industrial subsidies

Katherine Tai, USTR designate, on addressing WTO reform including dispute settlement if confirmed; the USTR 2021 Trade Policy Agenda

President Biden’s nominee for U.S. Trade Representative had a hearing on her nomination before the U.S. Senate Finance Committee on Thursday, February 25, 2021. Written questions to the nominee were due to the Chairman of the Committee on February 26 by 5:00 p.m. Questions with answers were returned to the Committee by the USTR nominee on March 1. Ms. Tai will be one of three nominees who will be voted on by the Senate Finance Committee on March 3 at 10:00 a.m. See Reuters, Senate panel to vote Wednesday on three Biden nominees, including trade pick Tai, March 1 2021, https://www.reuters.com/article/us-usa-biden-nominations/senate-panel-to-vote-wednesday-on-three-biden-nominees-including-trade-pick-tai-idUSKCN2AT3K4?il=0; Inside U.S. Trade’s World Trade Online, Finance Committee to vote on Tai’s nomination on Wednesday, March 1, 2021, https://insidetrade.com/trade/finance-committee-vote-tai%E2%80%99s-nomination-wednesday (includes link to answers to questions from Senate Finance Committee by the nominee).

It is expected that Ms. Tai will receive an affirmative vote and be referred to the full Senate for a confirmation vote in the near future. It is expected that she will be confirmed by the Senate in the coming days.

I had reviewed the February 25th hearing in an earlier post. See February 25, 2021, U.S. Trade Representative nominee Katherine Tai confirmation hearing before the U.S. Senate Finance Committee, https://currentthoughtsontrade.com/2021/02/25/u-s-trade-representative-nominee-katherine-tai-confirmation-hearing-before-the-u-s-senate-finance-committee/. The 95-page compilation of questions for the record and Ms. Tai’s answers contains a little more explanation of her view of the approach of the Biden team on trade issues of importance to the WTO membership. Yesterday was also the day that USTR released the 2021 Trade Policy Agenda and 2020 Annual Report of the President of the United States on the Trade Agreements Program.

While the bulk of questions to Ms. Tai were on the U.S.-China relationship and a wide array of issues flowing from various Chinese practices, there were also a number of questions going to WTO reform and, in particular, on dispute settlement and the Appellate Body. There were also a series of questions on the U.S.-EU WTO disputes on Airbus/Boeing. There were also questions about U.S. actions that are subject to WTO dispute (though the questions didn’t focus on the WTO disputes) — Section 232 tariffs on steel and aluminum; Section 301 tariffs on large parts of imports from China. There were questions on the Environmental Goods Agreement negotiations which stopped in 2016 and whether plurilateral negotiations should be on a non-MFN basis. There were also several questions about the WTO Government Procurement Agreement and U.S. notification of its intent to withdraw coverage from certain medical goods. In addition most of the topics raised in the hearing were covered by specific written questions (e.g., USMCA enforcement, US-EU issues on digital services taxes, negotiations with the U.K., Kenya, CPTPP countries, market access issues with countries like India, Japan and others).

On WTO reform and problems with the WTO dispute settlement system, Ms. Tai’s responses indicate that the Biden Administration will be actively engaged in search for reforms. This is the first affirmative indication that the Biden Administration is likely to move past identifying the myriad problems with the dispute settlement system (something the Trump team identified with great specificity) to engaging in identifying reforms needed. Similarly, Ms. Tai’s response on the WTO disputes on Airbus-Boeing indicates the Biden Administration will be focusing on finding a negotiated solution with the European Union. Similarly, the Biden Administration will focus on enforcement of existing obligations our trading partners have at the WTO or bilaterally or plurilaterally. With China this means the U.S. will seek compliance through the WTO or through bilateral agreements (such as the U.S.-China Phase I Agreement) where there are specific commitments not being complied with, and the U.S. will seek through negotiations new rules where there is a lack of clarity in current agreements or lack of existing rules.

The 2021 Trade Policy Agenda looks at how trade policy can address core Biden Administration priorities — tackling the COVID-19 pandemic and restoring the economy; being worker centric; putting the world on a sustainable environment and climate path; advancing racial equity and supporting underserved communities; addressing China’s coercive and unfair economic trade practices through a comprehensive strategy; partnering with friends and allies; standing up for American farmers, ranchers, food manufacturers and fishers; promoting equitable economic growth around the world; and making the rules count (enforcement). While many of the Administration’s priorities from a trade perspective include areas for potential WTO action, the main discussion of WTO activity is in the partnering with friends and allies section. A three page fact sheet from USTR released yesterday provides a summary on the 2021 trade policy agenda and is embedded below.

fact-sheet-on-2021-Trade-Policy-Agenda-report

Senate Finance Committee Questions and Ms. Tai’s Responses dealing directly with the WTO or the US-EU Airbus-Boeing disputes

I have copied below the questions and responses that deal directly with the WTO or the US-EU Airbus-Boeing disputes. I include the name of the Senator asking the question. Italics (questions) and bold (name of Senator and answers of Ms. Tai) in the materials is from the original text.

