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Trump threats, demands spark existential crisis at WTO

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FILE PHOTO: World Trade Organization (WTO) headquarters in Geneva, Switzerland, July 26, 2018. REUTERS/Denis Balibouse

GENEVA (Reuters) – The World Trade Organization is scrambling to develop a plan for the biggest reform in its 23-year history after U.S. President Donald Trump brought the world’s top trade court to the brink of collapse by blocking appointments of its judges and threatening to pull the United States out of the organization.

Mr Trump’s administration has targeted the WTO, the watchdog of global commerce, as part of his wider campaign against trade arrangements he contends have cost hundreds of thousands of US jobs.

Proposals to shore up the organization include increasing the number of judges and rewriting trade rules for industrial subsidies, state-owned firms and technology transfer. Those ideas and others will be discussed when Canada hosts a dozen trade ministers in Ottawa on today and tomorrow.

At stake is the effectiveness – even the survival – of a key stabilizing force in the global economy. Since its founding in 1995, the WTO has stopped governments from arbitrarily raising trade barriers and disrupting the flow of goods.

Much of the US displeasure stems from how the WTO has tied its hands in dealing with China, which it accuses of “dumping” cheap goods on the United States to take market share and unfairly using government subsidies to lower Chinese companies’ costs.

Dennis Shea – US ambassador to the WTO and deputy United States Trade Representative – has said the judges have “strayed” and taken liberties with their own rules of procedure, ignoring deadlines and staying on cases after their official departure dates. Mr Shea says such breaches may invalidate their work.

“We’ve been making these points for not just 15 months but for 15 years. Our proposal is that the Appellate Body needs to abide by the rules we agreed to in 1994.

“The paralysis of the Appellate Body would cast a long and deep shadow on the continued operation of the multilateral trading system,” he said.

US Trade Representative Robert Lighthizer has said the WTO does an enormous amount of good but that he wants more focus on negotiating new rules and enforcing existing ones with less litigation.

Mr Lighthizer is widely seen as the brain behind Mr Trump’s trade strategy, drawing on his experience battling cheap Japanese imports as the deputy US Trade Representative from 1983 to 1985 under the administration of President Ronald Reagan.

For more than 30 years after that, he was a partner at the law firm Skadden Arps, where he represented US steelmakers against China. Mr Shea also briefly worked at Skadden, later spending a decade investigating the national security implications of US-China trade for the US Congress.

“We have a slew of steel dumping lawyers on the protectionist side in charge of US trade policy,” said Mr Bacchus, the former WTO judge and congressman. “They are bullying the world, and now they are bullying the members of the Appellate Body.”

The goal, US officials have said, is to get China’s communist government, which still controls much of its economy, to institute sweeping free-market reforms to get into line with WTO rules. Lighthizer said the United States erred in letting China join the WTO in 2001 without such changes.

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