TWN Info Service on WTO and Trade Issues (Sept19/07)
19 September 2019
Third World Network

China to host informal ministerial in November

Published in SUNS #8979 dated 18 September 2019

Geneva, 17 Sep (D. Ravi Kanth) – China is to host an informal trade ministerial meeting of select countries on 5 November in Shanghai to discuss “possible outcomes of the twelfth WTO Ministerial Conference” in June 2020.

The meeting will take place amidst mounting unilateral trade measures and a worsening existential crisis in the multilateral trading system, trade envoys told the SUNS.

The Shanghai meeting will also focus on “advancing the necessary reform of the WTO” at a time when the WTO’s Appellate Body (AB) is set to become dysfunctional from 11 December 2019.

Significantly, the informal ministerial of more than thirty countries coincides with the US President Donald Trump’s 90-day threat, issued on 26 July, to major developing countries such as China, India, South Africa, and Indonesia among others to give up their special and differential treatment (S&DT) flexibilities, said a trade envoy, who asked not to be quoted.

China’s trade minister Zhong Shan will make opening remarks at the meeting followed by remarks by the WTO’s director-general Roberto Azevedo on the “state of play” in the negotiations as well as on the work of his Secretariat.

Barring these two issues – “possible outcomes of the twelfth WTO ministerial conference” in June 2020 in Nursultan, Kazakhstan, and “advancing the necessary reforms of the WTO” – trade ministers are not discussing other systemic issues that are confronting the WTO multilateral trading system, said a trade envoy, who asked not to be quoted.

It is not clear what China intends to achieve through this informal ministerial meeting as major grave existential issues have almost atrophied the WTO, said a trade envoy, who asked not to be quoted.

To start with, the continuing trade war between the US and China has adversely affected the global economy, with trade in services being the latest casualty.

The unilateral tariffs on steel and aluminum imposed by the US under its Section 232 provisions and the lengthening decline in cross-border sales of goods have already led to sharp declines in factory output.

Several countries, including China and India among others, are witnessing a sharp drop in their manufacturing output and exports because of the uncertainty caused by the arbitrary and unilateral actions launched by President Donald Trump, analysts, including the Nobel Laureate Paul Krugman, have repeatedly commented.

The adverse effects of the trade war also spread to services, according to the WTO, which issued a new indicator for trade in services barometer on Monday (16 September).

The WTO noted “a further weakening” in global trade after “services trade growth slowed during the first quarter of 2019,” as compared to the recent peak in July 2018.

“Declines in most of the Services Trade Barometer’s component indices drove the second quarter softening, as they signalled a broad loss of momentum across various services sectors,” the WTO maintained.

“The passenger air travel index (95.6), construction index (97.0), and global services Purchasing Managers’ Index (97.2) all fell further below trend in June,” it argued.

According to the WTO barometer, “the financial services index (99.7) also dipped, finishing slightly below trend” while “the index for information and communication technology services (100.3) fell from well above trend in mid-2018 to on-trend in June.”

“In contrast, the container shipping index (100.8) was slightly above trend and rising in June, following a multi-month slowdown,” the WTO noted.

More importantly, “despite the overall loss of momentum since the start of 2019, services trade has generally held up better than goods trade since the latter is more directly affected by recent trade tensions.”

“Tariffs, trade wars, and uncertainty over Brexit are contributing to a weaker demand environment that we saw in 2018,” said Alexandre de Juniac, IATA’s director-general.

Meanwhile, as China and the US resume their trade talks at the level of junior officials from Thursday (19 September) in Washington, there are doubts whether the two sides will reach an “interim” agreement when their chief trade negotiators meet in Washington next month.

Last week, there were signs that the two sides are inching towards a trade-detente following the postponement of planned unilateral tariffs by President Trump by two weeks which would have taken effect from 1 October.

Trump claimed that the delay to impose tariffs from 1 October was at the Chinese request because of their 70th national day celebrations (see SUNS #8976 dated 13 September 2019).

In response to Trump’s conciliatory gesture, China chose to exempt from punitive tariffs purchase of US soybeans, pork, and other agricultural products.

Chinese measures to exempt tariffs on soybean and pork could not have come at a more opportune time for Trump, who is facing an uproar of protests from farm lobbies in the mid-west states, particularly Iowa, several commentators have argued.

However, the US Trade Representative Ambassador Robert Lighthizer downplayed the prospects of an interim agreement on Monday (16 September) saying that much more work needs to be done before the US can complete a trade deal with China.

In his meeting with the US business officials on Monday, Ambassador Lighthizer is reported to have said that the administration is still pushing for a “real agreement” while remaining silent on the much talked about interim deal.

Trade envoys said China ought to have placed issues (on the agenda of the ministerial meeting) concerning the unilateral trade measures imposed by the US as well as the threat to developing countries of grave consequences if they do not give up their S&DT. Beijing should have also discussed how the existing as well as new agreements will be enforced in the absence of the AB.