Chairman Wyden

“Question 2 – Boeing/Airbus Dispute:

“As a longtime trade professional, you’re well aware of the history of the Boeing/Airbus dispute, a case that has spanned well over a decade. At the end of the WTO process, American businesses continue to be in an untenable position. The Europeans are continuing to subsidize Airbus to the detriment of U.S. competitors, while small American businesses—already suffering from COVID-related challenges—are facing extra tariffs on a variety of European products.

“The Boeing/Airbus dispute is just one “trade irritant” between the United States and Europe. There are numerous others—including digital services taxes, biotech authorization processes that aren’t based on science, and protectionist policies in standards development.

What’s going to change under the Biden Administration – and a USTR Tai – to ensure that Washington and Brussels can bring this dispute to a meaningful and timely conclusion? And ultimately, what would a positive outcome look like?

Answer: The Boeing/Airbus WTO litigation has been ongoing for more than 15 years. If confirmed, I will make it a priority to resolve this long-running dispute in a way that ensures Boeing and its workers can compete on a level playing field.

“Question 3 – WTO Reform:

“It was not always clear that the previous administration saw the value in the WTO. In contrast, the Biden Administration has pledged to work with our allies and re-engage in multilateral institutions like the WTO.

“That said, there has been bipartisan agreement that the WTO is in need of reform. There are numerous issues with the institution—from the lack of meaningful negotiations, to failure to comply with notification and transparency requirements, to ongoing concerns regarding the Appellate Body.

Where do you recommend the United States start in restoring the WTO to a functioning and useful institution?

Answer: If confirmed, I will work to re-engage with like-minded partners who similarly recognize the importance and necessity of WTO reform. Since the founding of the General Agreement on Tariffs and Trade (GATT) in 1947, U.S. leadership has been critical at every juncture when the global trade system has required a major update. This will be difficult work that may take some time, but I remain hopeful that with proper U.S. leadership, we can achieve the necessary reforms.

How can the United States support the incoming Director General, Dr. Okonjo-Iweala, in building consensus and ultimately ensuring that the WTO makes the needed reforms?

Answer: If confirmed, I will work closely with Dr. Okonjo-Iweala, following her own historic appointment, to tackle these challenges in a practical and constructive manner. Dr. Okonjo-Iweala brings a wealth of knowledge from her 25 years of experience at the World Bank and her two terms as Nigeria’s Finance Minister. She is widely respected for her leadership and management skills. The U.S. stands ready to assist her in building the consensus required to achieve the much-needed reforms.

Ranking Member Crapo

“Question 4:

“I have concerns about the power of technology companies. However, I am concerned that the EU is using such concerns as fig-leaf for discriminatory measures against U.S. businesses, including unreasonable digital services taxes or through measures that appear to target American companies in particular, like the Digital Services Act.

Are you willing to aggressively challenge these types of measures whether through use of Section 301 or through WTO dispute settlement?

Answer: The previous Administration started Section 301 investigations in response to the digital service taxes introduced by a number of countries, but it then suspended the introduction or implementation of specific remedies to allow time for negotiations. If confirmed, I will review the status of those actions and will work with my colleagues at the Treasury Department to address digital services taxes as part of the multilateral effort to address base erosion and profit shifting through the OECD/G20 process.

“Question 10:

“WTO reform is of great interest to many Members of this Committee. In particular, there are bipartisan concerns about overreach by the WTO Appellate Body. While I see some utility in second-level review, we need to ensure reforms that stop activism by the Appellate Body, including through rulings that have undercut our trade remedy laws and environmental conservation measures.

What are some concrete reforms that you think are necessary to ensure the Appellate Body operates as intended?

Answer: Over the years, the Appellate Body has overstepped its authority and erred in interpreting WTO agreements in a number of cases, to the detriment of the United States and other WTO members. In addition, the Appellate Body has failed to follow existing rules created to ensure that disputes are resolved in a timely manner. Reforms are needed to ensure that the underlying causes of such problems do not resurface and that the Appellate Body does not diminish the rights and obligations of WTO members.

“Question 12:

“I am deeply concerned about data localization requirements. The European Union attempts to be invoking privacy concerns in the WTO E-commerce negotiations as an excuse to allow it to engage in protectionist practices with respect to data.

Do you agree that that United States should not accept the EU’s proposed exception to allow countries to engage in data localization?

Answer: To participate in today’s global economy, U.S. companies need the ability to access networks, transfer data and use secure data centers of their choice. If confirmed, I commit to using the tools at my disposal to ensure that American workers and innovators are able to compete effectively abroad.

Senator Grassley

“Question 1:

If confirmed, how will you use the tremendous leverage the United States has to revitalize the WTO’s negotiating function so that the rules reflect the modern economy, including e-commerce?

