WTO’s paralysis comes at the moment it is most needed to settle disputes

As the leaders of the world’s top economies seek to defuse tension over United States 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 de-escalate the situation, but finding solutions will require political will and it will require leadership from the G20.”

However, Trump is unhappy the WTO has not held Beijing to account for failing to open its economy as envisioned when China joined the body 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.

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 US 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, they cannot be deemed to be illegal.

The Appellate Body currently has the minimum three members it needs to function, and from December 2019 will be down to one. A backlog of cases going through the dispute settlement process means the metals tariffs are unlikely to be ruled on and appealed within that time frame.

The US metals tariffs caused a storm because Washington says they are based on national security concerns, making them exempt from WTO rules.

But other countries dispute the link to national security, and are challenging it at the WTO. They fear the same reasoning could be used to put import tariffs on cars and other goods.

Another dispute concerns the refusal by the European Union and the US to recognise China as a “market economy” whose goods are fairly priced by the market. They say Beijing’s involvement in the economy has created a steel and aluminium supply glut.

Chinese and US officials discussing ways to ease the trade tensions were making progress on Friday at the G20 summit in Argentina, a Chinese official said.

Finding solutions will require political will and it will require leadership

ROBERTO AZEVEDO, WTO