By Jacob M. Schlesinger in Washington, Paul Vieira in Ottawa and Emre Peker in Brussels
President Trump's complaints about the World Trade Organization
have prompted American allies to seek ways to overhaul the body
before the U.S. protest effectively cripples the global commercial
arbiter by the end of next year.
In the broadest such effort, Canada is hosting a summit opening
on Wednesday with a dozen other partners to build support for
changes addressing Washington's criticisms, including concerns that
the WTO doesn't do enough to publicize and penalize trade distorted
by government subsidies and weak intellectual-property protections,
practices seen as particularly common in China.
The Trump administration also complains the WTO gives too much
flexibility to developing countries to skirt rules applying to more
advanced economies, and has been too slow to update rules for
digital commerce.
Some of Washington's arguments resonate with other members. "If
the WTO is not reforming itself, it risks becoming irrelevant, and
that would be a disaster," the European Union's trade chief,
Cecilia Malmstrom, told reporters this month.
While the meetings are intended to accelerate the first serious
WTO restructuring debate in a quarter century, summit participants
don't expect decisions from the two-day session. That is in part
because neither the U.S. nor China -- the two largest WTO members
and the main protagonists in the tensions within the body -- were
invited. That leaves uncertain the question of whether the
slow-moving organization can reach consensus on changes demanded by
the U.S. at the pace the U.S. wants.
The members are working against an informal deadline of December
2019. That is when the WTO legal system will grind to a halt unless
the Trump administration lifts its veto blocking appointment of new
judges to the Geneva court mediating trade disputes among its 164
members.
Washington has used its veto power to cut the size of the
seven-judge court down to three members, the bare minimum needed to
hear a case. The terms of two of those remaining judges expire Dec.
10, 2019. If they aren't replaced, the WTO's "appellate body" will
effectively shut down, leaving the organization's
dispute-settlement powers in limbo.
Under that scenario, "every case potentially becomes a trade
war," Alan Wolff, a deputy director-general of the WTO, warned in a
recent speech. "The state of nature applies."
While Mr. Trump has periodically threatened to pull the U.S. out
of the WTO altogether, there is no sign he is planning to do so
anytime soon. But his criticism has lent a degree of urgency that
members say they haven't witnessed since the organization's 1995
founding. The U.S. was the driving force behind the WTO's creation
during the heyday of globalization, pushing for common, enforceable
rules governing international commerce.
Mr. Trump has repudiated the longstanding American establishment
consensus favoring commercial globalization, which he described at
a Texas rally Monday night as the "rule of corrupt power-hungry
globalists" who want "the globe to do well" and who don't "care
about our country so much."
For the past two decades, the U.S. has been the organization's
leading defender. WTO advocates say the body's ability to arbitrate
trade fights helped quell a Great Depression-like trade war during
the 2008 financial crisis.
His aides argue the WTO undermines American sovereignty and
treats the U.S. unfairly. They accuse the trade court of judicial
overreach, improperly tying Washington's hands in protecting
American companies from what they consider unfair foreign
competition.
The Trump complaints echo some made by earlier administrations,
albeit not as vociferously, and are shared in some form by U.S.
allies. As a result of pressure from Washington -- Mr. Trump's
"disruptively constructive leadership," as his WTO representative,
Dennis Shea, puts it -- a number of overhaul efforts have been
launched in recent months.
The EU and Canada have released their own blueprints for WTO
revision, and European Commission President Jean-Claude Juncker
signed a joint statement with Mr. Trump at a July White House
meeting pledging to "work closely together with like-minded
partners to reform the WTO and to address unfair trading
practices." Japan has been active as well, facilitating a joint
push to update global trade rules with the U.S. and EU on the
sidelines of a WTO gathering in December.
This week's Ottawa meeting will include a diverse range of
members, including Australia, Mexico, Kenya and Singapore. Canadian
Trade Minister Jim Carr said in an interview that his strategy was
to start the discussion with "middle powers," to "maximize the
chances of building up a critical mass that can be rolled out to
others."
Beyond the body's laborious decision-making process, another
challenge will be reaching consensus under current circumstances,
since a core U.S. demand is that the WTO unite in doing more to
brand illegal -- and punish -- many Chinese trade policies, a
position Beijing and its allies are unlikely to embrace.
Many countries "want to be middle-of-the-roaders when, in fact
they really need to pick a lane," Mr. Shea said in a talk this
month at the Center for Strategic and International Studies in
Washington.
Europeans reject that framing, stressing the need for Chinese
support. To that end, Brussels persuaded Beijing in July to work on
a separate WTO effort with the EU, positioning the 28-member bloc
as a potential arbiter between the two feuding titans.
"WTO reform cannot be done against this or that partner," an EU
trade official said. "We are in a privileged situation because we
are part of all these different processes."
The big question hanging over the WTO is just how hard a line
the Trump administration intends to take over the next year --
whether serious debate is sufficient to lift the judicial blockade,
or swift, concrete action is necessary.
"We're not going to kick down the road these substantive
concerns for several more years," Mr. Shea said. Asked if the U.S.
felt urgency to keep the WTO courts functioning past next year, he
demurred, saying, "We'll see."
Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com, Paul
Vieira at paul.vieira@wsj.com and Emre Peker at
emre.peker@wsj.com
(END) Dow Jones Newswires
October 23, 2018 17:43 ET (21:43 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.