Trade ministers want reforms at the WTO

Trade ministers from the Group of 20 countries said that there was an “urgent” need to overhaul the World Trade Organization.

President Trump has threatened to withdraw the United States from the WTO over its lack of clarity in its operations.

Background

The WTO is the only international organization handling the regulations of trade between countries. As of 2017, there are 164-member states who have signed and ratified a number of multilateral treaties which cover sanitary measures, trade of services, intellectual property rights and so on.

Equal trading is ensured among all members through the Most Favoured Nation (MFN) clause. It requires a country to provide any concessions, privileges, or immunities granted in a trade agreement to one nation to all other World Trade Organization member countries. Thus, if one country raises import duties by 3%, all member states must increase duties on that state by 3%.  

To avoid the confusion that MFN status signified a special or exclusive relationship, U.S. legislators began using the term normal trade relations (NTR) in place of MFN in 1998. The United States extends NTR status to all nations except those who have had their status suspended by specific legislation.

The event in Mar del Plata was one of several issue-specific meetings taking place in Argentina ahead of a November summit meeting of G20 leaders in Buenos Aires.

Analysis

The statement by the G20 ministers after a meeting in Argentina was a tacit acknowledgement by world leaders that Mr. Trump’s criticism of the W.T.O. and his tariffs have significantly weakened the international trading system. Just two years earlier, when Barack Obama was still president, the G20 trade ministers, who represent countries including China, Japan and the United States, called on world leaders to further reduce barriers to trade.

Diplomats said they hoped to use the trade ministers meeting in Mar del Plata, a coastal city, to defuse trade tensions. “The fact that we are talking about the reform of the World Trade Organization means that we all agree that we need to have an organization that allows us to establish rules and allows us to work within the framework of international trade,” Jorge Faurie, the foreign minister of Argentina, said at a news conference.

However, details of the overhaul were not revealed, and it could be safe to assume that a structural reform of the WTO could take years to plan and execute. The United States and the European Union agree that the W.T.O. is dysfunctional, but they disagree on what should be done to fix it. The Trump administration has blocked the reappointment of judges to the W.T.O.’s dispute resolution panel, threatening to cripple it.

Then, the ministers agreed to “further work towards trade liberalization and facilitation.” There was no such language in Friday’s statement, a week after Mr. Trump threatened China with another round of tariffs.

The Trump administration broke with the longstanding international consensus on a free trade soon after Mr. Trump took office when G20 finance ministers and central bankers met in Germany. Most countries sent cabinet-level officials this week to the G20 ministerial meet, but the United States was represented by Dennis Shea, the deputy United States trade representative.

Assessment 

Our assessment is that the trade ministers in the meet were trying to overcome the negative impacts of the ongoing trade war by suggesting a possibility of serious reforms in the WTO. We believe that this statement was not made to counter Donald Trump’s claim of the WTO being biased against the US. We feel that the upcoming ministerial meeting to be held in June 2019 in Japan, will see more concrete recommendations for potential WTO reforms.