WTO paralysed as leaders meet to defuse US-China trade war

As leaders of the world’s top economic powers seek to defuse tension over US President Donald Trump’s protectionist trade policies, they will search for common ground on reforms to end a crisis at the institution that was created to prevent economic disputes escalating into war.

The World Trade Organisation is on the verge of becoming dysfunctional, just when it is most needed to fulfil its role as umpire in trade disputes and as the watchdog of global commerce.

“If we continue along the current course, the economic risks will increase, with potential effects for growth, jobs and consumer prices around the world,” WTO Director General Roberto Azevedo said last week.

“The WTO is doing all it can to support efforts to deescalate the situation, but finding solutions will require political will and it will require leadership from the G20.”

The WTO has fallen victim to Trump’s trade war on economic rival China and the United States has put pressure on the WTO itself to reform.

Trump is unhappy with the WTO’s failure to hold Beijing to account for failing to open its economy as envisioned when China joined the WTO in 2001.

To force reform at the WTO, Trump’s team has blocked new appointments to the world’s top trade court, the WTO’s Appellate Body which is now rapidly running out of judges, meaning it will be unable to issue binding rulings in trade disputes.

If there are not enough judges, “disputes go into limbo,” former Appellate Body member Jennifer Hillman said. Trump imposed tariffs on steel and aluminium imports into the United States earlier this year. Those, and his tariffs on Chinese imports, have drawn retaliatory tariffs, and represent the kind of dispute the WTO was created to help resolve.

Numerous countries have filed litigation at the WTO to contest the tariffs. But if the WTO is unable to rule on them, Trump’s aggressive policies cannot be deemed to be illegal and could continue with impunity.