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TWN
Info Service on WTO and Trade Issues (May26/07) Geneva, 12 May (D. Ravi Kanth) -- With Iran remaining firm on its proposal to end the war launched by the United States and Israel more than 70 days ago, US President Donald Trump appeared to have issued a fresh round of threats against Tehran, suggesting that the cease-fire currently in place is "on massive life support", with "a one percent chance of living," while rejecting the Iranian proposal on 11 May, according to President Trump's shifting narratives. Speaking at the Oval Office, the visibly frustrated President declared, "I would say the cease-fire is on massive life support," before using unusually undiplomatic language to describe the latest Iranian proposal as a "piece of garbage." "That piece of garbage [referring to the latest Iranian proposal] they sent us - I did not even finish reading it." A day before his latest outburst, President Trump on 10 May described Iran's proposal to end the war without commitments on its nuclear program as "totally unacceptable." An Iranian foreign ministry spokesperson defended Tehran's proposal as being "generous and responsible," stating that Iran "wasn't concerned with the satisfaction of others." The spokesperson Esmail Baghaei stressed that Tehran would continue to pursue the country's "national interests and legitimate rights," while pointing out that Iran remains prepared to engage in diplomacy "with goodwill and in a reasonable manner" whenever it deems appropriate. Although the cease-fire that came into effect on 8 April has largely held, military tensions and skirmishes have continued in the Strait of Hormuz. Despite the deep mistrust on both sides, neither side has engaged in major clashes in the strategic 52 km wide corridor. The continued closure of the Strait of Hormuz appears to have inflicted significant damage to the global economy, driving inflation higher and reducing industrial and agricultural production due to shortages of petroleum products, natural gas, fertilizers, helium and other critical supplies. Several countries have announced emergency economic measures, including appeals for citizens to curb the consumption of fuel and other essential goods. India under economic siege India, now ranked as the world's sixth-largest economy following a sustained downturn and sharp currency depreciation, is reportedly facing mounting challenges on multiple fronts. Speaking at several political events on 10 May, Indian Prime Minister Narendra Modi urged citizens to prepare for a prolonged period of global uncertainty triggered by the conflict. He called for "small sacrifices" and "collective responsibility," warning that the war's economic fallout could hit India through soaring import costs, disrupted supply chains and mounting pressure on foreign-exchange reserves. Even as he continues a series of foreign visits - most recently to the United Arab Emirates and several European countries - Prime Minister Modi said: "... Another issue is becoming increasingly sensitive. Over the past few years, the world has been passing through continuous instability - first the COVID crisis, then global economic challenges, and now rising tensions in West Asia." "The impact of these circumstances is being felt across the world, and India too is not untouched by them. If the coronavirus pandemic was the biggest crisis of this century, then the conflict in West Asia is among the biggest crises of this decade ... Just as we united and overcame the pandemic, we will surely overcome this challenge as well." The Indian Prime Minister also urged citizens to refrain from buying gold for a year, a move analysts say is aimed at protecting the country's foreign-exchange reserves, as geopolitical pressures continue to weaken the Indian rupee. India is one of the world's largest consumers of gold, which carries deep cultural significance and is widely viewed as a safe investment asset. The precious metal also forms part of the Indian central bank's reserve holdings, accounting for roughly 17% of foreign-exchange reserves at the end of March. According to a Wall Street Journal news report published on 11 May, India's dependence on remittances from citizens working in the Gulf countries has increased its vulnerability to the conflict. The outbreak of war in the Middle East in February contributed to rising oil and gas prices and a precipitous fall in the Indian rupee against the US dollar. At the same time, inflationary pressures triggered by the energy shock have reduced the attractiveness of gold, eroding the value of the country's reserves. In an effort to reduce capital outflows that are further pressuring the currency, Prime Minister Modi urged Indians to cut petrol consumption, work from home where possible, and limit overseas travel. "Rising crude oil prices and global instability are putting severe pressure on India's foreign-exchange reserves," Devarsh Vakil of HDFC Securities said in a commentary. "Reducing discretionary spending on gold imports and foreign travel could help the country conserve them," he added. US faces economic crunch According to a Financial Times news report published on 11 May, the Iran war launched by President Trump "is ripping across the US economy at a cost of hundreds of billions of dollars in lost output" due to soaring fuel prices, rising borrowing costs and supply-chain disruptions. Although Trump administration officials