industrial subsidies

Race for WTO Director-General — additional material on Dr. Ngozi Okonjo-Iweala (Nigeria)

Today I review some other press articles about the candidates to provide additional perspective on important issues or the candidate’s approach to the position of Director-General if selected. Yesterday, I posted material about Dr. Jesus Seade Kuri. See August 31, 2020, Race for WTO Director-General – additional material on Dr. Jesus Seade Kuri (Mexico), https://currentthoughtsontrade.com/2020/08/31/race-for-wto-director-general-additional-material-on-dr-jesus-seade-kuri-mexico/.

There is no intention on my part to be exhaustive and the research has been limited to press pieces in English. Rather the intention is to identify information not addressed in my earlier posts that may be of interest to readers.

Today’s post looks at a few articles featuring Dr. Ngozi Okonjo-Iweala from Nigeria, the second candidate nominated.

  1. The Australian, August 17, 2020, Should WT address antai-dumping measures?, https://www.theaustralian.com.au/subscribe/news/1/?sourceCode=TAWEB_WRE170_a_GGL&dest=https%3A%2F%2Fwww.theaustralian.com.au%2Fbusiness%2Fleadership%2Fshould-wto-address-antidumping-measures%2Fnews-story%2F995b960b1de450c1d983f4aabeca2351&memtype=anonymous&mode=premium&nk=1fc9f182863545ef2c82ab30edd82766-1598966889

The summary of the article states that “Ngozi Okonjo-Iweala says the WTO should investigate whether Australia was inappropriately using anti-dumping provisions to keep out foreign steel.” I am not a subscriber to the Australian and so the information provided above is limited.

2. Nikkei Asian Review, July 13, 2020, Good listener or strong negotiator? WTO candidates make case for top job, https://asia.nikkei.com/Editor-s-Picks/Interview/Good-listener-or-strong-negotiator-WTO-candidates-make-case-for-top-job.

Ngozi Okonjo-Iweala

* * *

Q: How would you go about navigating reforms at the WTO amid a rise of unilateralism and U.S.-China trade clashes?

A: This is the topical question of the hour, the growing nationalism, the divide. But if you listen carefully, you find that there’s some intersecting interests. After all, the same big powers that seem to have a big divide are sitting across each other at the table and negotiating some deals. 

“The WTO should work with all members including the big ones to find out what are those intersecting areas — however small they may be — how do we begin to deliver to make the two sides see their common interests that we can work on and build trust.

“It will take time, it will be challenging, there’s no magic wand to it, but you need someone with the energy, the passion, who is not a quitter, and who can deliver and work with these powers and listen — listen to them, because sometimes they feel they’re not even listening to the big powers.

Q: Could you talk about your visions for reforms?

A: First, updating WTO rules to the 21st century to take account of 21st-century issues, such as e-commerce and the digital economy, such as climate change, the green economy and biodiversity and circular economy … the issue of women and trade and micro-, medium and small enterprise. Even technology, what technology is doing to supply chains.

“Then you’ve got to look at existing rules and see whether they are serving the purpose. There are some members who feel that some rules may be leading to circumvention and disturbing the balance of rights and obligations of members. Issues like special and differentiated treatment, which developing countries feel very strongly about [but] developed countries have a different view.

“The dispute settlement system is paralyzed. You cannot have a rules-based organization, which is the sole place where people can take their grievances and complaints, but rules are not being followed. 

“A third area I would mention is transparency and notification. Transparency is so vital to the multilateral trading system, and notification for businesses. If something is going to be done in a country,  businesses  need to know that you’re willing to take one action or another, otherwise they can’t function.

“The WTO has to start achieving more outcomes. If it doesn’t do that then people continue to see it as irrelevant. 

Q: How should the WTO address Washington’s complaint about China’s state capitalism and developing country designation?

A: Those are some critical issues that members will need to discuss and debate on. But let’s put it this way, we must make sure that all members of the WTO feel that the balance of rights and obligations for all members of the WTO is about a fair system. So, that’s why it’s important to listen to who feels it’s not fair and then restore that balance of rights and obligations that members need to undertake.”

