMENT." (emphasis added). Any trade issue, not covered by the agreements in the annexes, need to be agreed to by consensus of the members, before it can be discussed. SUNS]

Azevedo was asked to comment, in light of the fact that he is bound by the rules as set out in the Marakesh Agreement, over the fact that India at the Budge t Committee meeting on Wednesday had reportedly accused him and the WTO secretariat of abrogating and violating the rules by taking up issues without the prior consent of members, particularly on investment facilitation where the DG had taken up projects without informing the members, and why the DG was undermining the WTO rules.

Azevedo responded by saying "that's not true."

There was no accusation against him as violating the WTO rules, he said, ad ding: "No, that is not what I heard. I was not in the meeting. What they are complaining about is that the Secretariat took (action) without informing the Committee on Budget, Finance and Administration, which in fact they did inform, but they informed late."

According to Azevedo, they informed in the 2018 report on things that had already happened in 2017. "And there is a discussion now on how to make the process better and more automatic and things like that. I am all for that. I have no problems at all in being as transparent as possible."

"What I cannot allow in any circumstances is that one or two or three count ries or groups of countries decide what the WTO or what technical assistance should be or should not be. That is something that they have to agree. I cannot be guiding my actions on the basis of the determination of some groups of countries. If there is a request for technical assistance we will provide the technical assistance as long as it is compatible with the aims and goals of the WTO."

"Now that determination is one that I am entitled to do, and I try to do it in the best of my judgement," he maintained.

He was again asked to comment on the fact that the issue here was not whether he can or cannot do it but that there are very clear rules set out, for example, in Article VII of the Marrakesh Agreement.

Responding, Azevedo said: "I am sorry Ravi [the journalist who posed the question], it is not that clear cut. That is the whole point. You are going to have a lengthy discussion here about a technicality which is the interpretation of the rules of the WTO when approving particular types of funds."

"I am absolutely bound like everybody else. First of all that accusation that you just said I did not hear. Maybe you did, but I didn't hear that accusation. But look you have your media, put it out," he said.

Asked as to what he is going to do about the paralysis in the Appellate Body, the DG said that it is not paralysed yet. There is a blockage in the appointment of the Appellate Body members and we are trying to solve that.

But for the moment it is still working. "The problem that we have is that it is overloading the system, so we may have a slowdown in the procedures. But it is still working. It's not paralysed yet. We're trying to figure something out. And this is something that members have to talk to themselves. I cannot solve that by myself."

"We are floating ideas. There are many ideas coming forward. There are different types of conversation between members on how to fix this situation. At this point in time, those conversations, in my view, have not advanced enough so that I can say we see a light at the end of the tunnel. I don't think that's the situation yet."

Azevedo also said that the system experiences stress every time that a major crisis arises in the world. It is not the system that is necessarily facing a dangerous situation, the DG said, "I think the global economy is facing a very difficult situation."

"The question is if this dynamic of trade restriction continues for too long, we are going to see a very significant impact on the global economy. We already see some forward looking indicators responding to that. In terms of investment decisions, in terms of future purchases, we already see a slowdown in some of those indicators and we are only seeing the beginning of this," he said, adding that this could go much further.

"The more of these measures that are put in place, the more of a risk to the global economy that will be."

Azevedo also highlighted the paradox where there are countries bringing cases to the WTO even though they are not particularly happy with the way the dispute settlement system is functioning.

It is not that the system doesn't work, it's simply that there are misgivings about certain types of things that are happening in the system. "So overall the system works."

He pointed to the fact that there is a record number of cases being brought to the WTO shows that.

"We are probably on the way of having the largest number of disputes in a year since the WTO was created in 1995. We're not there yet but the number of cases up to now - and we are still in July - tend to indicate that if the pace continues, we're going to have the largest number of cases in the history of the organisation."

In this context, the DG referred to panels and a lot of the load, because of the blockage of the appointments, falls on the Appellate Body.

"We will have to fix the Appellate Body at some point in time, so that when these cases get there, it will be in a position to respond to that higher demand."

As to how he sees the trade war ending, the DG said a lot of this has to do with conversations and negotiations.

"A lot of this is political. It's not technical. It's not something that a technical measure here or there is going to solve. This is a political situation. This has to be solved at the political level. So leaders have to talk to themselves."

On Brexit, he said it is a long way from being concluded, and that there are many things still under consideration in the negotiations. These are complex negotiations and there will be no easy fix.

Azevedo also said that if you look at what existed when the WTO was created in 1995 we barely had the internet.

The world has changed dramatically over the last 22 years. "I think the rules have to evolve with it. The system has to be responsive to this new world. I think the only moment when the WTO will become superfluous is when the world ends. Until then we'll need it."

He also said that the economic environment today is so interconnected - the economies are so interconnected, the production chains are so interconnected that what happens between two or three countries affects not only those parties but also everyone.

He pointed out that two-thirds of global trade is of products that were manufactured in at least two countries.