Info Service on UN Sustainable Development (Feb18/14)
23 February 2018
Third World Network
United Nations: Former DG Lamy points to a "WTO minus the US"
Published in SUNS #8627 dated 22 February 2018
Geneva, 21 Feb (Kanaga Raja) - Highlighting the threat of a United
States trade "offensive" at the World Trade Organisation
(WTO) including its blocking of the selection processes for the appointments
of three Appellate Body members, former WTO Director-General Pascal
Lamy has suggested that one possible outcome of this US move would
be that the other countries at the WTO build "a WTO minus the
Lamy's remarks came at the Geneva Dialogue, entitled "Trade in
Crisis: Headwinds or Maelstrom?", convened by the Secretary-General
of the UN Conference on Trade and Development (UNCTAD), Dr Mukhisa
Kituyi, on 19 February.
Speaking at this event, Lamy, who is now President Emeritus of the
Jacques Delors Institute, said that in his vew, the US trade offensive
will lead to three possible outcomes - soft, middle and hard.
The soft outcome would be reform of the Appellate Body jurisprudence,
while the middle scenario, which he said is most likely in his view,
would be to go back to the old GATT (situation), the precursor to
the WTO, with shallower disciplines and less enforcement.
"The third possible scenario is what I call "the lonesome
cowboy", which is either the US quits or the others, in order
to resist this US offensive, build a WTO minus the US," said
[Lamy's third scenario was envisaged and discussed in an earlier SUNS
article, "Contemplating the unthinkable, a WTO without the US",
by Chakravarthi Raghavan in SUNS #8590 dated 6 December 2017. SUNS]
Besides Lamy and Dr Kituyi, the other panellists at the event included
Baroness Valerie Amos, former UN Under-Secretary-General for Humanitarian
Affairs and now Director of the School of Oriental and African Studies
(SOAS) at the University of London, and Ms Anabel Gonzalez, former
Senior Director, Global Practice on Trade and Competitiveness at the
World Bank as well as former trade minister of Costa Rica.
The informal dialogue was moderated by Mr Jeff Koinange, a journalist
from Kenya and talk show host on Citizen TV.
Koinange noted that multilateralism seems to be at an impasse today,
and asked whether all this is to be blamed on trade.
Dr Kituyi said that the crisis in multilateralism touched trade in
that it is a crisis in rule-making through the multilateral process.
Trade as such is not in a crisis. It is rule-making that is in a crisis.
The UNCTAD Secretary-General said trade is an easy scapegoat, and
that the problems of globalization are being put at the doorstep of
The reality is that many more people have traded their way out of
poverty than the number of people who are falling behind because of
unequal distribution of trade.
Similarly, he said, the crisis in trade as such is a crisis of the
distribution of gains. It is not a crisis of trade as a phenomenon.
The liberal notion that opening up markets will fix problems has compounded
the problem of a retreating welfare state, and without adequate social
investment in the education of the labour force or comfortable retirement
for the labour force, said Dr Kituyi.
These are all being put in a simple argument that is easier for the
politicians to sell - trade is the enemy. Fix trade and build protectionism
and the problem goes away.
Baroness Amos said that the shifts in economic and political power
that is being seen around the world has been destabilising and threatening,
particularly for those countries that have been at the centre of the
rules-based system for such a long time.
For people in developed economies such as the United Kingdom that
were promised a great deal out of globalization, people feel that
promise has not been delivered and that has been deeply destabilizing.
In developing countries or developing economies, however we choose
to describe them, the development has been so uneven that in so many
countries, they have made economic sacrifices on the back of which
they were promised a degree of development and growth which has not
been delivered. That has also been an element of it.
"We have to look at this is a much bigger global context and
that this is not just about economics, or about trade, it is also
about politics," Baroness Amos said.
Former WTO DG Lamy agreed that he did not think that trade is in a
crisis, but he believed that the trading system is under threat.
According to Lamy, trade is not in a crisis given the context which
is a surge in protectionist discourse stemming from the inability
of the West to address properly the socioeconomic disturbances of
He said that given this context, trade is doing well. If you look
at the numbers, there is a bit of a surge in anti-dumping, safeguards
and anti-subsidy measures mostly on the US side as we have seen recently
with extremely important sectors of the modern economy which is steel,
aluminium and (large) washing machines. That is the frontier of new
"But so far, more bark than bite, overall," he said, in
reference to the threat of a US trade offensive.
He said the US offensive against trade arrangements in general - not
only multilateral but regional and bilateral as well - is that we
have a US president (Donald Trump) who campaigned with the view -
and he was very clear on that - that present trade arrangements are
unfair to the US, and that it leads to a huge US trade deficit, which
represents a huge number of US jobs "stolen" by the rest
of the world.