3. Nairametrics, August 12, 2020, WTO Job: Okonjo-Iweala reveals how to resolve rift between US and China, https://nairametrics.com/2020/08/12/wto-job-okonjo-iweala-reveals-how-to-resolve-the-rift-between-us-and-china/.

“On healing the rift between the US and China, Okonjo-Iweala admitted that it is going to be challenging and not be easy. She said:

“‘Well this is not going to be easy, if it was easy, it could have been done a long time since. So it would be very challenging but it is not an impossible job. It is very clear that both the US and China have been helped and benefitted from the multilateral trading system in the past. Hundreds of millions have been lifted out of poverty. They have experienced shared prosperity in the economies and their countries.’

“The Nigerian candidate pointed out that it is important to remind the US and China of this shared prosperity. She then disclosed that she would listen to both countries to find out what really are the issues causing distrust among them. She said that she will not want to be involved in the larger political problems, but will rather separate the trade issues and focus on them and build this trust.

“Going further on how to settle their rift, Okonjo-Iweala said, ‘You need to begin to find areas where there can be confidence-building and trade. Building trust is not talking about it, you have to have areas where both can work together and agree and we have a golden opportunity in the fisheries subsidies negotiations that are going on now because the US is a party to it, China is a party, the EU, all other members.’

“‘It is a multilateral negotiation, so if they can sit around the table with others to negotiate this and have a successful outcome, that is one thing that will be shared in common between the 2. So that will begin to build confidence. Then reaching out both in the US and in China to talk to the policymakers, go where the decisions are made, talk to congress also in the US and begin to show the benefits of the system again.’

“She also said they will look at reasons why they need to work together because their rift may be causing negative externalities for other members. She is of the opinion that exposing all of these, working with them, and listening carefully will begin to build confidence.

“She believes that while achieving this will be difficult, focusing seriously on trade issues can create room for a breakthrough.”

4. P.M. News, August 4, 2020, Okonjo-Iweala: My priorities as WTO chief, https://www.pmnewsnigeria.com/2020/08/04/okonjo-iweala-my-priorities-as-wto-chief/.

“’I would be focusing, if I get the job, on the dispute settlement system. Because this is the fundamental pillar of the WTO,’ Okonjo-Iweala said.

”If you have a rules-based organisation, you must have a place where rules are arbitrated and that’s what happens with the dispute settlement system. So restoring that will be a top priority as well.’

* * *

“The candidate showed her confidence to ‘find a way to unlock the seeming division’ on the trade side, between China and the United States, underlining that finding areas of mutual interest and to build trust within the WTO trading system would be important.

“’Actually, if you listen to the two members, they have some things in common,’ Okonjo-Iweala added.

“’The dispute settlement system of the WTO is valued by both, they want it to reform, they don’t want it to disappear.’

“Okonjo-Iweala also noted that she hopes China will play the role of an economic growth engine in the current COVID-19 pandemic as it did during the 2008 global financial crisis.

“’I think the best thing China can do is to recover quickly. Because it’s one of the engines of growth in the world and it’s almost a quarter of world trade,’ she told Xinhua.

“’So if it recovers quickly, it means that it can help the rest of the world recover. So that’s the role I would see for China.’”

5. Financial Times, August 4, 2020, Leading WTO candidates back US bid for system reform, Amina Mohamed and Ngozi Okonjo-Iweala say American criticisms of over-reach are valid, https://www.ft.com/content/f4830e2b-df7b-474a-8104-6336992ca193.

Article also reviews Dr. Okonjo-Iweala’s view that the WTO should be taking a lead on COVID-19 and should take steps to see that the early introduction of export restraints on medical goods and medicines is not repeated.

6. Inside U.S. Trade’s World Trade Online, July 22, 2020, Nigeria’s candidate: Technical skill won’t solve WTO problems, https://insidetrade.com/daily-news/nigeria%E2%80%99s-candidate-technical-skill-won%E2%80%99t-solve-wto-problems.

Inside U.S. Trade has conducted interviews with each of the eight candidates. In its July 22 write-up of Dr. Okonjo-Iweala’s interview, the publication noted that Dr. Okonjo-Iweala would see who is behind on notifications and see if the problem is due to a lack of technical capability which is a real but solvable problem for many developing countries. For those with the ability to provide notifications but who haven’t, she would see what could be done including some proposals where “sticks” have been suggested to address non-compliance.

