WTO Weaknesses Examined, Solutions Suggested at Trade Panel

The World Trade Organization cannot negotiate trade liberalization, and trade distorting agricultural subsidies are getting worse, not better, said Aluisio de Lima-Campos, chairman of the ABCI Institute, the Portuguese acronym for Brazilian International Trade Scholars. He was leading a panel Nov. 5 at American University, the end of a daylong trade symposium co-sponsored by ABCI.

Although the U.S. frequently complains about trade barriers to its agricultural exports, it is the fourth-worst offender in terms of agricultural subsidies, he said, after China, India and the European Union. He suggested that countries that don't believe in agricultural subsidies should begin a plurilateral negotiation, but it would only work if it was a different approach to today's WTO plurilateral agreements. In today's plurilaterals, only the signatories are subject to the obligations, but all WTO members get the benefits.

The WTO should allow a non-Most Favored Nation (MFN) plurilateral approach, to eliminate the problem of free riders, he said. He said under the General Agreement on Tariffs and Trade (GATT), with a 75 percent vote, an MFN waiver can be granted, but under the WTO, it cannot.

The more immediate problem at the WTO is the imminent end of the appellate body, because the U.S. has been blocking panel appointments, which means there will no longer be a quorum in December, unless current panelists stay on to finish the 12 pending cases. Simon Lester, associate director for the Center for Trade Policy studies at the Cato Institute, said he thinks the American panelist will continue for cases that have already had oral arguments, but not the rest.

When the appellate body collapses in December, Lester said, countries could agree not to appeal, or use mediation as an appellate mechanism. But if neither of those things happens, dispute settlement through the WTO would no longer be binding, because countries could "appeal into the void" and thereby avoid complying with decisions that went against them.

Lester asked: "How serious are all of these concerns the U.S. has expressed about the appellate body? Is this just the nitpicking we do about all courts? Does the Trump administration want the problems fixed, or does it just want to destroy the system?" Lester believes it’s likely some of the crisis will be solved in 2020, if a Democrat replaces Donald Trump, but that a future Democratic president may keep the U.S.-China trade war going.

Uri Dadush, senior fellow at the Policy Center for the New South, said the “extremely dangerous moment” the world finds itself in is a consequence of many factors -- economic stagnation for most workers after the financial crisis; inequality and economic disruption in the U.S., combined with a poor safety net; and, in response to the political dissatisfaction created by these factors, what Dadush called “wrong ideas.” In this case, these are protectionism and tariffs. Dadush said it’s not the first time wrong ideas were seized on in response to a crisis -- Nazism, Communism, import substitution were all wrong ideas.

Dadush complained that mini-deals like the U.S.-Japan trade deal or the Phase 1 deal with China “are designed to re-elect the president.” He said although the business community is profoundly disturbed by the trade policy of this administration, they are not being vocal about it. “They need to stand up and be counted,” he said. “I am amazed at how timid they are.”

Dadush said the American negotiations with China that are aiming at convincing China to dismantle its state-owned enterprises, forced technology transfer and favoring of domestic champions are doomed to failure. “The idea that the United States is going to decide what the system should be inside China is ridiculous. We couldn’t even do it in Iraq,” he said. “China and the United States are destined to an unhappy marriage for as long as the eye can see.”