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TWN
Info Service on WTO and Trade Issues (Jul25/28) Geneva, 24 Jul (D. Ravi Kanth) — China and the United States on 23 July clashed over Beijing’s proposal to resuscitate the multilateral trading system from the continued unilateral tariff assault by Washington against its trading partners that has allegedly made the World Trade Organization “ineffectual”, said people familiar with the development. On the second day of the WTO’s General Council (GC) meeting on 23 July before the summer break, under the agenda item “Heightened Trade Turbulence and Responses from the WTO”, China suggested that “tariff actions” by a member reinforced uncertainty and unpredictability in the multilateral trading system, said people familiar with the development. Even as China and the US are expected to hold their third bilateral meeting in Stockholm, Sweden next week to resolve their differences on tariffs and several other issues, the continuing tensions between the two countries are not showing any signs of abatement at the WTO, said people familiar with the development. As members go on their summer break on 23 July, the tensions and continued recriminations between the US on the one side, and several other WTO members, particularly China, on the other, appear to have come into the open on several issues, said people familiar with the development. At the GC meeting on 23 July, China’s proposal on “supporting the multilateral trading system under current situation” seems to have evoked a sharp debate, with several countries aligning with China’s proposal while the US allegedly leveled several accusations against China, said people familiar with the development. HEIGHTENED TRADE TURBULENCE In its submission referencing the heightened trade turbulence in the multilateral trading system (MTS), China said the MTS “is facing unprecedented challenges.” Without naming the US, which has reached tariff deals with several countries, China is understood to have said that “in the past month, turbulence had intensified, characterized by increased unilateral tariff actions, mounting uncertainties in global trade and growing risk of spillover and fragmentation.” Citing the WTO’s latest statistics, China said “nearly one-fifth of global merchandise imports are now affected by steep tariff increases, with trade-restrictive measures covering USD 2.7 trillion – an all-time high”. Building upon its earlier communication (WT/GC/272) on supporting the multilateral trading system, China said that its current proposal (WT/GC/272/Add.1) further elaborates on the three-pronged Stability, Development, and Reform (SDR) framework. Beijing suggested stability as the cornerstone, development as the priority, and reform as the pathway. China said that it shares the concerns of members and the global community, arguing that there are growing calls for responding to the trade turbulence and preserving the multilateral trading system. Elaborating on the issue of “stability”, China emphasized that “74% of global trade continues to operate under Most-Favoured Nation [MFN] terms, and that WTO rules remain a vital stabilizer for the global economy.” China said it wants to reinforce stability, proposing several benchmarks on how this could be accomplished. The benchmarks include: 1. Ensuring that all trade measures and bilateral agreements comply fully with WTO rules and principles, including MFN and non-discrimination. Starting from more transparency on bilateral arrangements. 2. Enhancing the WTO Secretariat’s monitoring functions, particularly in tracking unilateral measures and spillover risks from bilateral arrangements and making such information available to all members. 3. Strengthening collaboration between the WTO and other international organizations, including the IMF, World Bank, UNCTAD, and OECD, to assess the systemic impacts of rising trade restrictions. China also mentioned that on development, priority must be accorded to supporting the integration of developing members, especially least-developed countries (LDCs), into the multilateral trading system. Elucidating on reform, China underscored the need for meaningful reform of the WTO to ensure its continued relevance in the current trade context. It proposed several elements on what needs to be done on reforms, including: a. Restoring an operational WTO dispute settlement system; b. Need for a more efficient and inclusive WTO decision-making process based on consensus; c. Progressive rule-making along three tracks. Track One is entry into force, which includes Fisheries Subsidies Agreement, Investment Facilitation for Development Agreement and the E-Commerce agreement. Track Two is substantive progress, in areas such as agriculture, development and food security. Track Three is the preparation for structured deliberation, on topics relevant to our time, such as digital trade, AI, climate change, industrial policy. China’s rather controversial reform agenda appears to be more in tune with what some industrialized countries, as well as the so-called “Friends of the System” group are promoting, said people familiar with China’s proposal. China reiterated “its readiness to work with all WTO Members – pragmatically and constructively – to collectively safeguard and strengthen the rules-based multilateral trading system,” while expressing hope that the SDR (stability, development, and reform) framework could spark “more ideas and actions from the membership.” RESPONSES While several members, including Brazil, the Russian Federation and Venezuela among others seemingly aligned themselves with China’s SDR proposal, the US appears to have raised several questions while allegedly casting aspersions over China’s intentions, said people familiar with the development. The US is understood to have said that it finds great irony in China’s SDR proposal, particularly where China has stated that the multilateral trading system (MTS) is facing challenges due to unilateral actions that have infringed upon the rights and obligations of WTO members. The US challenged China on its assertion that the unilateral tariffs seriously violated the WTO rules while undermining the MTS. The US maintained that China’s proposal is “misleading”, particularly for China to say that it would like to safeguard the multilateral trading system. According to the US, the current MTS has seemingly “incentivized massive economic distortions and undermined free and fair trade.” Washington appears to have commented rather sarcastically that “China would like to safeguard what the WTO and the multilateral trading system have become, but not the system that members originally established at the time of its establishment,” said members familiar with the US statement. The US apparently argued that the WTO’s purpose and direction were set out in the preamble to the Marrakesh Declaration in 1994, emphasizing that “the parties expressed their determination to participate in the world trading system based on open market-oriented policies and the commitments reached in the Uruguay Round of Agreements and Decisions.” Making additional comments on China’s suggestions for better decision-making at the WTO, the US said it had stated in the past that proposals for decision or action need to be clear and presented to members, said members familiar with the development. Commenting further on China’s reform proposals, the US said that it had objected to other proposals that attempt to circumvent transparent decision-making processes, including passive suggestions to expand the role of the Secretariat. The US asked China and other members not to create an environment for trust-based decision-making, said members familiar with the discussions. Furthermore, the US said that it will not agree to any Secretariat monitoring, adding that even other members should not agree to such a prospect, said people familiar with the discussions. The US intervention is not only a strong rebuke against China’s proposal but also appears to be directed at the WTO’s Director-General, Ms Ngozi Okonjo-Iweala, who has seemingly violated paragraph 4 of Article VI of the Marrakesh Agreement, wherein she has openly supported several controversial agreements, particularly the Investment Facilitation for Development Agreement (IFDA), said people familiar with the discussions. On the issue of monitoring, the US is understood to have said that this is the responsibility of members through the relevant WTO bodies, adding that “it assumes that the chairs will respect a proper decision-making process and that the Secretariat will not let itself be co-opted by one particular member for its political purposes.” In a second intervention, China said that it took “note of certain accusations from some member [the US] to show some explanations for the current situation.” The Chinese official said that “it is quite clear for all members that we have seen how the dispute settlement system has been collapsed, and how that one member [the US] wants to impose its domestic law unilaterally across the world.” China said it welcomes “the constructive suggestions put forward by Members in their interventions,” urging them “to put on the table any constructive suggestions or proposals to move forward the reform process.” Vowing to “work with all Members to collectively respond to current trade turbulence,” China said its goal is clear: “To safeguard the rules-based multilateral trading system and steer the crisis toward opportunity at MC14.” In conclusion, China said it hopes that its “open-ended SDR framework could help inspire more concrete actions and ideas from interested Members.” +
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