Answer: The WTO negotiating function has failed to keep pace with changes in the global economy. WTO rules need to be updated to reflect developments that have unfolded over the past quarter-century, particularly in the digital economy. If confirmed, I commit to work with like-minded partners to ensure that any new rules are high-standard ones that reflect the Build Back Better agenda.

What reforms would the Biden Administration be interested in pursuing to WTO’s Appellate Body?

Answer: Over the years, the Appellate Body has overstepped its authority and erred in interpreting WTO agreements in a number of cases, to the detriment of the United States and other WTO members. In addition, the Appellate Body has failed to follow existing rules created to ensure that disputes are resolved in a timely manner. If confirmed, I commit to seeking a comprehensive range of reforms to address these shortcomings.

Do you think China should be accorded developing country status at the WTO?

Answer: If the WTO is going to succeed in promoting equitable economic development, it is critical that the institution rethink the ability of countries to self-select developing country status. The rules for special and differential treatment should be reserved for those countries whose development indicators and global competitiveness actually warrant such flexibilities; they should not be abused by countries that are already major trading powers.

“Question 7:

“The European Union is in the process of implementing legislation that will impose new EU antibiotic use restrictions on producers of animal products that export to the EU, a move that could cause serious disruptions. EU regulators are refusing to take into account relevant data from countries outside the EU or to consider use restrictions already in place in the U.S. and elsewhere, as required under WTO rules.

How do you intend to deal with this type of EU regulatory protectionism?

“Answer: I understand the importance of this issue. If confirmed, I commit to holding our trading partners to their WTO commitments with respect to sanitary and phytosanitary measures, the application of standards and other obligations that impact our agricultural exporters.

Senator Cantwell

“Question 4 – Boeing-Airbus Dispute/Europe:

“Aerospace has been a leading U.S. export for many years. The future of aerospace matters to U.S. jobs. There are more than 100,000 aerospace jobs in Washington state and before the pandemic there were even more.

“In 2006, the United States brought a case at the World Trade Organization (WTO) because Europe provided $22 billion in illegal subsidies for the development of Airbus commercial aircraft (A350 and A380).

“The Europeans countered with a case against the United States. The WTO ruled for the United States in 2012 and 2016 and for the EU in 2019. As a result of the WTO cases, the United States imposed WTO-approved tariffs of up to 25% on a range of products including European aircraft, wine and spirits, and dairy. The European Union still imposed tariffs of up to 25% on U.S. aircraft and a range of agricultural products including Pacific salmon, wine, wheat, and berries.

“The EU has kept sanctions in place even though in March 2020 Washington State repealed the tax provision that the WTO found to be out of compliance. Last year, the Trump administration failed to reach an agreement with the Europeans on commercial aircraft subsidies that would finally end the dispute and the tariffs.

“As it seeks to rebuild the transatlantic alliance, the Biden administration has a real opportunity to resolve this dispute, finally end harmful Airbus subsidies, and establish a level playing field for America’s aerospace industry.

Will you prioritize reaching an agreement on commercial aircraft subsidies to end European and U.S. tariffs and finally end the Boeing Airbus dispute?

Answer: The Boeing/Airbus WTO litigation has been ongoing for more than 15 years. If confirmed, I will make it a priority to resolve this long-running dispute in a way that ensures Boeing and its workers can compete on a level playing field.

Do you anticipate reaching separate agreements with the United Kingdom and the European Union?

Answer: The United Kingdom left the European Union on January 31, 2020. If confirmed, I look forward to working with the United Kingdom on a range of trade issues, including the disputes regarding Boeing and Airbus.

Will you commit to resolving the Boeing-Airbus dispute and tariffs prior to finalizing any U.S. – EU Trade Agreement or U.S. – United Kingdom Trade Agreement?

Answer: If confirmed, I will make it a priority to resolve this long-running dispute in a way that ensures Boeing and its workers can compete on a level playing field. I commit to working with Members of Congress on trade priorities with the European Union and the United Kingdom.

“Question 5 – Digital Trade/Europe:

* * *

What steps will you take to cooperate with Europe on addressing intellectual property and market access challenges in China?

Answer: While there are differences between the U.S. and the EU on some important issues, the U.S. and the EU share broad concerns about China’s unfair practices, including policies that in practice condition market access on technology transfer. It is a priority of the Biden Administration to work with our allies, including our European allies, to address the many challenges posed by China.

Will you re-engage on the WTO negotiations on e-commerce and will you make it a priority?

Answer: The WTO negotiating function has failed to keep pace with changes in the global economy. WTO rules need to be updated to reflect developments that have unfolded over the past quarter-century, particularly in the digital economy. If confirmed, I commit to work with like-minded partners to ensure that any new rules reflect the values of the Build Back Better agenda.

