China among WTO members backing Canada’s alternate trade dispute scheme

As the U.S. continues to paralyze the World Trade Organization’s system for appealing trade disputes, 17 members of the trade organization announced Friday they will collaborate on an alternative initiated by Canada and the European Union to resolve complaints that emerge between them in the meantime.

The announcement was made on the sidelines of the World Economic Forum in Davos, Switzerland, where ministers representing like-minded trading partners have been grappling with how to proceed as a group, unless and until Americans’ concerns about the need for WTO reform can be resolved.

“We believe that a functioning dispute settlement system of the WTO is of the utmost importance for a rules-based trading system, and that an independent and impartial appeal stage must continue to be one of its essential features,” said the joint statement released Friday by the group.

The WTO continues to try to resolve disputes at its committees, and panels are still struck to review complaints and report back when member countries are alleged to have broken the rules.

But as of December, the WTO’s appellate body no longer has enough members to hear new appeals.

For the last few years, the United States has refused to agree to the appointment of any new adjudicators until its concerns about the existing process are addressed. Without a consensus among its members on how to proceed, the trade organization is paralyzed.

Canada’s complaint and request for arbitration with the United States over softwood lumber duties is among the cases now stalled.

Canada and the European Union first announced an interim arrangement for resolving trade disputes with each other last July. Now fifteen more countries have climbed aboard. They are:

• Australia.
• Brazil.
• China.
• Chile.
• Colombia.
• Costa Rica.
• Guatemala.
• Republic of Korea.
• Mexico.
• New Zealand.
• Norway.
• Panama.
• Singapore.
• Switzerland.
• Uruguay.

Many of these countries met in Davos this week as part of the WTO’s Cairns group: agricultural exporters who share the  common cause of wanting to liberalize trade barriers.

But the most significant player in this new alternative scheme may be China.

Temporary solution

Many of the American concerns about the WTO centre on complaints about whether the terms of China’s membership in the WTO are fair. But China has a reasonable track record of complying with the final decisions of the WTO’s now-paralyzed dispute resolution process.

Neither China nor the U.S. was part of the Ottawa group, a collection of WTO members that also held a working dinner in Davos hosted by Canada’s trade minister, Mary Ng, to continue talks on WTO reform that began under Canada’s leadership in 2018.

The door was left open to China and anyone else joining the broader conversation around possible solutions at an appropriate time.

Friday’s agreement now sets these countries on a path to being able to resolve future disputes with China, a dominant player in international trade because of its massive market size, manufacturing capacity and corresponding economic influence.

The statement characterizes this interim system as “contingency measures” to “allow for appeals amongst ourselves” when the findings of those panels are in dispute. It’s based on Article 25 of the WTO’s dispute settlement rules, which allow for multi-party interim arrangements.

The statement says it will be in place “only and until a reformed WTO Appellate Body becomes fully operational” and any other WTO members are welcome to join these already signing on.

‘Dramatic’ move on WTO reform coming: Trump

More work remains to determine exactly how the new appeals process will work and what arbitrators will hear its cases.

“We have also taken proper note of the recent engagement of President Trump on WTO reform,” the group’s joint statement said.

In his closing news conference before leaving Davos Wednesday, the American president told reporters that a delegation from the WTO’s directorate was visiting Washington next week or the week after, and portrayed these talks as a form of negotiation toward reform.

Because the organization isn’t top-down, but only proceeds based on negotiations between its members, it’s unclear any kind of deal could result, although it would allow the White House to communicate its concerns directly.

“We’re going to do something that I think will be very dramatic,” Trump said, without giving any indication what exactly he had in mind.

CBC