On U.S. concerns about China’s state-run economy, Dr. Okonjo-Iweala noted that the WTO doesn’t comment on Member’s economic systems but should address the consequences to the global trading system of different economic systems. She believes the WTO should start by establishing a definition of “public body” and look at improving rules on industrial subsidies and would urge the U.S., EU and Japan to table their proposal in that regard.

Conclusion

Each candidate has been very busy these last several months meeting with WTO Members both in Geneva and in capital (whether in person or virtually), talking to the media, doing events with academia and think tanks and others. The above additional materials on Dr. Okonjo-Iweala are a small sample of what is available online. The excerpts or summaries from the various publications have largely been limited to some of the key issues my previous posts have examined (appellate body reform, industrial subsidies, etc.).

Future posts will look at additional materials for other candidates.

Race for WTO Director-General — additional material on Dr. Jesus Seade Kuri (Mexico)

The eight candidates for the Director-General spot at the World Trade Organization have just eight days left in their efforts to get themselves known to the WTO Members before the phase three process of finding the candidate most likely to achieve consensus within the membership starts.

In prior posts I have provided a summary of statements made at the General Council meetings during July 15-17 and the press conferences that followed and then did a series of posts looking at each candidate’s publicly expressed views on four issues of importance drawing from the same two sources as well as a series of webinars hosted by the Washington International Trade Association and the Asia Society Policy Institute. See July 19, 2020, The eight candidates for WTO Director-General meet the General Council – recap of prepared statements and press conferences, https://currentthoughtsontrade.com/2020/07/19/the-eight-candidates-for-wto-director-general-meet-the-general-council-recap-of-prepared-statements-and-press-conferences/; August 10, 2020 [updated August 27],  The race to become the next WTO Director-General – where candidates are on important issues:  reform of the Appellate Body, https://currentthoughtsontrade.com/2020/08/10/the-race-to-become-the-next-wto-director-general-where-candidates-are-on-important-issues-reform-of-the-appellate-body/; August 13, 2020 [updated August 27], The race to become the next WTO Director-General – where candidates are on important issues:  eligibility for special and differential treatment/self selection as a developing country, https://currentthoughtsontrade.com/2020/08/13/the-race-to-become-the-next-wto-director-general-where-candidates-are-on-important-issues-eligibility-for-special-and-differential-treatment-self-selection-as-a-developing-country/; August 17, 2020, The race to become the next WTO Director-General – where the candidates stand on important issues:  convergence vs. coexistence of different economic systems; possible reform of rules to address distortions from such economic systems – Part 1, background on issues, https://currentthoughtsontrade.com/2020/08/17/the-race-to-become-the-next-wto-director-general-where-the-candidates-stand-on-important-issues-convergence-vs-coexistence-of-different-economic-systems-possible-reform-of-rules-to-address-dist/; August 19, 2020 [updated August 27], The race to become the next WTO Director-General – where the candidates stand on important issues:  convergence vs. coexistence of different economic systems; possible reform of rules to address distortions from such economic systems – Part 2, comments by the candidates, https://currentthoughtsontrade.com/2020/08/19/the-race-to-become-the-next-wto-director-general-where-the-candidates-stand-on-important-issues-convergence-vs-coexistence-of-different-economic-systems-possible-reform-of-rules-to-addre/; August 23, 2020 [updated August 27], The race to become the next WTO Director-General – where the candidates stand on important issues:  fisheries subsidies and e-commerce/digital trade, https://currentthoughtsontrade.com/2020/08/23/the-race-to-become-the-next-wto-director-general-where-the-candidates-stand-on-important-issues-fisheries-subsidies-and-e-commerce-digital-trade/.

Today I review some other press articles about the candidates to provide additional perspective on important issues or the candidate’s approach to the position of Director-General if selected. There is no intention to be exhaustive and the research has been limited to press pieces in English. Today’s post looks at a few articles featuring Dr. Jesus Seade Kuri from Mexico, the first candidate nominated.