“Question 6 – Environmental Goods:

“Climate Change is a global challenge that no nation can solve on their own. For this reason, I appreciate President Biden rejoining the Paris Agreement so the U.S. can resume its role as a leader in reducing the world’s dangerous levels of carbon pollution.
Being part of the global solution on climate will also help ensure the U.S. has access to a rapidly growing trillion-dollar annual market that could create thousands of high-wage trade and manufacturing jobs in Washington state.

“But that market opportunity is currently constrained by a variety of tariffs that make environmental goods and services more expensive and less accessible then they should be, especially in the developing world where most future carbon pollution will come from.

“That’s why I think it’s imperative that we work to make it easier for all countries to adopt lower carbon technologies. Examples include goods and services that address air pollution control, renewable energy, water and waste management, environmental monitoring, and carbon capture and storage technologies.

“Ideally with America being the ones manufacturing and selling those technologies to the rest of the world.

“In 2001, the Doha Ministerial Declaration directed WTO members to negotiate the elimination of tariffs on environmental goods. In 2014 the U.S. and its global trading partners began negotiations on an Environmental Goods Agreement (EGA) under the WTO with the goal of eliminating tariffs on environmental products and services. That was a big deal, because the 46 WTO members negotiating that Agreement account for 90% of environmental goods traded worldwide. Unfortunately, discussions stalled in 2016 and were not pursued by the last Administration.

Ms. Tai, do you support the goals of the Environmental Goods Agreement?

Answer: Combatting climate change and developing green enterprises and jobs are key priorities for the Biden-Harris Administration. In July 2014, the United States and 13 additional Members of the World Trade Organization (WTO) officially launched negotiations on the proposed Environmental Goods Agreement (EGA) to eliminate tariffs on green technologies. If confirmed, I will pursue a trade agenda that supports the Biden Administration’s comprehensive vision of reducing greenhouse gas emissions and achieving net-zero global emissions by 2050, or before, by fostering U.S. innovation and production of climate-related technology and promoting resilient renewable energy supply chains.

As U.S. Trade Representative, will you seek to restart negotiations on this vital pact that could make the products we need to combat climate change cheaper and more accessible worldwide?

Answer: If confirmed, I will seek stakeholder input on the EGA and evaluate the agreement for its consistency with the Build Back Better agenda and its potential contribution to the Biden-Harris Administration’s goal of achieving net-zero global emissions by 2050.

Will you commit to looking into existing tariff levels with other WTO members to determine which countries have tariffs on environmental goods that differ or exceed corresponding US tariffs? And will you share that analysis with the members of this Committee?

Answer: If confirmed, I commit to working closely with you to identify barriers to reciprocal market access for U.S. producers of environmental goods.

Senator Cornyn

“Question 1:

“Since June 2018, certain American spirits exports to the EU and UK have faced a 25% tariff in response to the U.S. imposition of tariffs on steel and aluminum, and in connection with the WTO dispute concerning Boeing. Absent a resolution to the steel tariffs, the EU’s tariff on American Whiskey will automatically double to 50% in June. The U.S. has imposed a 25% tariff on certain EU and UK wines and spirits imports since October 2019 in connection with the WTO Airbus dispute. The negative impact of these tariffs are being felt across the U.S. from farmers, to suppliers, retailers, and the hospitality sector.

Will you commit to taking these views into account?

What is the Administration’s plan to negotiate resolutions to the various trade disputes with the EU and UK to ensure that these tariffs are quickly removed?

Answer: The purpose of WTO dispute resolution process is to ensure that other countries play by the rules so that our businesses, workers, farmers and ranchers can compete on a level playing field. Tariffs may be a tool to achieve these ends, but they are not the goal. The Boeing/Airbus WTO litigation has been ongoing for more than 15 years. If confirmed, I will make it a priority to resolve this long-running dispute in a way that ensures Boeing and its workers can compete on a level playing field and that takes into account all affected stakeholders.

“Question 8:

“The Biden Administration has announced its intention to increase government procurement of domestically manufactured goods and services. At the same time, the United States is a party to the WTO Government Procurement Agreement (GPA), which limits the United States’ ability to apply robust Buy America requirements to government procurement. Some have proposed suspending U.S. obligations under the GPA on a temporary, emergency basis to shore up critical domestic supply chains and spur economic recovery in the wake of the COVID pandemic.

What are your thoughts on such a concept?

Answer: It is the policy of the Biden-Harris Administration that the United States should seek to maximize the use of goods made in the United States for federal procurement and financial assistance awards, consistent with applicable law. If confirmed, I will work to ensure that our trade policy supports this goal.

Should the U.S. renegotiate any of its U.S. GPA commitments to ensure that the Administration can achieve its “Buy America” objectives?

Answer: As a part of its review of the implementation and efficacy of laws, regulations, and policies related to federal procurement, the United States should also examine procurements made under our trade agreement obligations to ensure that they serve the interests of the United States, its businesses and workers. If confirmed, I commit to undertake this review.

