“The US-China Trade Disputes and the Future of Global Trade Governance”
Remarks of Alan Wm. Wolff, Deputy Director-General World Trade Organization (WTO)

World Knowledge Forum 2020 – Seoul, Korea – 17 September 2020

You have asked me to address in my opening statement the challenges facing the WTO and the role of the new WTO Director-General.  This is in the context of today’s topic: “The US-China Trade Disputes and the Future of Global Trade Governance”.  

The primary challenges to the WTO for the WTO reform effort are, broadly, three: 

  • improving the deliberative functions of the WTO to enable its Members to reach binding agreements on pressing problems,
  • arriving at an agreed binding dispute settlement system and
  • deciding how best to have the WTO Secretariat provide services to the Members and those engaged in commerce.

Underlying these topics is a necessary discussion on fundamentals – understanding the purpose of the system, identifying common ground shared by Members. 

Members are looking to a new Director General, due to be chosen within less than two months, to provide leadership, to bring Members together to achieve the necessary reforms, so that the system can better serve global commerce.

First, all should understand the value of what we have today.  Most of the world still trades on the basis of WTO rules.  The global economy weathered the Financial Crisis far better than otherwise because the WTO exists, and this has been true for the current pandemic, and will be true for the global recovery. 

Secondly, dispute settlement is still in use with a very substantial caseload, despite pronounced additional uncertainties as there is no longer a single dispute settlement system seen as legitimate by all.

Third, the highly skilled professionals in the WTO Secretariat have been serving the Members and world trade well.

The focus of today’s discussion as chosen by our host is “The US-China Trade Disputes and Future Global Trade Governance”.  Several observations are in order about the implied linkage between the strained relations between the two largest trading nations and the health of the multilateral trading system :

  • The challenges facing the WTO are not primarily a result of US-China trade frictions.  The near absence of major multilateral negotiated results pre-dated current bilateral trade frictions.  The differences between the two largest trading nations can certainly affect forging of a consensus in some negotiating areas and finding a resolution of the impasse over dispute settlement, but their differences were not the chief source of the problems that have arisen.  
  • For any two Members, it is not primarily their bilateral relationship that affects the world trading system, it is their individual relationship to the system itself.  By this I am referring to their investment in the system, the nature of their engagement —  what they propose at the WTO, what they agree to, and how they implement their commitments.  The trade policy choices made by any of the largest Members can and often do have a substantial impact on the global trading system. 

There are, of course, likely side effects on the trading system of strained bilateral relationships among the largest WTO Members:

  • Cooperation.   Any two of the largest WTO Members in trade terms not actively working together for the common good, to improve the system, can delay needed change.   
  • Substantive differences.  There are issues that are raised that involve the two more directly, such as differentiation for developing country status and approaches to subsidies disciplines.  These issues would not likely receive the emphasis they currently are receiving absent strong differences of views and interests among major parties. 
  • The risk of contagion. Another potential side effect, if major Members engage in exchanges of restrictive measures not explicitly sanctioned under the WTOs rules, there is at least logically a risk of emulation – that others might impose  unilateral measures with greater frequency.  This has not apparently occurred, presumably because the existing international order is seen as being in third countries’ interests.

There are four clear ways in which the WTO can be relevant to the trade conflict:

    • If the two reach agreement on a subject that has more general applicability, such as industrial subsidies, the solution can be tabled in Geneva for WTO Members to consider whether it should be reflected in the WTO’s rules. 
    • If they cannot reach a bilateral agreement, they can bring issues into the WTO for resolution through adoption of new rules negotiated among interested countries or all countries.
    • The two countries can and do file cases under the WTO’s dispute settlement mechanism.  This can occur wherever there is coverage under existing WTO rules. 
    • The new WTO Director General can offer to work with the two Members to mediate trade issues that they have with each other.

During the Cold War, the United States and the Soviet Union found areas of possible agreement.  The U.S. and China have, as all countries do, despite their areas of disagreement, areas of potential agreement.  Their working together with others would be a powerful source of forward movement for the WTO where they have shared interests.  Some possible examples:

  • The largest WTO Members have an interest in there being rules for e-commerce, although there will be strong divergencies. 
  • Both are committed to working to a positive conclusion for new disciplines on fisheries subsidies. 

Upon examination there could be a surprising number of areas of common interest.  Eventually, the two largest trading countries may find ways to strengthen the world trading system on which a substantial part of their economies rely.

Conclusion

As for the WTO, the demands are clear.  It is time to consider needed reforms, to bring to life the negotiating forum that the founders of the WTO envisaged, to find a way forward to a single agreed binding dispute settlement that all can support, and to strengthen the institution more generally.  The support of the largest Members along with their trading partners will be necessary to succeed.  Crises have in the past opened up new opportunities for making progress in building the world trading system and can do so now again.