US unveils its plans for reforming the WTO

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The US has a five-point plan it thinks will fix the WTO.

US trade representative Robert Lighthizer has unveiled his country's plans for reforming and revitalizing the beleaguered World Trade Organization.

However, it perhaps inevitably concentrates too heavily on protecting the US's best interests while criticizing China. Here, we'll take a look at the plans, why the WTO might need overhauling, and where the situation is currently up to.

A five-point plan

Mr Lighthizer took to the Wall Street Journal last week to voice his opinions on the WTO and what needs to be done to save it in the form of a five-point manifesto.

In the op-ed, he first suggested a universal baseline set of tariffs that would be applied to almost all nations except the least developed. This would be similar to the current average for industrialized nations and, while it might not offend the most advanced, could pose a problem for those that rely on tariffs as a significant source of revenue.

Secondly, Mr Lighthizer revealed he is no longer in favor of bilateral and multilateral trade agreements "except for agreements intended to foster regional integration among contiguous states".

He suggested they should be abandoned in a new era of the WTO, which might have come as surprising news to many.

Thirdly, the trade representative took exception to the classification system for developmental status, which allows less-developed nations access to preferential treatment in some cases.

He claimed that although this is necessary for the very poorest countries, it is being taken advantage of by China and India.

The fourth item on Mr Lighthizer's agenda was again leveled at China and related to its state-owned enterprises and government subsidies. He alleges this is another way of giving the Asian country's state capitalism an unfair advantage, although he declines to mention that such things also exist in the US and Europe.

Finally, and arguably the least surprising on the list, was a complaint about the WTO's dispute resolution system. Mr Lighthizer said he would like to see it replaced with ad-hoc tribunals as opposed to the Appellate Body, which is currently being used as "both a sword and a shield" by "our major trade competitors".

"The rulings of these one-off panels should apply only to the parties in the dispute, and not become part of an ever-evolving body of free-trade jurisprudence," the trade representative said.

Writing in an article for CGTN, professor at the University of International Business and Economics Dr John Gong said: "Overall, the message from Lighthizer makes some sense, even amid his role as an anti-China trade war architect. Some of his suggestions need to be studied and analyzed."

However, he pointed out that the trade representative is running out of time in office to see such measures implemented - and that the op-ed reflects long-term grudges against the WTO based on his time as a trade lawyer.

An argument for reform?

It has long been said that the WTO has some major issues, with an EU official at the end of a recent G20 summit in Argentina agreeing it is falling short of its objectives.

US president Donald Trump went so far as to call it outdated and dysfunctional, while former chief Robert Azevedo told the BBC it is facing its worst crisis since 1947 - and that was before coronavirus.

Even the governing body's staunchest supporters concede its administration of multilateral trade rules, method of serving as a forum for trade negotiations and mechanisms for settling trade disputes have room for improvement.

It had seemed as though progress was being made toward this goal in 2018, when Mr Trump and European Commission president Jean-Claude Juncker agreed in the 'Rose Garden Deal' to work together on reforms.

A trilateral working group consisting of the US, the EU and Japan built upon this, but after some positive results, progress now seems to have ground to a halt.

Ironically, some of the major reasons behind this are the US blocking appointments of new judges to the WTO Appellate Body, meaning it can no longer function at all; a US focus on its own elections; and an ongoing row between America and the EU over Airbus/Boeing subsidies.

It will perhaps be irksome to some commentators, then, that a representative from the US appears to be attempting to come up with a silver bullet to fix the WTO after having done so much of the groundwork in destabilizing the foundations in the first place.

China is also unlikely to be pleased that much of the critique is directed at factors within the WTO allegedly favoring Beijing. Even the more neutral could argue that such a fixation fails to see the wood for the trees and could undermine helpful reforms going forward.

Other factors that are not helping are the departure of Mr Azevedo ahead of schedule without a new WTO chief having been elected and, of course, the global pandemic.

For now, international cooperation towards WTO 2.0 has been put on the backburner. It may be that when the world starts to bounce back from coronavirus, countries will be keener to work together for the greater good to rebuild the global economy.

However, saving the WTO might also depend on getting the US and China to put aside their differences with the EU as peacemaker - and that could prove a stretch too far given the current climate.