“Question 9:

“Both the Obama and Trump Administrations recognized the existence of serious deficiencies in the WTO dispute settlement process. WTO members have used the dispute settlement process to achieve what they could not achieve in negotiations, including the severe weakening of antidumping and countervailing duty laws. In addition, the Appellate Body has repeatedly failed to address China’s dangerous combination of government subsidies, state-owned enterprises and distortive non-market behavior. The United States needs to engage in serious and meaningful negotiations to resolve these issues prior to considering any reestablishment of the Appellate Body.

What are your plans for addressing the serious deficiencies in the WTO’s dispute settlement process?

Do you agree that the Appellate Body should not be revived until these problems are fully addressed?

Answer: If confirmed, I will re-engage like-minded partners who similarly recognize the importance and necessity of reform of the WTO, including its dispute settlement process. This will be difficult work, but I remain hopeful that with proper U.S. leadership, we can achieve the necessary reform that resolves our long-standing, bipartisan concerns.

“Question 10:

“Domestically produced steel is among the cleanest in the world.

How do you plan to ensure that the WTO cannot block or weaken the administration’s efforts to promote and expand markets for domestically produced steel?

Answer: If confirmed, I commit to examining any potential barriers to the expanding the exportation of domestically produced steel, including at the WTO, and working with Congress to address those barriers.

Senator Portman

“Question 3:

“In Choruses from the Rock, T.S. Elliot wrote of creating ‘a system so perfect that no one will need to be good.’ That sentiment might also be applied to the World Trade Organization (WTO), which despite having clear, agreed upon rules has found itself drifting from the obvious meaning of those rules. For systems, or organizations, to be sustainable they need active engagement and not just passive reliance on their underlying institutional architecture. One of the dilemmas facing the WTO reform agenda is the fact that the existing rules are quite clear, and yet the development of new rules may suffer from the same jurisprudential drift as the existing rules have.

Aside from tacking on a clause that says ‘and we mean it’ to a number of provisions in the WTO agreements, how do you believe new rules should be written to avoid the pitfalls that the United States has seen with respect to Appellate Body activism? And what mechanisms, if any, should be created to ensure that those who interpret such agreements remain faithful to the text of the agreement and neither expand or diminish obligations created by the agreement?

Answer: Over the years, the Appellate Body has overstepped its authority and erred in interpreting WTO agreements in a number of cases, to the detriment of the United States and other WTO members. In addition, the Appellate Body has failed to follow existing rules created to ensure that disputes are resolved in a timely manner. Reforms are needed to ensure that the underlying causes of such problems do not resurface and that the Appellate Body does not diminish the rights and obligations of WTO members.

“Question 4:

“The previous two administration have, on a bipartisan basis, blocked appointments to the Appellate Body (AB) of the World Trade Organization (WTO) over concerns about AB activism. Restoring the AB without addressing the underlying issues that sparked U.S. concerns would likely not be a sustainable solution to the problem of AB overreach.

How do you intend to approach issues related to the stalled AB? Do you believe that resuscitating the AB should come with reforms to guard against future overreach? What might some of those reforms be?

Answer: Yes, it is absolutely critical that any solution to the existing impasse be one that seeks to address the underlying problems, including longstanding concerns of overreach and jurisprudential drift. If confirmed, I will seek to work with other countries that share U.S. concerns about WTO dispute settlement to craft reforms to guard against such problems re-emerging in the future.

“Question 5:

“Last summer I introduced a bipartisan resolution, which articulated some proposed reforms to the World Trade Organization (WTO). One of those solutions is to pursue more plurilateral agreements without Most Favored Nation (MFN) requirements. This would allow the United States to pursue trade opening opportunities with like-minded nations while preventing those not party to the agreement from benefiting.

Do you agree about the value of non-MFN plurilaterals? If confirmed, do you intend to explore such arrangements with like-minded countries?

Answer: Given the negotiating challenges that the WTO has encountered in recent years, I agree that non-MFN plurilaterals need to be explored as a possible path forward. If confirmed, I commit to exploring the possibility of such arrangements with like-minded countries. Developing countries are hesitant to accept them, however, and getting these arrangements accepted within the WTO will not be easy.

“Question 21:

“For roughly the past two and a half years, the European Union (EU) and the United Kingdom (UK) have levied a 25 percent tariff on American whiskey imports in response to the United States’ Section 232 tariffs. These tariffs are set to double to 50 percent in June 2021. At the same time, the United States has imposed a 25 percent tariff on certain wine and spirit imports from the EU and UK in connection to the Boeing-Airbus dispute

How do you propose to solve the Boeing-Airbus dispute in order to ensure WTO compliance by the EU, while prioritizing the removal of tariffs on products such as American whiskey subject to 232 retaliation?

