Azevêdo: WTO Has Opportunity to Address ‘Crisis of Multilateralism’

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The past year’s developments in global trade have offered a stiff test to the international trading order and, more specifically, the World Trade Organization (WTO).

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Amid a surge in protectionist measures, the WTO has come under pressure. U.S. President Donald Trump has criticized the system on several occasions, even threatening to pull the U.S. out from the WTO if it did not “shape up.”

The fulcrum of the trade angst has been U.S.-China relations, as the U.S. has imposed a total of $250 billion in tariffs on Chinese imports so far this year. China has responded with retaliatory tariffs, matching the initial $50 billion tariff package and then responding with $60 billion in tariffs when the U.S. slapped an additional $200 billion in tariffs on Chinese goods.

During a briefing Friday, Trump reiterated his stance that China has “taken advantage of the U.S. for many, many years.” He added that, with respect to the previously mentioned additional $257 billion in potential tariffs — which would essentially subject all Chinese products coming into the U.S. to duties — the U.S. may not have go to that route.

“China would like to make a deal,” Trump said.

Meanwhile, also on Friday, WTO Director-General Roberto Azevêdo spoke at a Paris conference titled “A WTO Fit for the 21st Century: What Needs to Change,” outlining ways in which the organization must adapt for such turbulence on the global trading scene.

Referring to ceremonies held Nov. 11 in remembrance of the 100th anniversary of the end of World War I, Azevêdo referred to the international bodies’ origins in the aftermath of that conflict.

“The multilateral trading system, like other international bodies, was born out of the conflicts of the early 20th century, with the aim of making this vision a reality,” he said. “It was created to advance the cause of co-operation between nations, to preserve peace and stability, and thereby to support growth, jobs and development – the essential conditions for economic wellbeing. This mission is just as important today as it was back then. Co-operation, under shared rules, through the multilateral system, remains the best way of delivering it.”

He added the WTO system covers approximately 98% of global trade, and that the “trading system may not be perfect, but it is essential and it has proved very effective.”

Nonetheless, while pointing out the WTO’s successes, he acknowledged the need for change, particularly vis-a-vis the rise in tariffs over the past year.

“Our economists have been assessing a variety of possible scenarios to develop this picture, including the impact of a full, global trade war,” Azevêdo said. “By this we mean a breakdown in international trade cooperation, where instead of tariffs being set cooperatively in the WTO, they are set unilaterally. Under this more mercantilist, nationalist mindset, tariffs would rise sharply. We would see a reduction of global trade by around 17%.”

World leaders, including Trump and Chinese President Xi Jinping, will soon gather in Buenos Aires at the end of the month for the G20 Summit, a crucial moment for dialogue between the U.S. and China. The rate for the $200 billion tariff package implemented by the U.S. is set to jump from 10% to 25% at the end of the year unless a deal precluding the hike is reached.

“WTO reform has been raised with me in my interactions with a variety of leaders – including President Macron,”Azevêdo said of the French president. “And no doubt it will be a key issue when we meet at the G20 summit in Buenos Aires in two weeks’ time. That meeting will be an important moment.”

He also listed a number of initiatives and objectives that have been suggested by various WTO members, which included:

  • resolving disputes and reaching agreements more rapidly and effectively
  • addressing a variety of trade distorting practices that are either not covered or are just partially covered by existing disciplines
  • avoiding protectionism and unilateral actions
  • advancing current work
  • and improving notifications and transparency

However, challenges faced by the WTO’s dispute settlement system present the most urgent issue, he said.

“The specific issue here is the impasse in appointments to the Appellate Body,” he said. “This could eventually threaten the functioning of the whole dispute settlement system as we know it. There are some signs that members are engaging more deeply here. And proposals are being brought forward. But we need to see a major shift in gears and positions if we are to make progress.”

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According to the WTO release, at the Paris conference Azevêdo held bilateral meetings with France’s Minister of Economy and Finance, Bruno Le Maire; Minister of State, attached to the Minister for Europe and Foreign Affairs, Jean-Baptiste Lemoyne; and E.U. Trade Commissioner Cecilia Malmström.

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