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WTO clings to signs Donald Trump still needs it -- sometimes


WTO clings to signs Donald Trump still needs it  --  sometimes

The administration of Donald Trump has derided the World Trade Organization as a "toothless" failure, but the Geneva-based body is still clinging to hope that Washington has not completely turned its back on the rules-based order of global trade.

While the US President's unilateral tariffs have ridden roughshod over the WTO's core principle of reciprocity in trade, diplomats argue that, behind the scenes, the administration is still fighting to preserve elements of the global system.

The US is, for example, actively supporting the WTO in its bid to save the "ecommerce moratorium" -- a 1998 agreement that stops tariffs being levied on digital exports, such as software, ebooks and other digital content -- which will expire in March next year unless an agreement can be reached between the WTO's 166 members.

To the surprise of many in Geneva, when the Trump administration brokered its recent reciprocal tariff deal with Indonesia last month, it also extracted a commitment from Jakarta to drop its opposition to the moratorium becoming permanent.

The US has also, since Trump returned to the White House, backed a recently proposed WTO agreement reducing harmful fisheries subsidies and is at least not blocking another pending agreement aimed at facilitating investment in developing countries.

"The US is taking an 'à la carte' approach to the WTO," said one European ambassador to the organisation. "They pick and choose, but that does at least mean they are still at the table."

Still, that is not to say anyone in Geneva is naive about the US's attitude to the WTO or the prospects for reforming an organisation that has become increasingly paralysed by internal divisions and the growing stand-off between the US and China.

In a speech last month, the US trade representative (USTR) Jamieson Greer lambasted previous US administrations for outsourcing US trade policy "to directives from unelected judges in Geneva".

Greer promised Trump's "America First" approach to trade would not allow the US to be constrained by global rules, but added: "Today, when people ask me about the WTO, I tell them: we have them right where we want them."

For the WTO's director-general Ngozi Okonjo-Iweala, the former Nigerian finance minister fighting to make the case for the organisation's relevance in the face of the US President's onslaught, all is not yet lost.

"The US still has one eye on the WTO," she told The Financial Times at the WTO's Public Forum in Geneva last month, an annual meeting of more than 4,000 bureaucrats, diplomats and businesses.

Ngozi cited Trump's decision to appoint a new ambassador to the organisation -- former USTR general counsel Joseph Barloon who is to be confirmed by the US Senate next week -- as further evidence of US engagement. The WTO has also quietly been removed from a list of international bodies that the administration is threatening to defund.

More importantly, she added, when Brazil filed a complaint with the WTO in August over Trump's unilateral 50 per cent tariff -- officially, a "request for consultation" -- the Trump administration did not ignore the challenge, but accepted it via the correct legal channels.

"That's a demonstration that the US is engaging, [that] it is accepting consultations from other members," Ngozi said, even though the WTO's highest enforcement body, the Appellate Court, has been moribund since 2019 because the US has refused to provide judges.

Diplomats and officials at the WTO also argued that Barloon struck a relatively constructive tone in his US Senate confirmation hearings in June, saying that while the WTO had "strayed from its founding purpose", he still believed the organisation had an important role to play.

"I certainly think that there is a role for the WTO dispute settlement system, particularly to gain access for our farmers and our businesses," he told senators.

In practice, there is widespread acceptance of the limits of US engagement, but diplomats from both small and large countries argue that whatever can be salvaged from the wreckage of Trump's assault on the system will have WTO agreements at its foundation.

"We're not going to have the WTO of 30 years ago -- or the WTO even of October 2024," Matthew Wilson, the WTO ambassador from Barbados, told a panel discussion at the Public Forum. "It's going to be difficult, sometimes extremely uncomfortable, but we have to do it with the US at the table."

What that means in practice will depend partly on Barloon's approach when he takes up his position later this year, although WTO officials and diplomats say there have already been challenging moments since Trump returned to the White House.

When WTO economists presented an assessment of the impact of Trump's trade tariffs for WTO ambassadors in May, the US delegation later made it clear it was "furious" at the decision to hold the session, according to three of those present. A US official said the US "engaged constructively" with the presentation, and sought "a balanced agenda that took into account long-standing trade disruptive behaviour by large players in the global economy".

The official added that US interests were "not reflected" in the final program and that US officials raised their concerns with senior WTO officials.

Businesses would certainly welcome a constructive relationship beneath the rhetoric.

Foundational texts such as the customs valuation agreement, which sets common standards for valuing goods before tariffs are levied, or the work of WTO committees, which adjudicate on so-called technical barriers to trade, remain hugely valuable, they argue.

"The WTO is a bit like JavaScript: if it's running smoothly in the background of your computer, then you don't see it, but as soon as you have a bug, the problems are very quickly apparent," said Philippe Varin, chair of the International Chamber of Commerce.

For Ngozi, the fight to preserve the core functions of the WTO rests on the organisation making reforms that will streamline decision-making and address the concerns of developing countries over fairness.

The hope is that Trump's jolt to the system might push world trade ministers to accelerate reforms when they meet next March in Cameroon for the WTO's 14th ministerial conference.

By way of encouragement, Ngozi notes that 72 per cent of global trade is still conducted on "most favoured nation" terms and that -- despite Trump's multiple provocations -- the rest of the world has not yet descended into tit-for-tat reprisals.

China's announcement last month that it would drop its claim to benefits available to developing countries in trade negotiations under the WTO was widely welcomed as an "important step" in gaining momentum for reforms.

"If three-quarters of something is functioning, people have to accept that there is a core of stability in the system. And so the WTO is very much working -- it is dented, I will say the trading system is dented, maybe bent, but it is working," said Ngozi.

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