[Ip-health] Politico Europe: EU moves to outflank Trump on trade

Thiru Balasubramaniam thiru at keionline.org
Mon Jan 27 03:40:56 PST 2020

EU moves to outflank Trump on trade

The decision to set up an alternative to the world’s highest trade court
with 16 countries carries risks for Europe.

By JAKOB HANKE <https://www.politico.eu/author/jakob-hanke/> AND BARBARA
MOENS <https://www.politico.eu/author/barbara-moens/>

1/24/20, 3:54 PM CET

Updated 1/27/20, 11:11 AM CET

The EU's announcement Friday that it was launching a parallel
Trade Organization court to circumvent the United States in Geneva is the
clearest sign to date of a more muscular "geopolitical" Commission.

It is also the bloc's riskiest bargain.

Last December, the world's main trade court no longer had enough judges to
function. The U.S. had been blocking
appointment of judges to the World Trade Organization's Appellate Body, the
highest dispute-resolution panel, accusing the court of being too soft on
its archrival China.

WTO nations that wanted to save the multilateral trade order wondered
to do next. Without the court to adjudicate disputes independently, global
trade risked reverting to a system where economic muscle was all that
mattered. Their response came on Friday, by setting up a parallel WTO court
without the U.S.

Announcing the new agreement, EU trade chief Phil Hogan insisted it was
only a temporary stop-gap. “Let me underline again that this remains a
contingency measure needed because of the paralysis of the WTO Appellate
Body. We will continue our efforts to seek a lasting solution to the
Appellate Body impasse,” Hogan said.

Brussels believes it has scored a major victory to keep the multilateral
trading system alive and prevent future trade wars, by agreeing
<https://trade.ec.europa.eu/doclib/docs/2020/january/tradoc_158596.pdf> to
set up a binding trade dispute appeals arbitration with 16 other countries,
including China and Brazil. The new system will function without the U.S.,
which has suffocated the WTO's built-in tribunal by vetoing any
appointments of judges.

Friday's move inevitably puts the EU and China on the same side of the
table in Geneva, as the two major trade powers that are trying to maintain
the current WTO system and rules. Washington has argued that it makes no
sense to rebuild a WTO court before members have agreed on radically new
rules that take into account China's system of state capitalism.

Critics warn that the EU risks isolating
United States in Geneva. Brussels insists this is not its intention.

"This agreement is not directed against anyone. It’s not the EU working
with one other country against another but a group of countries working
together to set up a temporary alternative," said an EU official.

The deal helps prevent the world trade system returning to the law of the
jungle. Since the Appellate Body was on life support, countries that wanted
to resolve their trade dispute could still ask for a WTO ruling, but the
winner would be unable to enforce the ruling since an appeal from the
losing party would slide into legal limbo. That way, international trade
disputes may never see a resolution and could quickly evolve into tariff
wars. This agreement is a temporary fix for that scenario.

However, it wouldn't be the first time that a temporary patch becomes
permanent for lack of a better agreement.

It is also unclear how the new system would cope with disputes emerging
because of agreements with the United States, which will not feel bound by
it. For example, many trade experts — including the Commission itself —
believe China and the U.S. probably broke WTO rules with their "phase one"
deal which forces China to buy a certain amount of U.S. products, rather
than letting market forces decide.

An EU official said it was too early to say whether the EU would be able to
sue China under the new system for its agreement with Washington.

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

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