Trade Allies Press Ahead on WTO Changes Without U.S.

More than a dozen WTO members are set to meet in Ottawa on Wednesday in hopes of overhauling the global trade body. While the U.S. has typically been at the helm of such meetings, it’s not even invited.

President Trump and Canadian Prime Minister Justin Trudeau
AP Photo/Evan Vucci
Oct. 22, 2018, 8 p.m.

Just as long-simmering issues are coming to a head at the World Trade Organization, Canada and a handful of other members are working to overhaul international trade rules, banking on their hope that they’ll reach a consensus without the United States.

Canada is set to host a meeting of more than a dozen trade officials Wednesday and Thursday in Ottawa to hash out how to fix the WTO, the global-trade body created in 1994 to help unify rules and solve disputes between member countries.

Not on the invite list: the U.S. and China.

The United States’ absence is conspicuous for such a high-level meeting. But as the Trump administration has implemented rounds of tariffs on steel, aluminum, and a host of Chinese-made products, stymied the trade body’s appellate court, and threatened pull out of trade agreements, Canada appears to be stepping in to lead efforts to reach a consensus on reworking the WTO among countries that largely want to preserve global trade norms.

“What this looks like to me is that Canadians have at least taken on a bit of an organizing role,” said Phil Levy, a senior trade economist who served on President George W. Bush’s Council of Economic Advisers. “They don’t seem to be trying to push a particular proposal, but they’re recognizing there’s a serious issue here.”

By late next year, the WTO won’t have enough judges in its appellate court to reach a quorum. For years, judges have retired and the U.S. has blocked reappointing new members amid criticism that the body is unfair toward U.S. trade interests and won’t update its rules toward China. The body has three out of seven seats filled with another judge set to retire in late 2019, leaving the court inoperable. Without the appellate body, the WTO would be without a key instrument that grants it legitimacy in resolving international trade disputes.

Compound that with the escalating trade conflict between the U.S. and China, which is spilling into the WTO itself, and it makes for a sense of urgency to solve what has been long-simmering problems at the trade body, and hence, this week’s meeting.

Trade officials from Australia, Brazil, Chile, the European Union, Japan, Kenya, Mexico, New Zealand, Norway, Singapore, South Korea, and Switzerland will join Canada this week to search for solutions to some of the toughest issues plaguing the trade body: transparency, dispute settlements, U.S. tariffs, and Chinese industrial policies.

The U.S. is typically at the heart of these meetings, Levy said, and without a large economy at the center of the talks members are left looking for a coalition that can fill the space.

“The meeting is about the WTO, but it has to be seen in a larger context of President Trump's trade actions,” said Stuart Malawer, a professor of law and international trade at George Mason University's School of Public Policy. “My reading is that they are trying to get a handle of President Trump and his people, generally.”

U.S. trading partners are clashing with the Trump administration over its 25 percent tariff on steel and 10 percent tariff on aluminum imports. Days after the Canadian meeting is set to close, the WTO’s dispute settlement body is set to convene and hear complaints levied against the U.S. tariffs filed by China, the EU, Canada, Norway, Russia, and Turkey.

The move could kick off a years-long process in the WTO. The U.S. in turn has asked the WTO to review retaliatory tariffs imposed by the complainant countries.

The Ottawa meeting is likely to focus on an eight-page discussion paper Canada has been circulating to other WTO members spelling out goals for a reworked WTO.

“We know that the WTO is not perfect, but we know it’s good and we seek to make it better,” Canadian Trade Minister Jim Carr said at a Council of Foreign Relations event in late September. “So we’ve invited these like-minded nations from all over the world to see if we can’t come up with a consensus for reform that we will then roll out to other members of the WTO.”

First reported by Bloomberg, the paper is a rough blueprint of how to solve key issues dividing member countries, like overhauling the Geneva-based trade group’s dispute settlement system; modernizing rules for intellectual property, state-owned enterprises, industrial subsidies and other issues; and improving the efficiency of its trade monitoring.

The EU floated a similar set of proposals last month.

The Trump administration—which has threatened to pull out of the WTO—brushed off the Canadian effort and took credit for its “disruptively constructive leadership” spurring recent efforts to update WTO rules.

“I think the whole tenor of the paper is trying to be a more middle-of-the-road kind of approach and ‘let’s have more discussions, let’s start discussions,’” Dennis Shea, U.S. ambassador to the WTO, said of Canada’s proposal during an Oct. 12 event in Washington. “Yes, discussions are important, dialogue is important, but we need to get some actions in place.”

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