Australian warning over Trump’s WTO bear hug

Australian warning over Trump's WTO bear hug

“As an outward-looking nation where one in five jobs depends upon trade, Australia benefits from the certainty that global trade rules give our businesses when they go out into the world,” he told The Australian Financial Review.

“We welcome discussions and encourage all parties to engage in good faith to ensure we have trade rules that deliver the benefits of liberalisation while being as fair for the smallest of nations as they are for the biggest.

“Australia remains committed to working with other WTO members to advance reform in the operation of the WTO, as well as the development of modern digital trade rules and new restraints on fisheries subsidies to improve economies and sustainability.”

Concessions and threats

To add to global trade skirmishing, the European Commission warned China and other large fossil fuel producers to find a way to price carbon at home or risk being hit by the EU with a planned carbon tax on imports.

Commission president Ursula von der Leyen laid out Brussels’ plan to hit importers from countries that do not respect international climate goals as part of an initiative designed to protect European businesses from “carbon dumping” outside the continent.

China is viewed as a developing nation. India is viewed as a developing nation … As far as I’m concerned, we’re a developing nation too.

— Donald Trump

Australian trade officials hope Mr Trump’s review will force the WTO to confront the reality of how big economies like China have emerged, and how and when they seek concessions.

They are also looking to see if Mr Trump can unlock reforms that breaks the impasse over the appeals body. Australia and other members have criticised Mr Trump’s use of the veto against appointing new judges.

Working against the possibility of substantive changes is the WTO’s consensus-based decision-making process, meaning reforms cannot just be driven by the US. “This isn’t like him pushing the deals through with China or Japan, it is much trickier to land an outcome,” one official noted.

Reform agenda

Crunch time for the reform agenda looms at the 12th WTO ministerial conference in Kazakhstan in June, with informal talks in Paris a month earlier.

Trade consultant Alan Oxley, a former chairman of the General Agreement on Tariffs and Trade, the WTO’s predecessor body, said there had been no significant advances in WTO rules for the past 20 years.

He said it was difficult to say whether Mr Trump could be successful in shaking up the body, partly because of the President’s personality, but also because Mr Azevedo relied on the support of the African bloc of nations, which generally opposed trade liberalisation.

“With Trump you have to be very careful about these off-the-top-of-the-head throwaways and where he ends up,” Mr Oxley said.

He said the US may be interested in joining a bloc of countries, including Australia, that have been trying to establish trade rules and standards on the sidelines of the WTO to overcome the body’s inertia. Digital trade and services were two such areas that could benefit from US attention.

“You can’t make that work unless you have the Americans in that,” he said.

Speaking at Mr Trump’s press conference, Mr Azevedo acknowledged his organisation was going to have to change, and “we are committed to effect that change”.

Mr Trump said Mr Azevedo would visit Washington “next week or the week after”, to discuss “a whole new structure for the deal – or we’ll have to do something”.

At a solo press conference later, Mr Azevedo emphasised that he was a facilitator of discussions between members, rather than a deal maker in his own right. But this only added to the surprise that Mr Trump had sought him out at Davos, where he described their relationship as “tremendous”.

The WTO boss tried to temper Mr Trump’s expectations. “I don’t think we’re talking about negotiating a package of reform … it is better to be pragmatic, and reform as deep as we can, when we can … instead of trying to negotiate a big package of reform, because we’ll spend decades negotiating the package,” Mr Azevedo said at his own press conference later.

However, Mr Trump didn’t hold back on the big-picture reform he wanted to see.

“The World Trade Organisation has been very unfair to the United States for many, many years,” he said, turning his sights on India and China’s formal status as “developing nations” at the Geneva multilateral body, which gives them access to advantageous concessions.

“China is viewed as a developing nation. India is viewed as a developing nation. We’re not viewed as a developing nation. As far as I’m concerned, we’re a developing nation too,” he said.

“They got tremendous advantages by the fact that they were considered developing, and we weren’t. They shouldn’t be. But if they are, we are.”

‘Very sensitive’

During a visit to the US last year, Mr Morrison used a major speech to say China should be classified as a “newly developed economy”. This would mean it would lose concessions in areas such as labour and environmental obligations, and be given less time to implement agreements.

The Chinese embassy in Canberra challenged Mr Morrison’s contention, saying it was “one-sided and unfair” and that the gap between rich and poor in China remained too great.

Mr Azevedo described the issue of China’s status as “very sensitive”. But he said his talks with the US were “a path that we [WTO members] all have to be on together if we want to make the WTO relevant and performing to today’s requirements”.

Asked by the Financial Review at his press conference whether Mr Trump’s brinkmanship had been effective in forcing the reform agenda, Mr Azevedo conceded the point.

“With this administration, the tone was raised, the actions were much more disruptive, in an attempt to make sure these complaints were taken seriously,” he said.

“I think members do take these complaints seriously, they are ready to negotiate and to find solutions, but we are not quite there yet.”

Mr Trump was more conciliatory about China bilaterally, reiterating his success in reaching a deal and the closeness of his relationship with President Xi Jinping.

He told CNBC earlier that the two countries “like each other again” and then said at his press conference that with the China deal out of the way it was now time to “work on” Europe.

“They [the EU] have trade barriers … they have tariffs all over the place,” he said. “They are frankly more difficult to do business with than China.”

He said he had a specific date in mind to close a trade deal with Europe – a “fairly quick date”, and before the November 3 presidential election. At the same time he told CNBC he would be “very surprised” if he had to implement tariffs on Europe.

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