[A2k] Politico Europe: Europe fears Trump is out to kill the World Trade Organization

Thiru Balasubramaniam thiru at keionline.org
Mon Mar 19 06:33:35 PDT 2018


Europe fears Trump is out to kill the World Trade Organization

Brussels sees tariffs against steel and aluminum as just the first wave of
a broad assault on the architecture of global trade.


3/18/18, 6:00 PM CET

Updated 3/19/18, 6:07 AM CET

Europe is worried that U.S. President Donald Trump’s tariffs on steel and
aluminum are just the beginning.

The EU’s bigger fear is that Trump’s ultimate goal is to kill off the World
Trade Organization and rip up the current rule book that underpins global
trade networks.

European trade officials argue that their American counterparts are sick of
WTO judgments they think are too lenient toward China, and are now ready to
take a sledgehammer to the whole system.

America is well advanced in its plans to throttle the WTO’s appellate
court, where countries resolve disputes over everything from subsidies to
anti-dumping tariffs. Washington’s strategy is to block the appointment of
judges, which should bring the system to a halt next year.

To the Europeans, Trump is making a cynical calculation that the U.S. is
the world’s No.1 economy and can outmuscle any opponent in a trade dispute,
without the need for international arbitration. In a world that returns to
the law of the jungle, Trump reckons he wins.

Both Brussels and the WTO are moving into crisis mode over this attack on
the appellate court. The EU reckons that America’s might-is-right approach
will sap confidence in global trade and undermine economic growth.

Until recently, the prevailing theory in Brussels was that the U.S. was
simply trying to exert leverage and was holding the system “hostage” over
other concerns. Advocates of that view say Washington has not disengaged
from the WTO in areas where it still sees that the body could help. On
March 14, for example, the U.S. launched a WTO challenge against India over
export subsidies.

In recent weeks, however, the mood about Trump’s ultimate motive has
shifted dramatically. Even the normally highly diplomatic European
Commissioner for Trade Cecilia Malmström reckons that Trump is planning to
take a wrecking ball to the system, and that it’s time for the EU and its
allies to draw up a “Plan B.”


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In a closed-door meeting with trade ministers in Sofia at the end of last
month, Malmström issued a stark warning that there was no “common solution”
to America’s block on the appointment of WTO judges, because Trump’s policy
is not to take the appellate court hostage, but to destroy it.

While ministers were discussing ways to convince the United States to lift
the block on the judges, “Malmström was very, very pessimistic about the
appellate body and said that Trump wants it to fail,” said one official in
the room. A second official confirmed Malmström’s remarks.

French Trade Secretary Jean-Baptiste Lemoyne told POLITICO in an interview
this month that Trump has a “policy which aims to gut the dispute
settlement system of the World Trade Organization.”

No judges left on the bench

There’s now a race against the clock to save the court. The appellate court
is supposed to have seven judges, but will be down to three this year — the
legal minimum required for it to work.

According to Arancha González, head of the International Trade Centre, a
joint U.N. and WTO agency: “There is a risk that some will underestimate
the value of a dispute system with an independent appeal function, and only
value it when it has gone. This would be taking a 20 years step backward in
international economic governance.”

By the end of 2019, the court will be down to one judge and be unable to

The appellate body is the most powerful instrument in the WTO, because it
has the authority to pass final rulings on trade fights between countries.
Former WTO Director General Pascal Lamy likes to call the appellate body
the “jewel in the crown” of the WTO, because of the key role the body has
played in preventing the emergence of major trade wars since its creation.

Roberto Azevêdo, the current director general of the WTO, told POLITICO a
response is needed quickly. “The dispute settlement system is a fundamental
pillar of the WTO. Without an impartial and effective path for resolving
disputes you would very quickly see members take matters into their own
hands leading to a dangerous cycle of retaliation and counter-retaliation.
The current situation is of grave concern. We need to find a solution
quickly,” he said.

The EU’s bigger fear is that Trump’s ultimate goal is to kill off the World
Trade Organization and rip up the current rule book that underpins global
trade networks | Saul Loeb/AFP via Getty Images

Asked about Washington’s position, the Office of the United States Trade
Representative declined to respond directly to the EU accusation that the
ultimate goal was to destroy the WTO. Instead, the USTR referred to page 28
of its annual trade report, which states that “the WTO is undermining our
country’s ability to act in its national interest … First among those
concerns is that the WTO dispute settlement system has appropriated to
itself powers that the WTO Members never intended to give it.”

On March 10, the U.S. agreed a joint position with Japan and the EU that it
would seek to enforce “existing rules by working jointly on current and new
disputes in the WTO.” While some EU diplomats took heart from that,
Malmström seemed far from convinced. Only two days later, she expressed
concern that, on the appellate court, “the U.S. has not changed their mind.”

Time for Plan B

Not all the trade ministers in Sofia shared Malmström’s bleak assessment of
American motives, three people present said.

Countries including Italy and Spain said they want to keep “an open door”
for the Americans. They cautioned that the EU should avoid confronting the
U.S. and should instead try to work with it. “There is no appetite for any
initiative that would alienate the United States,” one diplomat said.

Malmström, however, said the EU would need to “eventually look for a Plan
B,” according to the two officials, because Plan A risks leaving the EU
without a proper international dispute settlement system.

Another senior trade diplomat said that behind the scenes, the EU and other
countries are already acting. “Faced with the prospect of WTO dispute
settlement crumbling, a large majority of members are already looking into
a Plan B, some sort of ‘whatever it takes’ not to end up there.”

France last week emerged as a strong supporter of Malmström. Trade
Secretary Lemoyne said he would push for the WTO to continue its work as a
judge despite Trump’s opposition.

“It is necessary to think about all the forms of Plan B, which make it
possible to maintain … a mechanism for those states that are in favor of
having it. Because there is still a very strong majority of WTO countries
that wish to continue to have this type of dispute settlement,” he said.

“So I think that now we must actually start to be creative and therefore
France will also … put proposals on the table to restore efficiency to the
WTO both in its function as a developer of standards and in its function as
a judge.”

Thiru Balasubramaniam
Geneva Representative
Knowledge Ecology International
41 22 791 6727
thiru at keionline.org

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