estimated the direct costs of the war at $25 billion, "economists foresee a far larger toll once the full military bill and higher financing costs are taken into account." Quoting Harvard professor Linda Bilmes, the FT report suggested that "the budgetary costs that have been announced are just the tip of the iceberg." "It might not be felt immediately - you can patch something up for a while," Professor Bilmes said, adding, "but the scale of this financially is such that you can't cover it up forever." According to another study, as of 8 May, American consumers had paid an additional $35 billion in petrol and diesel costs since the beginning of the war on 28 February. Trump's China visit China announced on 11 May that, at the invitation of Chinese President Xi Jinping, President Trump will pay a state visit to China from 13 to 15 May, setting the stage for a closely-watched meeting between the leaders of the world's two largest economies. The upcoming visit follows a phone call between the two leaders in February and their meeting in Busan last October. Chinese experts said the visit underscores the continuing importance of heads-of-state diplomacy in stabilizing and improving bilateral relations. At a time of growing global uncertainty and fragmentation, analysts noted that strengthening communication, managing differences and maintaining stable China-US relations serves not only the interests of both countries, but also broader global stability. Meanwhile, President Trump's anticipated visit to China on 13 May has generated intense international interest. According to a FT report published on 11 May, President Trump is expected to press President Xi to curb China's support for Iran. Amid expanding financial sanctions against several Chinese entities, it remains unclear how President Xi will respond to the US demands. Responding to a question about President Trump's upcoming visit and China's expectations, Chinese Foreign Ministry spokesperson Guo Jiakun said at a press conference on 11 May that this would be the first visit to China by a US president in nearly nine years. President Xi, he said, would hold in-depth discussions with President Trump on major issues concerning China- US relations as well as global peace and development. According to China's Global Times, "Heads-of-state diplomacy plays an irreplaceable role in providing strategic guidance for China-US relations," Guo said, adding that China is prepared to work with the United States to expand cooperation and manage differences "in the spirit of equality, respect and mutual benefit," while bringing greater stability and certainty to an increasingly volatile world. Meanwhile, Chinese Foreign Ministry spokesperson Mao Ning on 11 May posted a video on X (formerly Twitter) reviewing past interactions between President Xi and President Trump, saying that one message consistently stood out from their meetings: the steady development of China-US relations brings certainty and stability to the world. WTO DG cautions against protectionism In what appeared to be a delayed acknowledgment of the economic costs of the war launched by the US and Israel against Iran, the Director-General of the World Trade Organization, Ms Ngozi Okonjo-Iweala, wrote in the Financial Times that she was deeply concerned that the conflict "has caused strains in the availability of energy, food and fertilizer, raising the question of whether the world's response will repeat the early mis-steps of the Covid-19 pandemic." Without directly condemning the US-Israel alliance for launching a war against Iran that has caused extensive destruction and resulted in thousands of deaths in Iran, Lebanon and the occupied Palestinian territories, the DG said the current crisis resembled the disruptions caused by the Covid-19 pandemic and the war in Ukraine, both of which severely affected fertilizer and food markets. On 7 May, Australia and Thailand reportedly requested that the WTO Secretariat conduct a study into the worsening economic consequences of the Iran war. Although the DG immediately expressed willingness to undertake the study, the US reportedly objected, arguing that WTO members should first be informed about who had requested it. In her signed article published in the FT on 8 May, titled "Protectionism makes everyone poorer during global shocks", Ms Okonjo-Iweala highlighted the rise in restrictive trade measures during the early months of the Ukraine conflict. She said that "the response to the current Strait of Hormuz disruption appears less restrictive," adding that WTO members "have again implemented a substantial number of measures to address constraints in energy and related products, as well as fertilizer and food." A trade envoy, speaking on condition of anonymity, questioned why the Iran war was not discussed at the WTO's 14th Ministerial Conference (MC14) and why appropriate trade-related measures were not considered at that meeting. The DG also argued that "in an interconnected trading system, resilience cannot be secured through national measures alone." "The alternative to co-ordinated adjustment is a cycle of restrictions that leaves all countries worse off," she concluded. According to people familiar with the matter, the DG seems to be seeking a new role in mediating trade disputes arising from the Iran war, although observers believe the chances of such an initiative succeeding remain slim. +
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