Trump’s truculence on trade paying off? G20 backs WTO reform, sometime down the road

Despite criticism for the trade war with China, the US president appears to have backing of other world leaders seeking to overhaul the World Trade Organization, although WTO reform won’t necessarily go according to Trump’s plan.

Hammered out by diplomats behind the scenes as the leaders went for photo opportunities, the relevant section starts off by saying that “international trade and investment are important engines of growth, productivity, innovation, job creation and development,” before voicing unprecedented criticism of the WTO.

“The system is currently falling short of its objectives and there is room for improvement. We therefore support the necessary reform of the WTO to improve its functioning,” reads the text.

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According to what a senior official with the US delegation told Reuters, the statement was the “biggest thing” of the entire 31-point communiqué.
Formed in 1995, the WTO was supposed to usher in a new era of global trade by creating a level playing field for all participating countries, and leaving trade wars and protectionist tariffs in the past.

However, critics say that it may have in some cases distorted matters, as those who play by the rules put themselves at the mercy of countries that ruthlessly exploit its imperfections, or fail to provide transparency.

A common criticism is the self-assignment by a country of the status “developing,” as opposed to “developed,” the former of which attracts trading privileges. 10 of the G20 members, including some of the world’s biggest economies, continue to operate under that status, even as their income per capita has ballooned.

Another weakness is limited penalties for countries that violate WTO rules – for example by failing to open its markets to potential foreign competitors, or refusing to defend intellectual property rights.

Washington has long accused China of being the worst culprit on this score, and its resentment of the WTO falls in line with Donald Trump’s oft-repeated claim that advantage is often taken of the United States in the international arena.

But the most pressing US issues at present are concerned with purported overreach by the WTO’s Appellate Body, the top-level trade dispute court, similar to its resentment of other supranational legal panels.

In recent months Washington has moved to systematically paralyze it by blocking the appointment of new judges, leaving it with just one starting from 2019, meaning that the court can no longer make decisions.

While the White House will see the G20 point as proof that Donald Trump-imposed steel levies, affecting almost every country, and hiked tariffs on billions of Chinese goods, as well as other protectionist policies were more than just displays of impetuousness, a resolution does not appear close.

The EU has proposed its own reform plan, which the US has rejected in favor of its own terms, while developing countries are sure to contest any downgrading of their status dictated by the wealthy West.

For the moment, at least, the G20 appears to be content to kick the issue down the road, vowing in its statement to “review progress at our next Summit,” which will take place in Japan next June.

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