Answer: The purpose of WTO dispute resolution process is to ensure that other countries play by the rules so that our businesses, workers, farmers and ranchers can compete on a level playing field. Tariffs may be a tool to achieve these ends, but they are not the goal. The focus must be on the resolution of the issue that has been found to impact our industry and workers. If confirmed, I will make it a priority to review the status of this long-term dispute and seek a resolution that finally addresses the unfair practices found through the WTO process that disadvantage U.S. industry and workers.

“Question 22:

“The United Kingdom (UK) is no longer a member of the European Union. Yet, the UK continues to face Airbus-related tariffs. Since the UK cannot advocate for policy change in Brussels on this issue, and as a gesture of goodwill in the interest of bringing our countries closer together, these tariffs on the UK should be removed.

Do you believe that these tariffs should be removed from the UK?

Answer: The Boeing/Airbus WTO litigation has been ongoing for more than 15 years. If confirmed, I will make it a priority to resolve this long-running dispute in a way that ensures Boeing and its workers can compete on a level playing field.

“Question 23:

“Wheels of Jarlsberg cheese are produced in Ireland by a Norwegian company. These wheels are subject to a 25 percent tariff as a result of the Boeing-Airbus dispute. The same company makes loaves of Jarlsberg cheese in Ohio. The tariff on the wheels threatens the entire company and therefore the U.S. production of loaves. The last six-month statutory review of these tariffs did not benefit from public input, therefore did not account for the impacts on Jarlsberg cheese.

When do you plan to review the items that are subject to Boeing-Airbus tariffs, and will you seek public input? How will you decide what stays on the tariff list and what is removed?

Answer: If confirmed, I will work to make sure our trade enforcement actions consider the impact of tariffs on U.S. businesses and workers. When action taken under the Section 301 process leads to the imposition of tariffs on certain imports, USTR requests public input through a notice and comment period. This statutorily required practice will continue if I am confirmed as U.S. Trade Representative.

“Question 31:

“The World Trade Organization’s Government Procurement Agreement (GPA) opens up parts of the U.S. procurement market to other countries. Yet, the GPA is also a uniquely helpful model for bringing like-minded allies together on a plurilateral basis. In this way, the GPA can be both a limiting and empowering factor when it comes to restoring the resiliency of our supply chains.

To what extent do you intend to pursue changes to U.S. GPA commitments as part of the administration’s broader Buy American agenda?

Answer: It is the policy of the Biden-Harris Administration that the United States should seek to maximize the use of goods made in the United States for federal procurement and financial assistance awards, consistent with applicable law. As a part of its review of the implementation and efficacy of laws, regulations, and policies related to federal procurement, the United States should also examine procurements made under our trade agreement obligations to ensure that they serve the interests of the United States, its businesses and workers. If confirmed, I commit to undertaking this review.

“Question 32:

“In May 2020, President Trump signed an Executive Order directing the Food and Drug Administration (FDA) to identify essential medical countermeasures and require the U.S. Trade Representative (USTR) to withdraw coverage under U.S. trade agreements for these products. USTR has since notified the Government Procurement Agreement (GPA) Committee and our trade agreement partners of the intent to withdraw coverage for these medical countermeasures. This drew objections from some of our trading partners.

Do you intend to pursue this withdrawal of coverage?

Answer: As part of a review of whether our trade agreement obligations serve the interests of the United States, if confirmed, I will review the action taken to withdraw coverage of certain essential medical countermeasures from the Government Procurement Agreement and our trade agreements.

“Question 37:

“In 2018, China began to indulge protectionist impulses with respect to imports of certain waste and scrap paper. Just the other month, China banned imports of recovered paper. As you know, the United States has raised with China the inconsistency of China’s import restrictions on recyclable materials with World Trade Organization (WTO) rules. These new restrictions seem to likely to further constitute a violation of those rules.

Will you commit to looking into these new import restrictions on recycled paper, and work with domestic industry who has been affected by these restrictions? Do you see an opportunity to include these import restrictions on paper within the scope of any future negotiations with China?

Answer: If confirmed, I commit to engaging in a review of how trade policy can advance the development of the circular economy. As part of that process, I will engage in close consultations with domestic industry and Congress. Given the importance of China to these discussions at the global level, I would hope that China would be interested in active discussions with the U.S. on this matter.

Senator Brown

“Question 4 – World Trade Organization:

“As was discussed during Thursday’s hearing, many agree that it is past time for World Trade Organization (WTO) reform to ensure that both dispute settlement panels and the Appellate Body are not used as a venue for foreign governments and competitors to subvert the will of Congress and perpetuate unfair trade practices.

If confirmed, how will you approach WTO reform and how will you ensure that U.S. trade laws remain effective and are not weakened as a result of WTO dispute settlement proceedings?

Answer: If confirmed, I will work to re-engage with like-minded partners who similarly recognize the importance and necessity of reform of the WTO. Since the founding of the General Agreement on Tariffs and Trade (GATT) in 1947, U.S. leadership has been critical at every juncture when the global trade system has required a major updating. This will be difficult work that may take some time, but I remain hopeful that with proper U.S. leadership, we can achieve the necessary reforms. This includes reforming WTO dispute settlement to prevent diminishing the rights and obligations of countries to use their trade remedy laws to counteract unfair trade practices.

