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WTO crisis: Cut Trump some slack

Ashutosh Pandey
Ashutosh Pandey
December 11, 2019

The US president should be blamed for many of the problems plaguing the global economy, but the current crisis is not one of them. He is simply treading the path of his illustrious predecessor, says DW's Ashutosh Pandey.

A symbolic representation of the impending trade war between the United States and the European Union
Image: imago/R. Peters

The World Trade Organization's Appellate Body — the supreme court for global trade disputes — has slipped into coma thanks to years of sustained assault by the United States on the judicial independence of the global trade arbiter that, ironically, it helped establish.

The Trump administration — a fierce critic of the WTO — has blocked the appointment of new members to the appeals court over the past two years. The administration's actions have left the crucial panel with just one member, two less than the minimum needed to hear a case. With the trade referee on life support, we can't rule out an outbreak of tit-for-tat tariff wars.

To be clear, the blocking of new judges predates Trump. His predecessor, a more amenable president, Barack Obama, did not shy away from intimidating WTO judges. Trump is just walking on Obama's footsteps, albeit with greater determination.

Ashutosh Pandey, DW Business
Ashutosh Pandey, DW BusinessImage: DW

The Obama administration infamously blocked the reappointment of South Korean judge Seung Wha Chang to a second term. Chang paid the price for making decisions that did not appease Washington. Earlier in 2011, the administration had refused to renew compatriot Jennifer Hillman's tenure, allegedly because she did not uphold US protectionist measures to the extent they would have liked.

Obama's actions and now Trump's just show that the US is not really interested in having an impartial arbiter; the WTO is good as long as the US — which has won a majority of the cases it has brought to the WTO — is not penalized. In October, Trump was elated when the WTO allowed the US to slap tariffs on European goods following a ruling that Europe unfairly subsidized aerospace company Airbus.

Read more: Airbus-Boeing WTO dispute: What you need to know

Opportunity in crisis

Washington's blocking strategy has hit the WTO where it hurts the most. The trade body, which has hardly produced any international trade pacts amid lack of consensus between discordant members like China, India and the US, has been relying on its dispute settlement system for a much-needed credibility boost.

The fact that the appeals court's decisions have irked the United States — the most powerful country in the world — shows how effective the panel has been in upholding rule of law in trade and keeping the "rule of power" at bay.

The current crisis should, however, be seen as an opportunity to reform not only the Appellate Body but the WTO as a whole. Not all US concerns are ill-founded and are worthy of discussion. But that would need the US to adopt a more conciliatory approach rather than an obstructionist one.

The WTO must act on the concerns surrounding China, which has seen its economy boom since it became a member in 2001. Beijing has for long hoodwinked the WTO members with its market-distorting state-driven capitalism. The trade body must also reform its classification method that allows countries such as China — the world's second-largest economy — and Singapore to enjoy concessions by classifying themselves as "developing countries."

The WTO should also speed up the process to come up with regulations to deal with the rise of new trends such as e-commerce.

The global trade arbiter is flawed, outdated but it remains our best bet to prevent us from returning to "the law of the jungle," especially at a time protectionism is on a rise. That is until we found an effective and a more amenable successor.

Ashutosh Pandey
Ashutosh Pandey Business editor with a focus on international trade, financial markets and the energy sector.@ashutoshpande85