As a consequence of that, there is a simple new trade agenda for the
US which is "quit or change in favour of the US."
"That is the situation we are in," Lamy pointed out, adding
that this has been followed by the precautionary measure which is
blocking the (appointment) of Appellate Body members at the WTO.
In his view, this US offensive will lead to three possible outcomes
- soft, middle and hard.
The soft outcome is reform of the Appellate Body jurisprudence, while
the middle option, which is the most likely in Lamy's view, is to
go back to the old GATT, with shallower disciplines and less enforcement.
"The third possible scenario is what I call "the lonesome
cowboy", which is either the US quits or the others, in order
to resist this US offensive, build a WTO minus the US."
In his view, the big problem behind all of this is that it is not
a tactical choice. The reason behind this is that the US president
and the people working with him have a view of trade "which is
a medieval one".
For the past 50 years, Lamy said, "we believed that trade was
a win-win game, to the price of socioeconomic disturbances which have
not been well addressed. But overall we thought it would work."
"The new view on the US side is that trade is a win-lose game,
and that there is a winner and a loser and better me be the winner
and you be the loser."
This is dangerous because it is a theory of trade which is totally
at odds with the reality of global value chains.
Lamy maintained that the trading system is not right. There are areas
where the US is right to say that, for instance, China is taking it
easy with part of the issues not least because multilateral disciplines
are not what they should be on issues like public procurement or subsidization.
Ms Gonzalez, former senior World Bank official, said that she believes
that there has been a shock to the system.
She highlighted the role that trade can play in delivering on the
Sustainable Development Goals (SDGs).
"I think this is time that the trade community also thinks about
how to leverage trade for the attainment of the SDGs."
The global environment on trade is not conducive at this moment. Trade
itself is doing fine. It is estimated that for 2017, trade would have
grown by 4.3% which is actually the highest level since 2012, she
The problem however is with the trade policy environment. Another
factor is technological change which is impacting trade and investment
In terms of the prospects for trade and investment liberalisation,
Ms Gonzalez was of the view that they have weakened considerably in
recent times but also on long-term trends in terms of diminished trade
opening since the early 2000s.
She said the US has been "repositioning" on trade, based
on the notions of fair and reciprocal trade, with the purpose of achieving
the reduction of bilateral trade deficits.
In this context, she cited the withdrawal of the US from the TPP,
the suspension of TTIP, the renegotiation of NAFTA and revision of
certain parts of the US-Korea free trade agreement.
She also pointed to the increase in the number of investigations relating
to trade protection that have been initiated, and talk of a reciprocal
tax to leverage tariffs that US exports face in other markets.
"So this is an important shock to the system," Ms Gonzalez
But she said that there is also "positive energy" coming
from certain quarters. "If we look at what is going on in the
area of negotiations of preferential trade agreements, there is some
room for hope."
In this regard, she pointed amongst others to the renewed leadership
on the part of the EU in the negotiation of a number of preferential
trade agreements, the leadership of Japan in resurrecting the TPP,
China's Belt and Road Initiative and the African Continental Free
Trade Area (CFTA).
The question is can we leverage this positive energy to navigate the
challenges that the system has in a way that does not lead to fragmentation,
but rather to strengthening, of the system, she asked.
Baroness Amos said that countries always play the multilateral system
- whether they are powerful countries in the system or not so powerful
countries in the system - for their own ends.
"The challenge we have right now is the extent to which we allow
countries to lead us down a particular cul-de-sac because they don't
like the way the system is being worked or the extent to which we
are strong enough to take collective action particularly in the context
of the delivery of the SDGs."
The moderator asked the panellists about the Buenos Aires ministerial
conference last December, which some have called a complete failure
while others have called it a debacle.
Do countries need to keep banging their heads on the negotiating table
or are there other ways forward on trade and development, he asked.
Lamy in particular was asked if he were the WTO DG, what would have
happened at Buenos Aires.
Lamy said that he is the only one on this panel not to be able to
answer this question. He said that when he started in politics, he
was once told "be careful, in politics you always succeed incapable
people and you are always succeeded by ungrateful people."
He said that trade is doing well and that volumes of trade are fine.
At the end of the day this is what matters for those of us who believe
that trade opening works for welfare.
He believes that there is a backlash against trade "in a part
of the world, a relatively small part of the world by the way"
and this stems from the fact that the conditions under which trade
opening works for welfare has been forgotten, or has not been addressed
properly in recent decades.
This does not prevent trade from growing and trade opening to keep
moving, said Lamy.