Senator Bennet

“Question 8:

“The Airbus/Boeing dispute tariffs are significantly affecting the Colorado small businesses. Restaurants in particular, which are already struggling due to the pandemic, are facing substantial costs on European food, wine, and spirits.

If nominated, what will be your first steps regarding the EU Airbus/Boeing dispute?

Answer: If confirmed, I will make it a priority to review the status of these long-term disputes and seek a resolution that finally addresses the unfair practices found through the WTO process that disadvantage U.S. industry and workers.

Will you work with a wide range of interests to understand the tariffs’ impacts on their industries, including restaurants?

Answer: The purpose of the dispute resolution process is to ensure that other countries play by the rules so that our businesses, workers, farmers and ranchers can compete on a level playing field. Tariffs may be a tool to achieve these ends, but they are not the goal. The focus must be on the resolution of the issue that has been found to impact our industry and workers. If confirmed, I will ensure that our trade enforcement actions consider the impact of tariffs on U.S. businesses and workers.

Senator Cassidy

“Question 4 – Sugar – WTO Quota Allocation Methodology:

“There have been indications over the past year or so that USTR and USDA are considering revising the methodology used by the United States to allocate our WTO sugar quota. This quota has traditionally been allocated in varying amounts to 40 countries based on a longstanding formula, with reallocations being carried out later in the fiscal year to account for nonperformance. While it is understood there may be some inefficiencies built into the current methodology, there are also elements to the arrangement that benefit the overall operation of existing sugar policy.

Can you provide your assurance that USTR will engage in thorough consultations with both USDA program managers and industry stakeholders regarding potential changes to the existing allocation process before any such changes are instituted?

Answer: If confirmed, I commit to consulting with USDA program managers and industry stakeholders before any changes to the current allocation process take place.

“Question 5 – Spirits:

“Since June 2018, certain American spirits exports to the EU and UK have faced a 25% tariff in response to the U.S. imposition of tariffs on steel and aluminum, and in connection with the WTO dispute concerning Boeing. Absent a resolution to the steel tariffs, the EU’s tariff on American Whiskey will automatically double to 50% in June. The U.S. has imposed a 25% tariff on certain EU and UK wines and spirits imports since October 2019 in connection with the WTO Airbus dispute. The negative impact of these tariffs are being felt across the U.S. from farmers, to suppliers, retailers, and the hospitality sector.

What are your thoughts on how this situation can be improved?

Answer: The purpose of the WTO dispute resolution process is to ensure that other countries play by the rules so that our businesses, workers, farmers and ranchers can compete on a level playing field. Tariffs may be a tool to achieve these ends, but they are not the goal. The focus must be on resolving the issue that has harmed has our industry and workers. If confirmed, I will make it a priority to review the status of these long-term disputes and evaluate the use of tariffs, including their impact on unrelated industries, to ensure U.S. trade tools maximize the benefit and minimize the cost for U.S. industries, workers, and consumers.

Senator Daines

“Question 4:

“As you know, many agricultural commodities have been targeted by the European Union with retaliatory tariffs due to disputes over Boeing/Airbus and other issues. In particular, Hard Red Spring wheat has been harmed by WTO sanctioned punitive tariffs on U.S. grown non-durum wheat. Until the Airbus/Boeing dispute is resolved, or the tariffs are lifted in negotiations, U.S. wheat growers will be at a disadvantage in the marketplace relative to competitors in Canada and elsewhere.

What steps can be taken to find a negotiated solution and put the respective tariffs on hold?

Other agriculture commodities have been impacted as well. Will you commit to working to lift these retaliatory tariffs?

Answer: The purpose of WTO dispute resolution process is to ensure that other countries play by the rules so that our businesses, workers, farmers and ranchers can compete on a level playing field. Tariffs may be a tool to achieve these ends, but they are not the goal. The Boeing/Airbus WTO litigation has been ongoing for more than 15 years. If confirmed, I will make it a priority to resolve this long-running dispute in a way that ensures Boeing and its workers can compete on a level playing field and that takes into account all affected stakeholders.

Senator Warren

“Question 1:

“The Covid-19 pandemic has been the worst public health crisis facing our nation and the world in over a century. Now that safe and effective vaccines are available, it is vital that all people around the world have access to vaccines and any future treatments for Covid-19. Unfortunately, the Trump administration put the profits of pharmaceutical manufacturers ahead of global public health. Too many people in low- and middle-income countries may have to wait years to get vaccinated because of the high prices being charged for Covid-19 vaccines, and an insufficient supply that is currently being bought up disproportionately by wealthy nations. No one should die because drug company profits are prioritized over the health and wellbeing of human beings.

