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TWN
Info Service on WTO and Trade Issues
Geneva, 22 May (D. Ravi Kanth) — The United States on 20 May apparently signaled that World Trade Organization members can “recast” the international trading system around fairness, balance, and national interests, according to people familiar with the development. The remarks come after Washington appeared to have upended the rules-based, member-driven global trade body – an organization it helped to create – to the point of irrelevance, said a trade envoy, who asked not to be quoted. During a discussion at a meeting of the Council for Trade in Goods (CTG) on China’s proposal for a technical discussion on the proper use of Article XXVIII of the GATT 1994 (which allows for the modification of scheduled tariff commitments under specific circumstances), a US official from Washington delivered an unusually long virtual statement outlining the Trump administration’s priorities, said people familiar with the development. At a time when successive US trade actions over the past year – starting with the allegedly illegal reciprocal tariffs and repeated invocations of security exceptions to shield apparent violations – have eroded the integrity of Washington’s actions, the US official appeared to argue that the international economic system must prioritize and protect national interests while ensuring balance and fairness. The US official also argued that WTO members continue to benefit from detailed rules across many areas, including intellectual property (IP) and services, which sustain modern economies and enable effective international business cooperation. To recall, both IP and services were brought into the WTO by the US and other industrialized countries during the Uruguay Round, which led to the WTO’s establishment in 1995. It is well known that IP rules serve “Big Pharma” through patent monopolies and other protections, while services represent America’s perceived future in an era of hyper-globalization. However, the US failed to mention that several other issues formed the Uruguay Round package – such as commitments in agriculture, a binding dispute settlement system, and enhanced rules under the Marrakesh Agreement, including non-discriminatory most-favored- nation (MFN) treatment, consensus-based decision- making, and robust enforcement functions. These undergird the procedural and substantive agreements, including the launch of plurilateral negotiations based on multilateral processes, said people familiar with the development. “NATIONAL INTERESTS” The US apparently said that it cannot allow its national interests to be “boxed in by outdated frameworks that no longer serve their purpose,” without clarifying which frameworks it was referring to, according to people familiar with the development. Washington maintained that the system that has been operating for the past three decades required the US to absorb the ever-rising trade surpluses of other nations – without acknowledging that there is little connection between the WTO rules and the creation of trade surpluses by other countries, said people familiar with the development. The US has seemingly “weaponized” the trade surpluses recorded by other countries in bilateral trade to justify its imposition of unilateral reciprocal tariffs under the International Emergency Economic Powers Act (IEEPA) of 1977 in April 2025, in alleged violation of Article I (MFN) and Article II (binding scheduled commitments) of the GATT 1994. Without naming China for its large trade surpluses with the US, the US official said America bought “ever larger amounts of artificially cheap goods funded by constantly growing piles of debt,” according to people who took part in the CTG meeting on 20 May. That approach was not sustainable – economically or politically, the US official insisted, according to people familiar with the development. NEED FOR A NEW SYSTEM “A new system is needed,” the US official told participants at the CTG meeting. The US official said that WTO members must ensure that the new system “builds in the flexibilities to reduce economic vulnerabilities, unlock productivity gains in our domestic markets, and address non-market policies and practices that create dependencies and make us vulnerable to economic coercion” – in an apparent reference to China’s alleged non-market policies. Most importantly, the US official said, “the new system must address structural imbalances head on, and make long-term balance a cornerstone of international economic policy.” Further, the US official said that for his country – the world’s consumer of last resort – “this new system will require a long-term reset to higher average tariff rates, while for other countries it will require opening long closed markets, shifting to greater domestic consumption, and reining in overcapacity,” an argument that hints at raising the current scheduled tariff commitments under GATT Article XXVIII. The US official said that Washington is already well along this path, and that this approach – combined with sensible energy, tax, and regulatory policies – has resulted in increased GDP, a reversal of the trade deficit trend, and higher wages, particularly for blue collar workers, according to people familiar with the development. The US official added that the US is not the only member seeking to address vulnerability, noting that other economies are also vulnerable to non-market practices including overcapacity, again in an apparent reference to China. The US official cautioned that more and more workers in those economies (the European Union’s member countries) are “apparently seeing their own livelihoods damaged by cheap imports.” To be a consumer, the US official argued, one must be a producer, informing WTO members that a balanced international economic order is in their interest as well. The United States, according to the US official, is surprised by China’s inquiry on this issue. Upon reviewing materials put out by the Secretariat in the Committee on Market Access, the US official said there already appear to be a number of resources that China could review to find further information related to its inquiry. The US official added that some of these resources were even identified by China in its own paper, and that the existing guidance in those materials should be sufficient to answer many of the issues China raised. Commenting on the proper use of GATT Article XXVIII, the US official noted that “the circumstances under which a Member may invoke Article XXVIII is up to that Member to determine.” Rejecting the Chinese proposal, the US official said a committee or other WTO body should not be put in a position of having to decide what can proceed under Article XXVIII, assuming all obligations and rules are followed. In short, the official said that the US does not believe a technical discussion on this issue is warranted – even as several developing countries supported the Chinese proposal, said people familiar with the development. One trade envoy, who asked not to be quoted, said that the US proposal would be tantamount to an “a la carte” approach of deciding what agreements the US wants, and forcing through WTO-illegal decisions – such as the plurilateral initiative on maintaining indefinitely the moratorium on customs duties on electronic transmissions even if it allegedly violates the rules. CHINA CRITICIZES S301 PROBES At the CTG meeting, China criticized the US for launching Section 301 investigations on seemingly spurious grounds – on the issue of overcapacity in 16 countries, including the EU and Singapore, and alleged use of forced labour in some 60 countries. China is understood to have said that the Section 301 investigations cover bilateral trade, suggesting that the relevant US measures undermined the multilateral trading system, according to people familiar with the development. China delivered a strong note of rebuke against the US measures, while the Russian Federation criticized the US investigations into alleged forced labour, as being inconsistent with the rules-based multilateral trading system, said people familiar with the development. In response, the US maintained that it is merely seeking public comments, suggesting that Washington has sought consultations with the identified economies. China had already argued that Section 301 of the US Trade Act of 1974 is seemingly WTO-illegal, as a dispute panel had previously ruled against its use, said people familiar with the development. +
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