Dr Kituyi noted that when he met Baroness Amos and Lamy at the WTO
Cancun ministerial in 2003, there was a push for the so-called Singapore
issues, with developing countries insisting that the Doha agenda be
completed before moving onto anything else.
He said fast forward 15 years to Buenos Aires there is still disagreement
on new issues and intransigence on the old issues.
He said everybody is looking at the Trump White House as wreaking
havoc to the multilateral trading system.
The reality is that over the past 20 years, the US has not been very
happy about the multilateral trading system.
"We cannot wish away reality," Dr Kituyi said, adding that
the liberalism that celebrated globalization failed to say that even
free trade has to be disciplined under ceratin types to reduce the
numbers of losers.
Ms Gonzalez said that the multilateral trading system has shown some
capacity to adapt to the changing circumstances.
Baroness Amos said while trade has the ability through growth to tackle
inequality, there is also concern about growing inequality that is
seen within countries.
There are a whole set of associated social factors which we are expecting
to be addressed through a trade agenda. It is not just about trade,
it is about a host of other social, economic and political consequences
of a trade agenda which have a direct impact on the welfare of individuals
in particular countries.
Lamy said the biggest lesson learned at Buenos Aires was that WTO
members could not agree on disciplining fisheries subsidies.
This is not a developed versus developing country issue, he maintained.
As to where the problem is with fisheries subsidies, the problem is
as in many of the issues, with the "elephant in the room, which
is called China," he maintained.
The reality is that at the root of the problems we have is the problem
whether China "is a rich country with many poor or a poor country
with many rich."
The US view has been for the last 15 years that China is a rich country
with many poor, hence China should join the bandwagon of developed
country trade disciplines.
China's view has been that it is a poor country with many rich and
that it will take some time before a poor country with many rich takes
the same sort of obligations as a rich country with many poor.
Does this mean that the US is wrong when it targets China as the "big
cheater" in the trading system?
"I think they are wrong in that," said Lamy. China does
not cheat, he added.
China abides by the rules it has subscribed to in the WTO. China has
been very efficient at making sure that the rules of the WTO do not
discipline China more than what they did in 2001, especially in areas
like subsidization or public procurement.
"I find it absolutely unfair that given the size of China in
today's world economy that the Chinese public procurement system is
not open. And on this I think the US has some right to say that the
balance hasn't moved the way it should have."
This sort of thing should be more widely recognised and a more "frank
conversation" should take place in these areas, said Lamy.
Dr Kituyi noted that fisheries subsidies was never properly a trade
issue, until one Pascal Lamy smuggled it to the agenda of the WTO.
When you look at disciplining fisheries subsidies, it is not a trade
issue as such, but it is an ecological and livelihood, and a developmental
Those of us who hope that because the WTO has a disciplined way of
tying up commitments into rules that are enforceable, we look to deliver
some skeletal rule-making on fisheries to them at Buenos Aires.
Baroness Amos said that essentially, this is about courage. "This
is about the courage of countries within the United Nations to recognise
that they have a degree of power and influence without the United
"That when a power vacuum is created, countries can actually
fill the power vacuum. The opportunity exists to do that."
In her view, the countries within the system shouldn't feel cowered
by the fact that the United States is going down one particular line
in terms of the perceptions of its own national interests, because
what it is actually doing as opposed to the rhetoric are two slightly
"In fact it is quite difficult to know what the policy actually
is outside of the rhetoric. But it does create an opportunity for
the other countries to exercise the power and influence that they
have in a courageous way to take this agenda forward."
Lamy said if the "coalition of the willing is breaking down,
let us build a coalition against the unwilling. If that is the name
of the game about trade, better think twice."
Referring to the US, Lamy said that if a major power does not want
to play by the rules of internationally disciplined trade, the others
will have to react.
"I am not saying this is Plan A. I think Plan A is trying to
see whether there is legitimate concern which can be addressed. That
would be my preferred option."
"You have a problem, tell us what the problem is. Please convince
us you have a serious problem."
He said that he is personally not convinced that the US has a serious
problem with the track record of case law in the Appellate Body.
When he looks at the numbers, the US wins 80% of its offensive cases
and 80% of the defensive cases, like anybody else.
The question is whether the US problem is trying to fix a number of
issues or whether the US strategy is to wreck the system, said Lamy.
In some concluding remarks at the end of the session, Ms Gonzalez
said that trade is fundamental for growth and for development.
"We need to confront the tensions that the system has. There
are alternatives out there but it is important that all members participate
in this discussion."
Baroness Amos said that collective action is key. "Remember you
have enormous power and influence when you act together."
Dr Kituyi said that the world is not as bad as we make it sound. We
are going through a slight turbulence, but we will be able to move
past this to a world driven by inclusive trade, he added.