“Countries that can manufacture pharmaceuticals should be given the opportunity to produce Covid-19 vaccines and treatments as quickly as possible in order to bolster global supplies and ensure equitable distribution. In October, South Africa and India proposed a temporary waiver of the WTO’s Trade-Related Intellectual Property Rights (TRIPS) agreement, to increase the global supply of COVID vaccines and treatments and save lives throughout the world. That proposal is now supported by a large number of low and middle income countries. Under the Trump administration, the United States was one of the wealthy nations working to block this emergency waiver.

Will you as United States Trade Representative reverse the Trump-era decision that is putting lives at risk, and instead support the TRIPS waiver so that Covid-19 vaccines and medications can be made widely available in low and middle-income countries?

Answer: Responding to the COVID-19 pandemic is the top priority of the Biden Administration. I recognize the critical importance of ensuring widespread access to life-saving vaccines, diagnostics, therapeutics, treatments, and other key products worldwide in order to counter the pandemic and enable global economic recovery. If confirmed, I commit to examining the TRIPS waiver proposal thoroughly to determine its efficacy in enhancing our global health security and saving lives.

“Senator Barrasso

“Question 4 – Sugar:

“The current world sugar market is highly dysfunctional, driven by production and trade distorting practices employed by nearly all sugar-producing countries.

“It is more important than ever that the United States maintain its current no-cost sugar policy which provides a stable and predictable economic environment for U.S. producers, an environment necessary for capital investments and long-run sustainability.

“How would you envision taking on a multilateral challenge like the reform of the global sugar market, and

Answer: If confirmed, any reforms I pursue regarding the global sugar market will be consistent with maintaining the current no-cost U.S. sugar policy.

Do you think the World Trade Organization (WTO) is equipped now, or can be made equipped going forward, to effectively address the underlying issues among all members?

Answer: WTO rules need to be updated to reflect long-standing agricultural issues that have not been rectified under the WTO’s current construction. If confirmed, I will work with like-minded partners to ensure that any new rules are consistent with U.S. domestic sugar goals.

The full set of questions and answers is embedded below.

USTR-nominee-answers-to-written-questions

Excerpts from USTR’s 2021 Trade Policy Agenda and 2020 Annual Report of the President of the United States on the Trade Agreements Program

The section of the 2021 Trade Policy Agenda dealing with “partnering with friends and allies” is copied below. However, other priorities correspond with priorities for major trading partners like the EU and with the priorities identified by the WTO’s Director-General Ngozi Okonjo-Iweala, including dealing with the COVID-19 pandemic and recovery, having trade play a role in addressing climate change, addressing China’s many trade distortive practices and more.

Partnering with Friends and Allies

The Biden Administration will seek to repair partnerships and alliances and restore U.S. leadership around the world. The Biden Administration will reengage and be a leader in international organizations, including the World Trade Organization (WTO). The United States will work with Director-General Ngozi Okonjo-Iweala and like-minded trading partners to implement necessary reforms to the WTO’s substantive rules and procedures to address the challenges facing the global trading system, including growing inequality, digital transformation, and impediments to small business trade. The Biden Administration will also work with allies and like-minded trading partners to establish high-standard global rules to govern the digital economy, in line with our shared democratic values.

“The Biden Administration will also coordinate with friends and allies to pressure the Chinese Government to end its unfair trade practices and to hold China accountable, including for the extensive human rights abuses perpetrated by its state-sanctioned forced labor program. In addition, the trade agenda will seek to collaborate with friends and allies to address global market distortions created by industrial overcapacity in sectors ranging from steel and aluminum to fiber optics, solar, and other sectors to which the Chinese Government has been a key contributor.”

The complete publication from USTR is embedded below.

USTR-2021-trade-policy-agenda-and-2020-annual-report

Conclusion

President Biden’s nominee for U.S. Trade Representative is likely to be confirmed in the coming days after being voted out of the Senate Finance Committee tomorrow. Her confirmation hearing before the Committee and responses to questions asked cover a very wide array of topics. But a significant number pertain to WTO reform including addressing distortions flowing from China’s state capital system and changing special and differential treatment away from self-selection, addressing the problems of the Appellate Body reviewed by prior Administrations including the overreach problem, working to resolve long running disputes (US-EU on Airbus-Boeing), getting results in the e-commerce/digital trade plurilateral negotiations, addressing the growing conflict over digital services taxes (although likely through the OECD/G20 process) and other issues. Her answers are consistent with the 2021 Trade Policy Agenda released by USTR yesterday and show strong interest in using trade policy to help address the COVID-19 pandemic and restore global economic growth, addressing the existential threat from a warming planet and other Biden Administration priorities. The Biden Administration, and Ms. Tai as the next USTR, will work with trading partners in the WTO to help restore relevance and hopefully create rules for the 21st century. Both the answers to questions and the 2021 Trade Policy Agenda should be good news for our trading partners looking at the future of multilateralism.

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.