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TWN
Info Service on WTO and Trade Issues (Nov24/07) Geneva, 7 Nov (D. Ravi Kanth) — The “historic” and “unprecedented” victory of Donald Trump on 6 November for a second term as US President could upset the “grand” plan of the incumbent World Trade Organization’s Director-General in securing a second term in office, and portends uncertainty and chaos in both bilateral and international trading arrangements, with China likely to be targeted for harsher tariff treatment, said people familiar with the development. The WTO Director-General, Ms Ngozi Okonjo-Iweala, a dual citizen of both Nigeria and the United States, is currently in Washington DC, perhaps to assess the current political developments, said people who asked not to be identified. The US trade envoy to the WTO and the Deputy US Trade Representative, Ambassador Maria Pagan, is also in Washington DC at this moment. According to unconfirmed reports, Ambassador Pagan may take charge as acting USTR, if the current USTR, Ambassador Katherine Tai, resigns as per the customary practice, said people familiar with the development. Also, under the normal US practice and convention, it is highly likely that the acting USTR could consult with officials in the new Trump administration for any further direction about the WTO DG selection process, said people familiar with the development. FAST-TRACKING DG SELECTION PROCESS? Despite the well-known opposition of the former US Trade Representative (USTR), Ambassador Robert Lighthizer, to Ms Okonjo-Iweala becoming the WTO DG, it appears that the WTO General Council (GC) chair, Ambassador Petter Olberg of Norway, is determined to fast-track the DG selection process even before the Trump administration takes office in the third week of January, said people familiar with the development. At a meeting of select trade envoys on 6 November, the GC chair told the participants that he will issue a notice on 8 November to explain the next steps concerning the DG selection process, said people familiar with the development. The GC chair has not responded to a question posed by the SUNS on whether it is proper for him to proceed with the DG selection process when there is going to be a change of the US administration, and whether he should wait until the new administration in Washington makes up its mind on the process. According to paragraph 7 of the Procedures for the Appointment of Directors-General (WT/L/509), adopted by the General Council in December 2002, the process should commence nine months before the expiry of the incumbent’s term of office. Since Ms Okonjo-Iweala’s term of office ends on 31 August 2025, the process should legally commence on 1 December 2024. It was reportedly suggested that the DG and the GC chair are allegedly seeking to circumvent the rules because of the fear that President Trump may block the re-appointment of Ms Okonjo-Iweala, as the previous Trump administration had blocked her original appointment, said people familiar with the development. TRUMP’S TRADE PRIORITIES Going by incoming President Trump’s campaign promises, the US could impose tariffs of up to 20% on all its trading partners, while, regarding China, it intends to impose a baseline tariff of 60% on all Chinese products, which could further go up to 100%, according to media reports. Writing in the Financial Times on 1 November, the Trump administration’s likely trade policy chief, Ambassador Robert Lighthizer, outlined three priorities. He wrote: “There are essentially three ways to bring about fairness and balance, and so help (US) businesses and workers.” “First, the US could impose a system of import/export certificates (known as export quotas which the Reagan administration had imposed on Japan in the 1980s). Second, it could legislate a capital access fee on inbound investment, meaning that buying up our assets would be more expensive. Or, finally, the US could use tariffs to offset the unfair industrial policies of the predators.” WTO REFORM During his first term in office, President Trump held a meeting with then WTO Director-General Roberto Azevedo, who later joined PepsiCo, Inc, on the margins of the Davos meeting on 22 January 2020, to drive home the message on how to reform the WTO. While praising Azevedo as “a highly respected man” and a “gentleman”, Trump said that “the World Trade Organization is – you know, I’ve had a dispute running with them for quite a while because our country hasn’t been treated fairly.” The US President went on to say: “China’s viewed as a developing nation. India’s 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. But they’ve got tremendous advantages by the fact that they were considered developing and we weren’t. And they shouldn’t be, but if they are, we are. And we’re talking about a whole new structure for the deal or we’ll have to do something. But the World Trade Organization’s been very unfair to the United States for many, many years, and without it, China wouldn’t be China. China wouldn’t be where they are right now. I mean, China, that was the vehicle that they used, and I give them great credit, and I also don’t give the people that were in my position great credit because, frankly, they let that all happen, but the vehicle was the World Trade Organization.” On the issue of WTO reform, which is now in varying stages of discussions at the WTO, Ambassador Lighthizer proposed several far-reaching changes in his book “No Trade is Free: Changing Course, Taking on China, and Helping America’s Workers.” He wrote that “an important step to force balance is for the United States to repeal the granting of Most Favored Nation (MFN) status, which is also called “Normal Trade Relations,” to China. This would correct the mistake that was made by the Clinton Administration.” He argues that “countries should have the ability to act unilaterally to counter predatory, mercantilist policies.” More importantly, Ambassador Lighthizer said that “the concept of a sunset should be incorporated into the WTO agreements.” Elaborating on the sunset clause, he said: “Economies change, and so should the obligations of members. No business would sign an eternal contract with its suppliers, nor should any country.” He said: “WTO must adopt a mechanism that assures long-term balanced trade. Commitments must be flexible when a country such as the United States runs up trillions of dollars of deficits for decades.” Ambassador Lighthizer said that “the dispute settlement system should be scrapped.” “A new one, modeled after commercial arbitration, should be put in its place. There should be a one-stage panel process with a vote of the WTO member states being able to overturn the decisions. Further, the decisions should be the basis of party negotiations and not be binding. The strawman of the law of the jungle versus the status quo cannot obscure the fact that the current system is a massive failure on its own terms – and certainly with respect to US interests. The status quo is not an option.” Ambassador Lighthizer said that “killing the Appellate Body was important.” “But more must be done to fix the WTO,” he argued. “Contrary to critics of the Trump administration, absolutely no one is arguing that we should revert from a rules-based system to the so-called law of the jungle in trade relations,” Ambassador Lighthizer pointed out. “But sticking with the current WTO would actually entail betraying the core principles of a rules-based system, because this organization has shown itself to be chronically incapable of proceeding according to those principles,” Ambassador Lighthizer maintained. He called for “systematic reforms”, as “mere tweaking will not be enough”. “First,” he said, “we need a reset on the global tariff system. This practice of countries having wildly different tariffs for the same products is unfair, inefficient, and historically anachronistic.” In short, he called for “a new baseline for all tariffs. There should be some small number of exceptions permitted to accommodate grave political and economic situations.” It remains to be seen whether the developing countries will accept this “my way or the highway” approach to global trade, said people familiar with the development. +
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