  1. CNBC, August 26, 2020, China needs to make ‘a greater, clear contribution’ to solve trade disputes, WTO hopeful says, https://www.cnbc.com/2020/08/26/china-has-to-make-greater-efforts-in-trade-disputes-wto-hopeful-says.html.

The press excerpt from the interview states that Dr. Seade indicated that “China must make greater efforts to overcome trade disputes with its World Trade Organization (WTO) partners.”

“There are issues with China that China needs to make a greater, clear contribution to resolve those issues between them and everybody else.”

“He argued that there needs to be progress over a price mechanism and over technological differences, adding that in 19 years of membership, there have been 44 disputes initiated against China. ‘That’s a lot,’ he said, although he noted that ‘at the same time, China has been very engaged in many other respects.'””

The video interview of Dr. Seade on CNBC is available at the following link, https://www.cnbc.com/video/2020/08/27/china-is-very-important-to-the-wto-say-director-general-candidate.html.

2. Successful Farming (Reuters article), August 17, 2020, Time for Forceful Leader to Fix WTO, Not a “Butler,” Mexico’s Pick Says, https://www.agriculture.com/markets/newswire/time-for-forceful-leader-to-fix-wto-not-a-butler-mexicos-pick-says.

“To restore U.S. faith in the dispute resolution body that Washington accuses of overreach, he said members could consider a stronger supervisory mechanism to make sure the powerful appellate body did not stray beyond its mandate.”

3. The Jamaica Gleaner, August 11, 2020, Jesus Seade Commentary, Caribbean’s Place at the World Trade Organization, http://jamaica-gleaner.com/article/commentary/20200811/jesus-seade-caribbeans-place-world-trade-organization.

“POSSIBLE TO SUPPORT SVEs (small and vulnerable economies)

“Later on, during my time with the International Monetary Fund, the World Bank, and the WTO, I gained invaluable experience working with many Caribbean countries. From that involvement, I believe that it is possible to support SVEs with developing risk-management programmes and cooperative schemes to mitigate the impact of external shocks, supporting faster recovery, and promoting economic diversification. As the only candidate to have the honour of having served at senior positions in all three Bretton Woods organisations, I believe that I fully understand the intertwined interaction among trade, development, and finance and how comprehensive policies can solve problems in different areas.

“Back to the WTO. The organisation is facing important challenges itself. It has failed to achieve significant progress in much-needed negotiations since its creation 26 years ago, its Appellate Body is in a state of disrepair, and the organisation will now have to face the severe dislocation of world trade caused by the pandemic. Staying as it is now, the WTO will fail to offer the support SVEs need. The Caribbean, in particular, has been struggling in recent years with the weakness of global trade, compounded by the region’s economic dependence on the trade of a limited array of goods and services, and its fragility vis-à-vis climate change. Those issues require suitable flexibilities and support from the WTO. Moreover, they require the scaffolding that goes beyond stop-gap measures.

“As members recognise, there is a need to reignite our work at the WTO and engage in a true 21st-century agenda, with development at the core. In that sense, CARICOM will play a vital role in improving the WTO’s work on small developing economies, with emphasis on special and differential treatment. It is imperative to enhance the work at the councils and committees. Moreover, the WTO must invest more in training and technical assistance, possibly leveraging resources with assistance in kind from member countries and other partner agencies.”

4. Inside U.S. Trade’s World Trade Online, July 31, 2020, Seade: Transparency could help break WTO divide on industrial subsidies, https://insidetrade.com/trade/seade-transparency-could-help-break-wto-divide-industrial-subsidies

Inside U.S. Trade has done a series of interviews with the candidates for the WTO Director-General position. The Seade interview is summarized in the July 31 article cited above. Dr. Seade highlighted the potential importance of transparency in helping WTO Members forge a path forward on industrial subsidies and other issues.

There has been a serious concern by the U.S., EU and others on inadequate transparency of subsidy programs provided by some Members (including China and India) as is clear from counternotifications filed by the U.S. in the past.

The article indicates that Dr. Seade viewed the issue of industrial subsidies as “perhaps the most serious” one before WTO Members. As Dr. Seade has commented in other settings, it is up to those seeking changes in industrial subsidies (U.S., EU, Japan) to work with China to see what package of issues need to be addressed for China to be at the table.

