Wto: how Brussels means to sidestep Trump's vetos

The connection between trade and security is the basis of each geopolitical balance and the response to the logic of power relations: only the EU can re-launch the WTO

U.S. President Donald Trump attends a dinner with business men and CEO's during the World Economic Forum (WEF) annual meeting in Davos, Switzerland, January 25, 2018. REUTERS/Carlos Barria
U.S. President Donald Trump attends a dinner with business men and CEO's during the World Economic Forum (WEF) annual meeting in Davos, Switzerland, January 25, 2018. REUTERS/Carlos Barria

"When goods do not cross borders, soldiers will" warned the French 18th century economist Frederic Bastiat, a strenuous opponent of all forms of protectionism. The attack on two oil tankers in the Hormuz Straits which in the middle of June rekindled the clash between the United States and Iran after Trump's withdrawal from the Iranian nuclear accord proves that Bastiat's predictions were by no means academic and are now being dramatically borne out by reality. After all, the extremely close connection between trade and security is what all geopolitical equilibriums between states are based on and the history of the European Community provides living proof.

It's still too early to say whether the new doctrine promoted by the American president against the other two major global trading powers, meaning China and the European Union, will lead to an armed conflict, but it has to be said that all the theories that up to yesterday supported free trade and multilateralism as an answer to inequality and relations based on power mongering have recently taken a hit.

Yet one has to admit that the World Trade Organisation (WTO), which as a result of the Bretton Woods agreements was meant to oversee the rules governing world trade, was in trouble well before Trump turned up. If he were still alive, the Italian Ambassador Renato Ruggiero, first director of the World Trade Organisation in Geneva, would have had no doubts: it's up to the European Union to pick up the slack on behalf of the organisation and provide the necessary answers to overcome the current stalemate.

Not that the current director, the Brazilian diplomat Roberto Azevedo, who has been confirmed for a second mandate until 2021, doesn’t have the technical competence to manage the current crisis, but it is a fact that since 1995, the date when it first arose out of the ashes of the GATT, this is the first time that the WTO seems almost condemned to becoming dangerously irrelevant. Even in the memorandum of understanding between Italy and China related to the new Silk Road it was suggested that any trade disputes between Rome and Beijing be settled through bilateral arbitration. Thus bypassing the dispute settlement mechanism foreseen by the WTO.

Nor has there been a dearth of official statements backing the action and role of the WTO. The G7 in Canada and the G20 in Argentina in 2018 both supported the reform process to allow equal opportunity of access to trade operators. The same was done at the G20 in Osaka at the end of June and the same will be voiced, almost certainly, at the end of August, at the French G7 to be held in Biarritz. But the European Union and the European members of the WTO are not helpless. They are the ones who hold the cards that could revive the organism based on the document issued by the European Council of 28-29 June 2019, which discusses the issues of subsidies, State companies, market access, tariff barriers and the protection of intellectual property.

More specifically the EU commission is promoting a form of "flexible multilateralism". If the impossibility of multilateral outcomes on certain issues is established, pluri-lateral discussions are to be foreseen among a "coalition of the willing" with variable compositions, capable of working towards multilateral agreements. The Commission also intends to overcome the current crisis of the Appelate Body of the Dispute Settlement system, which sees the number of standing adjudicating members down from 7 to 3 (minimum number) owing to the failure to replace members caused by the US veto, with the risk that the Organism could be paralysed as of December 2019, when the mandate of two other judges will expire. The Commission aims to unblock the appointments, by increasing the efficiency of the procedures and, more in general, by suggesting that bilateral understandings be reached among all the OMC members involved, so that a second degree of judgement of current and future disputes can be put in place while the solution to the Appelate Body crisis is found.

But it's not just the Trump variable that's weighing down on the crisis of the WTO. The crisis had already come to a head in the ministerial meeting of December 2017 in Buenos Aires which certified a stalemate resulting from the failed transposition of the Doha Agenda of 2001. A risk of irrelevance for the organism that currently threatens all the ordinary administrative and monitoring activities on multilateral and pluri-lateral agreements and the Dispute settlement mechanism, the pillar safeguarding member state  compliance of their trade commitments. And all this does not take into account the unresolved issue of the disparity between developing countries which are calling on the WTO to "repair" the injustices suffered and the industrialised countries, that are keen to extend the Geneva regulations to the new rapid growth sectors such as e-commerce, service sector regulation and small and medium sized enterprises, all issues on which Italy has backed the commitment of the European Union.

And as for Italy, our country, despite only negotiating through the EU Commission as intermediary, has always supported "inclusive and transparent" discussions in order to bolster the clout and relevance of the WTO in restricting the growing protectionist tendencies.  For Italy the priority is to shore up the organism's powers for dispute settlement with the appellate mechanism in operation and based on the independence of judges, with China also being involved in this process. Our country intends to contribute to the negotiations on fishing subsidies, the only current multilateral negotiation taking place. But it also wants to support the current initiative on e-commerce, launched following the Davos Declaration and is in favour of a possible pluri-lateral negotiation on the internal regulation of services and easing of investments.

But this begs the question: at the international summits (G7 included) can Italy hope to be truly independent of American positions?

@pelosigerardo

This article is also published in the July/August issue of eastwest.

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