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November 19, 2019

US trade tariffs put under question the future of the WTO

WTO tradeThe unilateral imposition of duties by the US President Donald Trump last week is slap for the World Trade Organization (WTO), which is a frequent victim of his attacks. But the allies of the US President are calling for reform of the 164-member group and not for its downplaying. The future of the WTO is particularly precarious, as the administration approach in Washington both circumvents it, but also relies on it.

On the one hand, last week, the administration imposed duties that, according to many countries, violate the WTO rules, with the US conducting direct negotiations with other capitals to enter into business transactions outside of the organization. Trump himself called the WTO “disaster”, whose attitude to the United States is “very unfair”. At the same time, the country is exerting pressure on its allies, seeking help in reforming the organization, and joining them in its complaints against China.

The European Union and six other countries have secured a temporary moratorium on US tariffs on steel and aluminum imports, with the proviso that they will work with Washington on US trade concerns.

The recourse to bilateral agreements reflects the disappointment of the trade organization established in 1995. In 2001, when China officially joined the EU, the member states launched a debate on revising and rewriting world trade rules, but these efforts were abandoned for ten years Later.

The EU, one of the supporters of free trade and the WTO, has signed or wants to enter into deals to liberalize its trade with Canada, Japan, Mexico, Australia and Singapore. Such bilateral transactions are allowed under the WTO regulation if they are defined as complementary to the world trading system, cover essentially the whole range of trade and facilitate the free flow of trade flows without hampering the activities of the parties outside.

However, many say the increase in such agreements simultaneously reflects and contributes to the deteriorating reputation of the organization.

According to the US allies and some trade experts, the biggest problem for the WTO is that China benefits from the rules of the body at the expense of other members.

The WTO laws are largely inadequate to deal with some – but not necessarily with all of the problematic trade practices coming from China. The representatives of the European Union also said they wanted a change in WTO rules to allow swifter action against dumping and illegal subsidies.

Joining the revision of the world trading system can be a positive result of the current tension if the issue of steel and aluminum duty has a happy end. However, a wider dispute is unlikely to cause fundamental trade organization reforms to meet China’s challenges.

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