Bracing for an ‘improved' WTO
The Covid-19 pandemic has tested the ability of the world to act in concert to tackle an unprecedented challenge, and found it wanting.
- The disruption of global supply chains and the growing gravity of the economic downturn have spurred widespread trade protectionism, deepening a trend that set in two years ago.
- WTO finds trade restrictions by member governments have affected global imports valued at US $747 billion in 2019 alone.
US-China trade war
- A WTO panel found the US had illegally imposed tariffs on more than $350 billion worth of Chinese imports.
- Since he unleashed a trade war against China in 2018, Trump had threatened tariffs on nearly all Chinese imports but stepped back from the brink in January when he signed an initial trade deal with China.
- The US had claimed its tariffs were justified because China was stealing intellectual property and forcing American companies to transfer technology to Chinese firms.
- WTO’s three-member panel did not accept the argument. It said that such unilateral responses are themselves both unfair and illicit under the WTO agreement.
Bypassing the WTO
- Some members have initiated a bypass operation to circumvent the blockage of the dispute settlement proceedings.
- In April, 18 members including the EU, Australia, China, Canada, Singapore and Brazil, notified the setting up of a Multi-Party Interim Appeal Arbitration Arrangement.
- Arbitration is not mandated by WTO and how far it will succeed is an open question.
- That’s the reason the panel which ruled on the US-China dispute wrote in justification that “it is very much aware of the wider context in which the WTO system currently operates,” reflecting “a range of un-precedented global trade tensions”.
- While the European Commission has published a revised paper on modernising WTO to “make international trade rules fit for the challenges of the global economy”, more than a dozen likeminded members have organised minister-level meetings to chart the way forward.
- Besides the US, the EU and Japan have issued scoping papers on strengthening WTO disciplines on industrial subsidies and state-owned enterprises, initiatives that are aimed at reining in China.
- A word of caution is required at this juncture on the extension of the frontiers of the trading system into new areas. The use of the trade rules as a mechanism for imposing disciplines in non-trade areas would create heavy strains on the system.