5. Archyde, August 2, 2020, Candidate for the presidency of the WTO, Jesus Seade wants to revive international trade, https://www.archyde.com/candidate-for-the-presidency-of-the-wto-jesus-seade-wants-to-revive-international-trade/.

What do you propose to overcome the blockade of the United States which prevents the appointment of new judges to the Appellate Body (OA) and cripples the dispute settlement mechanism?

J. S. : These problems are not insurmountable. The United States complains not about the trade agreements, but about their interpretation by the AB. This is autonomous and must remain so. In order to move forward, I propose the creation of a supervisory committee of the OA, made up of five ambassadors and three lawyers. It is up to him to determine whether the appeals body is confined to applying the agreements or whether it has exceeded its powers. We could thus reassure the Americans and relaunch the WTO.”

6. CGTN, 24 July 2020, WTO ‘in a very serious situation’: Leadership candidate Jesus Seade urges reform, https://newseu.cgtn.com/news/2020-07-24/WTO-in-a-very-serious-situation-Leadership-candidate-urges-reform-SkWda4vrDq/index.html.

“He stressed that the WTO had to provide more space for new negotiations on international trade to adapt to the demands of contemporary geopolitics, especially the rise of emerging economies.

“‘Now you have major new players on the block. China was not a member; now, it is formidably important.’ 

“He warned that the WTO had to overhaul the ‘broken’ system for dispute resolution to accommodate such shifts. But in spite of its challenges and shortcomings, Seade described the organization as ‘a fundamental piece of global architecture.'”

7. Nikkei Asian Review, July 13, 2020, Interview, Good listener or strong negotiator? WTO candidates make case for top job, https://asia.nikkei.com/Editor-s-Picks/Interview/Good-listener-or-strong-negotiator-WTO-candidates-make-case-for-top-job.

Jesus Seade

Q: How do you see the situation of trade at this moment?

“A: I feel bad that an organization I helped to create is now in a situation that needs a serious fix. I think I can provide that fix.

“The crisis in the WTO is in good measure a crisis between the United States and Europe, not China, for dispute settlement.

“For Europe, the dispute settlement system had to be like a “court” who decides things and establishes jurisprudence, whereas the United States always wanted a more basic approach for facilitation of the solutions.

“The United States is very uncomfortable about how things have happened and has taken extreme measures, strong measures. That is why the appellate body now is no longer functional. So that’s a crisis as important as COVID or as differences with China.

“We need to fix that, urgently. It is a very complicated process it’s not one country versus another country. There are many parties in many aspects. This is a very complex crisis. That is why we need a real expert. 

“Q: How will you become the bridge between the U.S. and China?

“A: The United States and China are not talking. The director general has to get involved and lead the discussions. What they need is a strong personality, a strong leader to call them to discussions and be engaged on that discussion.

“For the [director general] position, you need to be a top trade negotiator. Because if you come from a background in finance and politics, you can have fantastic leadership and leadership is very important, but at the first difficult discussion between the United States and China, or between the United States and Europe, what will happen?

“I don’t think we should have a director general only encouraging [the parties] to discuss. He has to be part of that, he has to lead the discussion.

“Q: How would you enable the appellate body to function again?

“A: What I have in mind is taking measures that diverse countries — most of them, except the United States — have proposed, which is called the Walker Principles, a package of measures [put forth by New Zealand’s Ambassador to the WTO David Walker] that basically reinforce the measures that already exist. The United States is not rejecting the proposal, just saying that’s not enough.

“So what I’m saying is that I will propose those proposals and then two other measures I have in my mind that would have to be developed in detail, but the fundamental idea is already in my mind and would be additions to those proposals. I see no reason why Japan or the European Union or China would reject my extra proposals. What I hope is for the United States to say, ‘Ah! With those extra proposals maybe, this is going to be interesting,’ and then we’ll hear from the United States.

“It’s not a very complex thing because nobody — not the United States, not Japan, not Europe — nobody is saying that it’s necessary to change the dispute settlement understanding. I think there is something we should be able to solve in the matter of the weeks.”

