US, EU team up against China in blasting world trade order

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BUENOS AIRES: The US and Europe argued the world trading system is failing to live up to expectations, even as China defended the existing order and urged countries to forge ahead with globalisation. As trade ministers from around the world gathered for meetings of the World Trade Organisation, the top US trade negotiator said the WTO is focused too much on refereeing legal complaints, which distracts from its core mission of expanding commerce.

We are concerned that the WTO is losing its essential focus and becoming a litigation-focused organisation, US Trade Representative Robert Lighthizer said in a speech on Monday at the WTO’s biennial meetings taking place in Buenos Aires through on Wednesday.

Under President Donald Trump, the US has stepped up criticism of the Geneva-based organisation, which was founded in 1995 to promote open trade. While the 164-member body is meant to be a forum for countries to negotiate how to reduce trade barriers, talks on a global trade deal have stalled. The US has been blocking appointments to the WTO’s appeals panel, a move the organisation says is undermining its ability to handle disputes.

Too often members seem to believe they can get concessions through lawsuits that they can never get at the negotiating table, Lighthizer said. With the US questioning the WTO’s usefulness, trade ministers meeting this week in Argentina are expected to make only moderate progress at cutting trade barriers. European Union Trade Commissioner Cecilia Malmstrom reiterated that concern on Monday, adding that the WTO isn’t living up to its potential.

We need to break down the logjam that’s prevented this organisation from playing the part it should in global trade, she said in a speech The problems are many but essentially they boil down to one fundamental issue: an inability to discuss issues of concern to members and to agree on a suitable way forward. This problem is systemic and it is beginning to jeopardise the whole organisation.

At the same time, Europe’s five biggest economies are also criticising US proposals to overhaul corporate taxes that they say could flout WTO rules, while harming trade and investment flows. In a letter to Treasury Secretary Steven Mnuchin, the finance ministers from Germany, France, the UK, Italy and Spain said a proposed 20 per cent excise tax in the House version of the tax bill “could discriminate in a manner that would be at odds with international rules embodied in the WTO.

Lighthizer has said the WTO isn’t equipped to deal with what his country sees as China’s mercantilist tactics. The US has joined the EU in rejecting China’s claim that, under the terms of its accession to the WTO, it should have graduated last year to market-economy status, which would offer greater protection from anti-dumping duties.

It is impossible to negotiate new rules when many of the current rules are not being followed, said Lighthizer, adding that the US is leading talks on how to improve the sad performance of many members. Lighthizer also questioned why rich countries are claiming developing-country status at the WTO, which gives them special treatment.

We need to clarify our understanding of development within the WTO, he said, adding that some members are “intentionally circumventing their obligations. Speaking shortly after Lighthizer on Monday, China’s Commerce Minister Zhong Shan defended the WTO’s role in facilitating global trade, which is set to grow faster than the global economy this year for the first time since 2014. We don’t believe there’s any other institution that can promote trade like the WTO, so we must push ahead with globalisation to make the world open, inclusive, equitable, he said.

China’s position in the WTO has become awkward as it shares interests with the US and other advanced economies on some issues but on others is closer to developing nations, making it difficult to take sides, according to Tu Xinquan, dean of the China Institute for WTO Studies at the University of International Business and Economics in Beijing. What China could do is to call for other members to stick to the WTO and globalisation, Tu said in a phone interview Tuesday. There’s no better way, at least for now.

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