WTO Director General Says Push for Reform Brings Rare Opportunity
The U.S. says the World Trade Organization is hobbled and Roberto Azevedo, the director general of the WTO, said the conversations around reform are gaining momentum. "I think we have a once-in-a-generation opportunity to renew the trading system," he said at a speech April 11 at the Peterson Institute for International Economics. "Inaction would compromise the relevance or even the existence of the system as we know it." Among the U.S. complaints about the international body are that the WTO's rules are inadequate for dealing with China's myriad subsidies and that countries can self-designate as developing countries, thereby avoiding concessions in negotiations.
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The Trump administration's willingness to hike tariffs on trading partners outside of antidumping structures has led to a huge spike in tariffs, on both U.S. imports and exports. Azevedo said these measures total $580 billion, which is seven times the amount of tariffs above most-favored nation (MFN) levels of 2017. The tariffs are slowing international trade, he noted. In 2017, trade grew by 4.6 percent; last year, it grew by 3 percent. He said WTO economists modeled how much a global trade war would cost the world economy -- he said it would cut global GDP by 2 percent, and the volume of trade would fall by about 15 percent, the same magnitude as in the Great Recession of 2008-2010.
Azevedo recognizes there's an "upsurge in anti-trade and frankly anti-foreigner sentiment" in many countries. While he believes more job losses are blamed on trade than should be, he said, "regardless of the causes, it is clear people feel left behind by the pace of economic change."
Some speakers before Azevedo gave WTO partial blame for the rise in trade tensions -- PIIE Senior Fellow Chad Bown said the WTO "largely wrote that [safeguard] tool out of the rulebook" after the Section 201 action on steel in the early 2000s, without explaining how it could be done differently and comply with international trading law. Bown said that led to Section 232 tariffs on steel, because AD/CVD has not been effective at combating the price pressures due to Chinese non-economic overcapacity.
Azevedo declined to project what implications the recent Russia national security case could have for pending challenges at the WTO to Section 232 -- except to say that the body does have the right to see if the tariffs were imposed "in times of war and other international emergencies."
He expressed optimism that the deadlock around appellate body appointments -- led by the U.S. -- will be resolved (see 1903140044). "Clearly no dispute mechanism is not an option," he said. "Clearly something will be figured out. I don't know what."