Conclusion

Each candidate has been very busy these last several months meeting with WTO Members both in Geneva and in capital (whether in person or virtually), talking to the media, doing events with academia and think tanks and others. The above additional materials on Dr. Seade are a small sample of what is out there. The excerpts have largely been limited to some of the key issues my previous posts have examined (appellate body reform, industrial subsidies, etc.).

Future posts will look at additional materials for other candidates.

Continued Stress in U.S.-China relations — Reduced Cooperation in Multilateral Fora

The two largest economies in the world view each other as competitors and potential adversaries. With significantly different political and economic systems and ideologies, the United States and China have had different perspectives on commitments and obligations undertaken in the economic sphere.

U.S. concerns

Specifically, the United States has viewed its bilateral trade negotiations with China and the later conclusion of China’s accession to the World Trade Organization (“WTO”) as having created a commitment by China to continue on market-based reforms with the eventual conversion of the Chinese economy into a market-economy consistent with the basic rules of the WTO. There have been high level dialogues between the two countries for years with a feeling in the U.S. that repeated commitments by China to fulfill commitments have not been honored and that the bilateral relationship had growing serious problems.

China concerns

China has had a different view of the world and its obligations to other countries through its joining the WTO. Reforms continued for a while but were replaced with a growing focus on state direction, state investment and heavy subsidization of a widespread number of sectors. China has viewed the United States as attempting to prevent its economic growth and global role and as not respecting its “right” to view itself as a developing country within the WTO and hence to have fewer obligations than a developed country.

Trump Administration changes approach

Under the Trump Administration, the United States has taken a more aggressive approach to dealing with what it perceives as distortions in economic competition and lack of meaningful reciprocity in the bilateral trade relationship. The U.S. has also looked at bilateral and multilateral approaches to address the problems it perceives China has created and is creating with the functioning of the global trading system.

Bilaterally, the U.S. has conducted its 301 investigation on a host of longstanding concerns of the U.S. business community on Chinese policies and practices. The adverse findings from the USTR investigation has led to the U.S. imposing additional tariffs on Chinese goods when resolution of the underlying issues was not achieved followed by retaliation by China and a series of additional rounds of more tariffs and more retaliation. The U.S. and China did engage in negotiations to see if they could resolve the underlying concerns of the United States. A phase 1 agreement was signed in January 2020, with a phase 2 process supposed to have commenced by May.

At the same time, the United States has pursued reform at the WTO (1) to address longstanding and bipartisan concerns with the WTO dispute settlement system, (2) to address rule changes to address some of the distortions that flow from China’s nonmarket economy, (3) to modify the self-selection nature of which Members are “developing” and (4) to improve transparency.

On transparency, many countries are not current on the various notification requirements, but major concerns have existed with China and India in terms of the number and dollar value of subsidy programs that are not being reported in their notifications to the WTO.

Some of the reforms of interest to the United States are being pursued as well by others, such as the EU and Japan on state-invested companies and industrial subsidies and various other countries on transparency.

But the WTO has been struggling to achieve forward movement on many issues of importance to different Members in part due to lack of consensus on issues and a lack of leadership/coordination among major players.

COVID-19 Complicates the Bilateral Relationship

The COVID-19 pandemic has complicated the situation for the WTO and for U.S.-China relations both because of the global reach of the health problem resulting in reduced functionality of the Missions in Geneva and the current inability to hold face-to-face meetings and the widespread use of export restraints on medical goods (including personal protection equipment like masks, gloves, shields, gowns, etc.) as demand in nations with significant number of infections has grossly exceeded existing inventories and production capabilities both in country and globally.

In terms of U.S.-China relations, the lack of complete transparency by the Chinese in the early months of the COVID-19 outbreak, some slowness of action by the World Health Organization, and both missteps on testing and slowness of initial action within the United States (and resulting massive unemployment, costs to the economy and multiple trillion dollar government response) has added finger pointing on the pandemic to the already tense bilateral relations. It has also resulted in the U.S. distrusting the WHO and temporarily suspending U.S. funding for the organization.

