Despite bright sunny weather, there is a cloud hanging over the World Trade Organization’s headquarters on the shores of lake Geneva.
The annual Public Forum held this week in the Swiss town was packed with visitors. WTO staffers were overwhelmed with requests to organise panels and filled up almost all available rooms for three days in a row. One cannot escape the impression that the trade policy community is huddling together at a time of great uncertainty for the global trading system.
The current backlash against globalisation and trade across the West, epitomised by the election of Donald Trump to the White House on a protectionist platform, was on everyone’s mind.
The underlying themes of a large number of panel discussions were ‘sustainability’ and ‘inclusiveness’ – a reflection of the current zeitgeist.
The Trump administration is casting a shadow over the very trading system the United States contributed to create in the 1990s. Washington is blocking the nomination of three new Appellate Body members, potentially condemning the dispute settlement body, which many call the “jewel in the crown” of the WTO, to a slow but sure death.
“It’s like a knife hanging above us” said a WTO staffer.
US gripes with the WTO and its dispute settlement system are not new. The Obama administration was already airing displeasure with the moribund Doha Development Round and with the Appellate Body: the first time the nomination of a new member was blocked was in 2016, under the stewardship of Ambassador Punke.
Punke steered negotiations on services out of the WTO to launch TiSA, the Trade in Services Agreement. This was a means to get around opposition in the WTO from the likes of India, and to avoid any ambitous deal to be watered down by China. Punke vehemently opposed special treatment for developing countries in the Doha Round and subsequent trade negotiations.
Toughening up
With Trump the US is toughening up further.
Christopher Wilson, number two at the US Mission in Geneva explained the US was very dissatisfied with three areas.
Member governments are not sufficiently notifying their trade policy measures, Wilson deplored.
“The discussion on trade and development has become completely broken”, said Wilson on Tuesday in Geneva. On this issue “we are ready to hit a reset”, Wilson stressed.
Then there is the Appellate Body issue. The US considers that the judges are stretching WTO rules too widely and encroaching on what Wilson termed “the prerogative of members to make the rules”.
What is not clear yet is how the United States will approach the coming Ministerial Meeting in Buenos Aires, MC11 as the meeting is called, where members are trying to scrape together a minimal deal on a small set of topics.
Some of this has to do with the very fact that the US has yet to nominate an Ambassador at the Geneva mission. So far there seems to be no clear guidance from Washington on the road ahead for Buenos Aires.
Christopher Wilson appeared keen to manage expectations on MC11: “We re looking to a meeting that is successful”, but told his audience “not to expect that every ministerial will deliver an outcome”.
The general mood ahead of Buenos Aires is not very upbeat.
Susana Malcorra, Argentina’s former foreign minister, who is charge of coordinating preparations for MC11, made sure to manage expectations. “The mood these days is not a mood to open up conversations and discussions to put more things on the table… There is a sense that there are still some pending issues that have not been resolved, and that it is hard to open new ones when you haven’t sorted out what is called the Doha Agenda”, Malcorra explained.
“I would like to see this moving forward but I am not sure how much the market out there [is] so that we get to that place”, Malcorra said.
Low hanging fish
Tim Yeend, Deputy Director at the WTO, said that it was still “too early to say” if MC11 will succeed or fail in delivering some negotiated outcome.
The pace of work is clearly intensifying. Areas of intense negotiations include agriculture support, namely the long-standing issue of public stockholding, fisheries subsidies, domestic regulation in services, e-commerce, investment facilitation, and SMEs.
Sceptics say the risk of no deal or text at all is high, as there is no agreement yet on where the focus should lie. On the other hand, pessimism was rife ahead of the last ministerial meeting in Nairobi, with its deal on export subsidies clinched at the very last minute in December 2015. Ruling out a deal might still seem premature.
The greatest chance of at least relative success is seen in the fisheries sector. A coalition of interests from advanced economies and developing countries is seeking a prohibition of some subsidies that lead to overfishing. The deal is seen as one of the possible “low hanging fish” for Buenos Aires.
Motivations to get to a deal vary from environmentalism to delivering on the United Nation’s 2030 Sustainable Development Goals, namely goal 14.6 on ‘sustainable fishing’.
China shadow
In many ways the US stance on the WTO is about China.
More generally, China’s surge in the global economy since it joined the WTO in 2001 has been a major factor in the failure of the WTO to deliver a trade accord under the Doha Development Agenda of 2001.
Emerging markets did not want to liberalise their tariffs further for fear of China. China was hiding behind calls for Special and Differential Treatment for developing countries to avoid taking on any new trade liberalisation commitments.
Today the issue of steel overcapacity and China’s treatment as a market economy is the dominant topic. The US’ main irritation with the Appellate Body stems from its rulings on US antidumping measures, not least against China, and not least in steel.
China is pressing for the end of WTO-inconsistent methodologies currently applied to non market economies by many WTO members, allowing them to apply higher antidumping duties on Chinese expoerts. Beijing sees itself entitled to this as part of its accession deal in 2001.
China is suing the EU in the WTO for having missed a December 2016 deadline set in Beijing’s accession protocol to do away with its ‘analogue country methodology’ applied by the European Commission against non market economies like China.
China has also requested consultations in the WTO with the United States on this issue. The US has flatly refused to grant China market economy treatment.
Many observers believe that given existing rules in the WTO, China stands a good chance of winning its dispute settlement case against the EU – making the United States even more nervous.
The China factor has plagued many other discussions in the WTO.
Take fisheries subsidy negotiations. These negotiations are part of the WTO’s committee on rules. This committee also deals with trade defence. China has tried to put forward new rules on antidumping in the Buenos Aires package – but has not succeeded. China also tried to link progress on fisheries to the trade remedies file.
To get around that situation, the outgoing Obama administration proposed to make fisheries talks ‘plurilateral’, i.e. only involving a subset of WTO members and not China.
The Obama administration was a key driver of the fishing discussions – indeed it had included a ban on fisheries subsidies in the Transpacific Partnership, the trade agreement Donald Trump subsequently pulled out of. The current administration’s position on fisheries is not clear.
Interestingly, there are at the moment signs that China might want to come to the negotiating table on fish.
Even in the small area of fisheries, as on many other issues at the WTO future direction: it’ still too early to say if there will be a deal.
If there is no deal, some believe Buenos Aires might be the last big biennial ministerial meeting gathered by the WTO.
