[The W.T.O. fancies itself a United Nations for global commerce, a place where its 164 member nations convene to hash out clear rules of engagement, seeking to defuse conflict. But as the United States and China, the two largest economies on earth, edge closer to a trade war, the organization established in 1995 to prevent such hostilities appears increasingly impotent.]
By Peter S. Goodman
 |
|
President
Trump after signing a memorandum targeting Chinese trade on Thursday.
“These
unilateral actions may lead to an escalation of trade-restrictive measures,
ending
up possibly in some kind of trade war,” Roberto Azevêdo, the head of
the
World Trade Organization, said. “I’m significantly concerned.”
Credit
Doug Mills/The New York Times
|
GENEVA
— The handsome stone edifice
that serves as the headquarters for the World Trade Organization rises like a
fortress over Lake Geneva, projecting an air of impregnability. But lately the
institution looks vulnerable, sowing worries that global commerce itself may be
in jeopardy.
As the United States accuses China of
predatory trading practices while doling out unilateral punishment, the trade
organization tasked with preserving the peace appears marginalized.
The latest indication came on Thursday, when
President Trump effectively bypassed the trading organization in announcing
plans to impose tariffs on as much as $60 billion worth of Chinese imports,
from electronics to running shoes. By Friday morning, China was threatening to
retaliate with tariffs on some $3 billion worth of imports from the United
States.
Diplomats and trade officials said the
American action — if followed through — would flout W.T.O. rules, given that
the United States would be imposing tariffs without first adjudicating its
grievances. Chinese retaliation would similarly deviate from WTO rules.
The W.T.O. fancies itself a United Nations
for global commerce, a place where its 164 member nations convene to hash out
clear rules of engagement, seeking to defuse conflict. But as the United States
and China, the two largest economies on earth, edge closer to a trade war, the
organization established in 1995 to prevent such hostilities appears
increasingly impotent.
In an interview on Thursday, just before Mr.
Trump’s announcement of the tariffs on China, the body’s director general,
Roberto Azevêdo, expressed concerns that member states were taking matters into
their own hands.
“These unilateral actions may lead to an
escalation of trade-restrictive measures, ending up possibly in some kind of
trade war,” Mr. Azevêdo said. “I’m significantly concerned.”
Mr. Trump appeared to acknowledge on Thursday
that he was circumventing the rules-based trading system, asserting that the
W.T.O. “has actually been a disaster for us.”
“It’s been very unfair to us,” he said.
Yet, in a strange bit of cognitive dissonance,
the Trump administration at the same time declared plans to seek justice from
the body. The United States trade representative, Robert E. Lighthizer, said he
planned to file a new case at the W.T.O. to try to halt Beijing’s policy of
forcing foreign investors to transfer technology to China.
The administration’s China offensive followed
its decision to impose tariffs on steel and aluminum imports. On Thursday, the
administration significantly diminished the reach of those tariffs, exempting
many of its allies — not least, the European Union.
But diplomats in Geneva said the damage to
the global trading system went beyond the impact on metals, dealing a blow to
the foundations of the W.T.O.
The Trump administration has justified its
steel and aluminum tariffs by claiming that American national security is
imperiled by a dependence on imported metals. Trade experts have heaped scorn
on that claim, noting that the United States already produces more than
two-thirds of the steel it uses.
The Trump administration’s invocation of
national security broke with a deep-seated collective understanding that such
claims are verboten as justification for tariffs. Once one country makes such a
claim, the argument goes, others feel irresistible pressure to manufacture national
security worries to protect their own industries.
Trade disputes at the W.T.O. involving Russia
and Ukraine will almost certainly feature the invocation of national security
concerns to justify impediments to trade. The same goes for cases involving the
United Arab Emirates, Qatar and Saudi Arabia.
“It’s no longer unprecedented,” Mr. Azevêdo
said. “But I still believe this is not the best way to go.”
Quiet and orderly, Geneva is generally not a
place of drama. But recent weeks have generated anxiety and fear among the
bureaucrats and diplomats who make up the trade organization.
Many said Mr. Trump had effectively
downgraded the W.T.O. to an optional stop that can be skipped by countries
willing to break with rules and tradition in pursuit of self-interest.
Many assumed that Mr. Trump was using extreme
actions as a prelude to negotiation. They cited the fact that the steel and
aluminum tariffs initially were to apply to every steel producer on earth and
now apply to only a handful of countries, including China.
Diplomats and trade organization officials
acknowledge that the aggressive posture of the United States is in part an
outgrowth of a substantial failure by the W.T.O. to update its rules to contend
with China’s rise.
Back in 2001, when China gained admission to
the trade organization, it was supposed to be the beginning of a transformative
opportunity for the world. China would gain access to global markets for its
wares, while the rest of the planet would gain entry to China. Some argued that
China’s integration into the world economy would encourage its leaders to further
embrace market forces and eventually democracy.
In the years since, China has absorbed
staggering amounts of foreign investment — much of it from the United States —
erecting factories that have churned out products shipped to ports around the
world. But persistent impediments have limited the chances for foreign
investors to cash in.
China has forced foreign companies to engage
in joint ventures with Chinese counterparts while transferring technology to
China. Chinese state-owned companies have remained a central force in the
Chinese economy, securing sweetheart credit arrangements from government-owned
banks, cut-rate energy supplies and other subsidies.
China’s president, Xi Jinping, has used its
growing commercial might to redouble the power of the state, cracking down on
dissent.
Officials and diplomats now concede that the
notion that inclusion in the global trading body would encourage China to
embrace liberal values is a failure.
But the consequences of that failure are
sowing worries that the future of the rules-based trading system is on the
line.
The W.T.O. is the direct descendant of a
global trading pact reached at the end of World War II, fueled by the idea that
trade across borders minimizes prospects for war.
“If the member countries simply begin to take
matters into their own hands, disregarding all these principles, all these
concepts, we may be in a situation where the global economic environment could
deteriorate very fast,” Mr. Azevêdo said. “These measures tend to exacerbate
nationalistic sentiments. They tend to exacerbate intolerance.”
He fretted that the United States continued
to block the appointment of new judges to a W.T.O. appellate body that renders
judgment on trade disputes between countries.
The United States has long complained that
the process is slow and unfair, relying on archaic rules about fair pricing in
the global economy. But Mr. Azevêdo said the Trump administration had offered
no proposals for how to improve the process, while simply refusing to replace
judges whose terms expired.
“What is the point of having agreements if
there is no means of promoting enforcement?” he asked. “The appellate body
situation, if we don’t address it, could lead not now but in the future to a
paralysis of the dispute settlement mechanism. This would compromise the whole
system.”