With the collapse in global trade, the pandemic has also made it far less likely that China will honor its increased import commitments from the U.S. in 2020 as contained in the Phase 1 Agreement. See U.S.-China Phase I Agreement – some progress on structural changes; far behind on trade in goods and services, https://currentthoughtsontrade.com/2020/05/12/u-s-china-phase-i-agreement-some-progress-on-structural-changes-far-behind-on-trade-in-goods-and-services/. That said, the U.S. continues to identify important advances being made at least in agriculture with China. See https://ustr.gov/about-us/policy-offices/press-office/press-releases/2020/may/usda-and-ustr-announce-continued-progress-implementation-us-china-phase-one-agreement.

On trade, the pandemic has crippled the economies of many countries with the resulting declines in imports and exports in the March-April time frame and likely going forward for some period, though China as the first country through the outbreak and a major producer of medical goods actually saw increased overall exports to the world in April.

United States Strategic Approach to The People’s Republic of China

Earlier this week, the White House forwarded to Congress a document required by the 2019 National Defense Authorization Act, United States Strategic Approach to The People’s Republic of China. On the trade/economic front, the paper repeats the concerns that the Administration has laid out in other documents most of which are summarized above (not including the COVID-19 issues). The U.S. views challenges from China to three broad areas — (1) economic challenges (largely failure to continue reforms to become a market economy, failure to honor commitments made to the US, use of predatory practices, insistence on being a developing country, etc.); (2) challenges to U.S. values; and (3) security challenges. The link to the document is here and the text is embedded below. https://www.whitehouse.gov/wp-content/uploads/2020/05/U.S.-Strategic-Approach-to-The-Peoples-Republic-of-China-Report-5.20.20.pdf.

U.S.-Strategic-Approach-to-The-Peoples-Republic-of-China-Report-5.20.20

Challenges for the WTO

The WTO remains able to move forward where issues are limited to a subset (the “willing”) as progress on e-commerce talks would support. But in a consensus based system, distrust between major players will paralyze large parts of any agenda. Indeed, with the large number of WTO Members (164) at various stages of economic development, there will almost always be a wide divergence of views on any issue. In such a situation, leadership and cooperation among major economies become important to develop a consensus. So it is hard to see how the WTO advances a reform agenda without improved relations between the organization’s two largest Members.

With the recently added challenge for the WTO of selecting a new Director-General, the sour relationship the U.S. and China will likely make finding a candidate who would be supported by a consensus of the Membership that much harder, suggesting at a minimum a process that takes the full six-month time for selection (versus any hoped for expeditious resolution in light of DG Azevedo’s departure at the end of August) and perhaps extended time lines. If the selection process breaks down into highly polarized camps (the existing procedures were developed to try to prevent such an outcome), the ability to move forward the WTO’s reform and existing negotiating agenda will be delayed by certainly months and perhaps longer.

Conclusion

At a time when the world is struggling with a global pandemic which continues to cause huge health challenges to many countries in the world and has devastated the global economy at least temporarily, costing tens of millions of workers jobs, and likely closing hundreds of thousand of businesses around the world while requiring government financial support that will likely exceed ten trillion dollars, there is an unfortunate lack of global cooperation between the major economic players and distrust at least from the U.S. of multilateral institutions viewed as either ineffective to deal with China’s economic system or not operating in an unbiased manner.

A major part of the challenge flows from the distrust that exists between the world’s two largest economies that precedes the pandemic but that has been worsened by the pandemic’s development and handling. The two countries have different economic systems which are essentially non-compatible, have different political systems and different ideologies and view each other as competitors and potential adversaries.

In a change of approach, the United States has decided to take a more aggressive approach to achieve reciprocity in fact with China and not merely on paper or from spoken promises. The change in approach has resulted in the U.S. acting unilaterally in certain situations. China has appeared unable to understand or agree with the concerns raised by the U.S. (and others) and harbors a belief that the real motive behind U.S. actions is “to keep China down”. This mutual distrust has resulted in both hard feelings and an inability to achieve cooperation on a large number of trade, economic and other issues.

The current U.S.-China relationship increases the problems for many multilateral organizations, but certainly for the WTO both in terms of selecting a new Director-General and in developing WTO reforms and moving ongoing negotiations forward.

Look for a challenging second half of 2020.