TWN Info Service on WTO and Trade Issues (Apr18/11)
16 April 2018
Third World Network

DG Azevedo ambivalent on US trade war threats, AB blockage
Published in SUNS # 8662 dated 16 April 2018

Geneva, 13 Apr (D. Ravi Kanth) - The World Trade Organization Director-General, Roberto Azevedo, said on Thursday that the escalating threats of a trade war between the United States and China are not factored into it s "positive" forecast of 4.4% growth in global merchandise trade in volume terms this year as compared to around 4.7% last year.

Releasing the WTO's annual forecast of global trade, Azevedo twice said that the latest estimates "do not factor in the possibility of a dramatic escalation of trade restrictions."

In a series of ambivalent responses to questions from reporters about the threats of trade war, the need for re- balancing the US trade deficit, the alleged illegality of US Special 301 actions, and US stance on other issues, Azevedo offered a nuanced defense of Washington's actions both outside and inside the WTO, particularly on the dispute settlement front.

Azevedo did not once mention the source for the "trade restrictions" or name the member/members responsible for these actions.

It remains to be seen whether the WTO in its upcoming Trade Monitoring Repo rt will mention the unilateral trade restrictions such as US Section 232 actions on steel and aluminum (claiming national security), and the proposed Special 3 01 measures of levy of additional tariffs of $50 billion on Chinese products because of Beijing's alleged violation of intellectual property rights.

Asked to comment on the trade war between the US and China, Azevedo said "technically I would say NO, we are not there yet."

"Still a number of measures have been announced and not implemented [and] there are conversations and dialogues ongoing between these players you mentioned."

Asked to comment on the pronouncements made by Peter Navarro, who is one of the key advisors to President Donald Trump on global trade, for "rebalancing" the country's trade deficit, Azevedo said: "It is their call and their view, an d they are entitled to have that view."

Azevedo went on to add: "I think we live in an interconnected world; about two-thirds of the global economy is connected to value chains. Trade is somehow connected to global value chains; the previous perception of what a trade surplus and deficit means and the need to look at them with different lenses is simplistic. We have to see the nature of trade surplus and deficits and I'm sure they a re doing that."

About the alleged illegality of retaliatory measures over US planned tariff levies under the US Special 301 trade law, which have already been ruled against b y a dispute panel (DS152) at the WTO, Azevedo said that it is for members to decide.

He went on to praise the US for "engaging" in all issues at the WTO, including in raising trade disputes at the Dispute Settlement Body. Azevedo added that the US has some concerns on the dispute settlement mechanism, emphasizing the need to address them.

But Azevedo did not utter a word about the "systemic" crisis that is being faced at the Appellate Body due to the repeated blocking by the US of a process for filling three vacant positions on the AB.

The director-general also remained silent at the press conference on US President Donald Trump's statement that the WTO is a "catastrophe". Nor did he say a word about the US President's tweet on the special benefits availed by China as a developing country.

President Trump, who is the head of the world's largest economy and the country that played a central role in creating the multilateral trade architecture, particularly the GATT (General Agreement on Tariffs and Trade) in 1948 and the WTO in 1995, said on 6 April: "China, which is a great economic power, is considered a developing nation within the World Trade Organization. They therefore get tremendous perks and advantages, especially over the US. Does anybody think this is fair. We were badly represented. The WTO is unfair to US."

Denying an opportunity to a reporter to ask questions on President Trump's tirade against the WTO, while selectively allowing other reporters of their choice, the WTO director-general failed to provide a "credible" account of what is happening because of trade restrictive measures adopted by the US.

Azevedo, who remains silent on such damaging/disparaging tweets from the US President, however wants to hold consultations to address the US concerns.

He said that "we need to address the US concerns on the Dispute Settlement Body" but did not mention the "systemic" crisis arising from the US decision to block the launch of a process to fill the vacancies on the 7-member AB.

Even the trade figures issued by the WTO are subject to several caveats. In 2019, the growth in global trade is expected to moderate to 4% which is "below th e average rate of 4.8% since 1990 but still firmly above the post-crisis (financial crisis of 2008) average of 3%," the WTO claimed in a press release.

But merchandise trade volume growth has to be taken with a caveat as it may have been inflated due to the persistent weakness of trade over previous two years that provided a lower base, the WTO admitted.

In value terms, the global trade in exports notched a growth of 10.7% for merchandise exports and 7.4% for commercial services exports last year.

The ratio of trade growth to GDP growth or "elasticity of trade with respect to income" - which remained at 1.5 times faster than world real GDP at market exchange rates for world merchandise trade volumes - has now rebounded from 0.8 in 2016 to 1.5 in 2017.

Last year, the exports and imports of developed countries grew by 3.5% and 3.1% respectively, while developing countries recorded export growth of 5.7% and import growth of 7.2%.

Major economies in Asia contributed significantly to buoyant growth in merchandise trade by consuming more imports than their exports to other countries.

The value of global exports of merchandise goods stood around US$17.2 trill ion last year while the value of imports remained around US$17.5 trillion.

The US for whom the growing trade deficit is the core priority, recorded a deficit of more than US$800 billion (imports-exports: $2409 billion - $1547 billion).

The Trump administration, particularly its controversial advisor on trade, Peter Navarro, has repeatedly demanded "rebalancing" of the deficit with China.

China recorded a surplus of US$421 billion (exports of US$2263 billion - imports of US$1842 billion) in goods.

The European Union and Japan notched a surplus of US$26 billion while India (exports of US$298 billion - imports of US$447 billion) remained however the biggest trade deficit country for goods among developing countries with a total deficit of around US$149 billion.

For global commercial services, the US recorded a surplus of US$246 billion last year while China recorded a deficit of US$238 billion. India notched a modest surplus in commercial services of US$29 billion.

In sum, the more the WTO's director-general defends the US despite the "systemic" crisis it is causing to the multilateral trading system in general, and the WTO in particular, the more he is aggravating the "systemic" crisis at the WTO.