U.S. Trade Representative Katherine Tai said recently that the U.S. continues to support the World Trade Organization but wants to see reforms to the organization that better position it to deal with the challenges posed by China.
In a speech at the Center for Strategic and International Studies in Washington, D.C., Tai reiterated that the U.S. “is committed to the [WTO] and its foundational goals and values” but said that in today’s “more challenging era – marked by rapid technological change, increasing extreme climate events, vulnerable supply chains, intensifying geopolitical friction, widening inequality, and spiking food insecurity—we all need a WTO” that is focused on those goals” and “fit for today’s economic realities.”
Reforms are needed to achieve this objective, Tai said, and the changes she said the U.S. is most interested in are designed to counter tactics employed by China since it joined the WTO in 2000.
One priority is to “rebuild the WTO’s ability to negotiate new rules for the new challenges that we face,” Tai said, such as “the massive global economic disruptions from non-market policies and practices that are contrary to the basic rules and norms that we all agreed to” as WTO members. Tools like “industrial targeting or discriminatory interventionist activities of state-owned enterprises” are being used by China to “dominate key industrial sectors, promote national champions and discriminate against foreign competitors, massively subsidize key sectors, and manipulate cost structures,” she said. When successful, these efforts “create supply chain concentrations and vulnerabilities—which in turn become levers for economic coercion,” a frequent U.S. complaint against Beijing.
Another longstanding aim of the U.S. is to reform the WTO’s dispute settlement function. Tai argued that this system “was meant to facilitate mutually agreed solutions” between WTO members but instead “has become synonymous with litigation.” It has also “suffered from a lack of restraint,” she said, asserting that the Appellate Body has “systematically overreached to usurp the role of Members themselves to negotiate and create new rules.”
The goal of reform is therefore “not restoring the Appellate Body or going back to the way things used to be,” Tai said, but “providing confidence that the system is fair.” To that end, the U.S. has suggested changes like making alternatives to litigation (e.g., mediation) real options for the entire WTO membership and ensuring that dispute panels address only what is necessary to resolve the disputes and “resist the urge to pontificate.”
With respect to issues the U.S. has with China specifically, Tai said dispute settlement changes should also include restoring “policy space” to allow WTO members to “regulate and find solutions to their pressing needs,” such as protecting against the non-market policies the U.S. consistently accuses China of utilizing. The White House also wants to correct WTO panel reports “that have asserted that the WTO may second-guess members’ legitimate national security judgements, something none of us ever intended.” The WTO has ruled against tariffs the U.S. imposed on imports from China based on national security grounds but U.S. officials have forcefully responded that the organization has exceeded its authority in doing so.
Finally, Tai called for improved transparency; specifically, more visibility into the laws and regulations each WTO member establishes that affect trade. She said one way to reach this goal is making it easier (e.g., by using new digital tools) for members to share their laws and regulations and for the public to search and view them. She also said that countries deliberately not honoring their transparency obligations (an accusation the U.S. has long levied against China) “are undermining the international trading system,” but she stopped short of calling for specific consequences for such inaction.
Tai said the U.S. wants to see progress on the reform effort by the WTO’s next ministerial meeting in February 2024 and that to achieve that goal members should be willing to “lock in progress on areas where we can agree, rather than continue to preserve an unsatisfying status quo until some theoretical point in the future when we all agree on everything.” However, a Bloomberg article said that “expectations for a breakthrough [at that meeting] remain low because the 2024 deadline falls during a US presidential election year and trade officials agree that the Biden administration would be hard-pressed to spend political capital to repair a system that’s failed to temper China’s worst trade abuses.”
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