DEPUTY DIRECTOR-GENERAL ALAN WM. WOLFF
The creation of the multilateral trading system is a remarkable achievement. It took humanity some 3500 years from when it first began writing rules for trade to achieve it. The multilateral system itself is now only 75 years old.
My primary concern, at this point, is improving the multilateral trading system as embodied in the rules and procedures of the WTO. All benefit from the existence of the system, not least the United States and China, and other major trading partners. It would serve the interests of all WTO Members to have all trade measures taken be within the rules of the multilateral trading system rather than outside the rules.
In my current role, I neither condone nor condemn any trade action taken by any Member. That is for Members to decide, or to be resolved through dispute settlement when Members choose to invoke those WTO procedures.
While there has been no indication from either China or the United States that their current conflict could be best resolved if it included joint agreement to reflect any settlement in the WTO rules governing their trading relationship. This is the case for several reasons:
- The two countries should both have an interest in the stability of the results of their negotiation. WTO rules have a better track record of enduring than a solely bilateral understanding.
- Many of the subjects that may be under discussion are of broader interest than these two parties. For example, were there an understanding on transparency through notifications, both countries should be interested in any understandings of this kind being applicable to all WTO Members.
Fortunately, the exchanges of trade measures and countermeasures between the United States and China come at a time when reform of the WTO is a central topic of policy concern for the world’s trading nations. Members accounting for most of world trade, meeting as the G20, (consisting of Argentina, Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom, and the United States) meeting in Buenos Aires on December 1, 2018, have declared that the WTO is in need of reform.(1)
Three of these Members, accounting for a majority of world economic activity, have dedicated themselves to address specific international trade rule changes, including: (1) with respect to transparency through obtaining enforcement of the WTO’s notification obligations, (2) through limitations on industrial subsidies, especially those resulting in the creation of excess capacity, (3) through disciplines on state-owned enterprises, and (4) through rules against forced technology transfer.(2)
Of these subjects, a proposed text has been tabled by these three WTO Members(3), joined by a number of others(4), to improve the enforcement of the WTO’s notification provisions. Among the obligations to notify is that governing the granting of subsidies. Proposals on the other subjects contained in the trilateral trade ministers December 2017 Buenos Aires declaration are expected to be tabled in coming months.
The U.S. has also tabled a proposal that deals with a complaint voiced by the USTR at the Buenos Aires Ministerial, that not all countries can self-designate themselves as developing countries, which they presumably do to obtain special and differential treatment (better treatment than developed countries) in any future negotiations. 120(5) out of the 164 WTO Members have declared themselves to be developing countries, including some which have per capita GDPs in excess of that of the United Kingdom. The largest trading country to claim developing country status is China. It is adamant that this status is deserved and that it intends to retain it. Self-designation of developing country status is clearly for the United States a burr under its saddle,(6) as evidenced by the fact that it was a key topic in the recent meeting of the presidents of the U.S. and Brazil. The U.S. proposal in the form of a draft General Council decision provides the following:
To facilitate the full implementation of future WTO agreements and to ensure that the maximum benefits of trade accrue to those Members with the greatest difficulty integrating into the multilateral trading system, the following categories of Members will not avail themselves of special and differential treatment in current and future WTO negotiations:
i. A WTO Member that is a Member of the Organization for Economic Cooperation and Development (OECD), or a WTO Member that has begun the accession process to the OECD;
ii. A WTO Member that is a member of the Group of 20 (G20);
iii. A WTO Member that is classified as a "high income" country by the World Bank; or
iv. A WTO Member that accounts for no less than 0.5 per cent of global merchandise trade (imports and exports).(7)
Clearly, where there is a bilateral understanding on this subject, it would be an input into discussions of WTO Members on the topic or developing country status. I have seen not report of a bilateral discussion on “differentiation” of developing country status other than the one between Brazil and the United States.
Discussion of various WTO reform proposals outside of those addressing reform of the Appellate Body is just beginning. The positive exception is a Joint Initiative relating to E-commerce. The United States and China are among the 77 WTO Member countries that have been engage in open plurilateral discussions and where negotiation of rules governing electronic commerce is just beginning. While there will undoubtedly be differences among the participants about what rights and obligations should be included, this is an area where there could be some cooperation between the China and its major trading partners.
Not everything in the U.S.- China trade conflict will be resolved in the WTO under any new rules, and perhaps few new rules will gain acceptance by a broader range of countries in the in the near term. Creating new rules in the multilateral trading system is a time-consuming business.
Securing new rules with broad acceptance is imperative in order to underpin more stable trading relations for all concerned.