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So as promised off I went to the annual World Trade Organization Public Forum in Geneva last week. Conclusions? Gloom about the institution, but more cheer about the actual state of globalization. >.) Once a cathartic venue for hand-wringing NGOs and then a quasi-research conference, the forum this year had lots of business folk around. Is its future as a junior Davos, both literally and metaphorically at a lower altitude than the original? Today’s newsletter first expands on an interview the Financial Times did with WTO director-general Ngozi Okonjo-Iweala and then examines an idea about how the middle-rank countries might save the institution. Charted Waters is on LNG exports.
And now my question for you, a very simple one indeed: how would YOU save multilateralism? Answers (10,000 words or less plus hand-drawn charts) to alan.beattie@ft.com.
Better to jaw-jaw than law-law
If you haven’t seen it, today’s write-up by my FT colleague, the great Andy Bounds, of our interview last week with Okonjo-Iweala is here. Her desire to agree on a common framework for carbon pricing is a noble if rather ambitious aim. Part of her motivation, as she says, is that the WTO will have difficulty taking the strain if carbon tariffs such as the EU’s CBAM end up being litigated through the organisation’s dispute settlement system.
“We see [litigation] coming. We think it will be quite difficult and problematic. So we’re trying to avoid that by saying why don’t we develop a global framework that is interoperable? ”
Better to jaw-jaw than law-law, to adapt something Winston Churchill didn’t quite say. It might seem paradoxical that the head of an organisation is worrying about the one function that is still largely working, but it’s better not to test it to destruction. These days, the WTO strategy is to expand into a softer, more deliberative and consultative mode.
More than one WTO director-general has worried that dispute settlement is asked to do too much. Okonjo-Iweala’s predecessor, the Brazilian Roberto Azevêdo, warned it was risky to bring cases questioning member governments’ rights to invoke national security to justify otherwise WTO-illegal acts.
Better, he said, to negotiate a trade-off between security and trade. Needless to say, that didn’t happen. Governments brought cases against the US over Donald Trump’s “national security” steel and aluminium (aluminum, whatever) tariffs, they duly won favourable rulings, the US duly ignored the rulings and neither global trade nor the rules-based system was better off.
The WTO is likely to face a similar if less acute problem over carbon tariffs. India, the leader (and if necessary prepared to be the only member) of the WTO awkward squad, doesn’t like CBAM and is threatening a case. But Delhi flat out refuses to negotiate over the environment at all in the WTO. And if not the WTO, where is this conversation about interoperable carbon frameworks going to happen? The OECD is a rich countries’ club. The UN is hopelessly unwieldy and doesn’t have enforcement mechanisms. The IMF, despite its pretensions, is not in fact a centre of expertise on climate change.
I wish this idea luck (so many observations in the WTO field start “I wish this idea luck”) but the most likely way we get a global carbon price is still protracted CBAM litigation rather than calm conversation.
The middles against both ends
So who is going to rescue the multilateral system in general and the WTO in particular? Let’s face it: not the US, where distrust of the institution is visceral and bipartisan. Not China, widely regarded as having a great deal of hard power but not much soft.
One group of candidates is what Peterson Institute president Adam Posen, who spoke on a panel at the forum last week, calls the “third nations” beyond the big two, including big associations (the EU) and smaller countries (Singapore, Kenya).
Relatedly, though not precisely the same, some talk of the role of the “middle powers”, relatively small open trading economies who may belong to overlapping blocs and alliances but who value multilateralism for keeping the wider trading system open: Australia, Chile, the UK, South Korea, Malaysia, perhaps Turkey, perhaps Vietnam.
The idea here is not so much that these countries all gather together behind a giant battering ram to unblock the WTO by pushing the US and China out of the way — though Posen notes that if Washington and Beijing can neither lead nor follow, getting out of the way is the best thing they can do. It’s that they keep as much of the multilateral system — dispute settlement, plurilateral and sectoral agreements — going as possible and in general co-operate as much as they can.
I wish this idea luck (see, there it goes again) but some of the obstacles are formidable. One is India. The US may be sceptical of some of the WTO’s functions but is relatively happy to let them go forward. India is following a classic dog-in-a-manger tactic of trying to stop other governments’ plurilateral agreements coming under the WTO umbrella.
The other is the influence the middle powers remain under from the US and China, which are fighting a battle for influence against each other through the trading system. Canada regards itself as an open progressive trading nation with a strong commitment to multilateralism, but it has adopted almost certainly WTO-illegal tariffs on Chinese electric vehicles at a snap of Washington’s fingers.
And taking a middle way between the giants doesn’t necessarily mean multilateralism. Indonesia (the original non-aligned country during the cold war, as it happens) has played off China against the US to get its nickel industry developed, but in doing so used export controls which miffed the EU, leading to a successful case at the WTO.
Still, in a system short of inspiration, the third nations/middle-powers idea is at least a constructive attempt to move forward. There’s certainly a lot of co-operative and multilateralist sentiment around that’s not being maximised. I’ll keep an eye on progress.
Charted waters
President Vladimir Putin’s invasion of Ukraine has certainly had one galvanising effect on the world economy, and that’s the increase in LNG production from a variety of sources to reduce reliance on Russia.
Trade links
The FT reports that the EU has rejected a Chinese offer to hold off the electric vehicle anti-subsidy tariffs in return for a commitment to maintain minimum prices across a number of products, reminiscent of the EU’s negotiations with Chinese solar panel producers a decade ago. However, Brussels signalled willingness to keep working on a negotiated settlement.
Speaking of China and tariffs (and more tactics from earlier decades, in this case the “tariff-jumping” of the 1980s), a bunch of middle-income countries have put import duties on imports from China, often combined with a desire to see Chinese companies invest directly in their economies.
Speaking yet more of China, the IMF research department must by the toast of Beijing right now after publishing a paper arguing that macro imbalances rather than subsidies and industrial policy are driving China’s surpluses and the US’s deficits.
Sam Lowe of the Most Favoured Nation newsletter courageously takes on the Twitter- and Bluesky-famous fashion commentator Derek Guy (aka the “menswear guy”) on the question of whether Trump’s tariffs on Chinese imports necessarily feed through to the cost of a suit sold in an American store.
Trade Secrets is edited by Jonathan Moules
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