The World Trade Organization is running on fumes, and beyond the lackluster reforms of the Appellate Body that have always been used as the official reason to ignore it, Europe and China have helped make this a toothless dino.
CPA CEO Michael Stumo asked guest speaker, Dennis Shea, Former Deputy USTR and Chief of Mission to the WTO between 2018 and January 2021, where he saw that multilateral organization five years from now.
“Tough question,” said Shea, who started the fourth and final day of the CPA Annual Conference on Friday. “It is on the brink of becoming very irrelevant to the United States. You see in Congress a growing awareness…with efforts like the Endless Frontier Act (Senator Chuck Schumer’s bill) to increase U.S. investments in some of these technologies China is focused on now. And what is the WTO role in that? I don’t see any role in that. I don’t support withdrawing from the WTO, but five years from now the WTO may just be an afterthought.”
Since China became a member of the WTO in 2001, Washington has brought on nearly two dozen cases against China on a wide range of important subjects. And even though the U.S. won, it took years to litigate, a significant amount of financial resources and time. The end result? The needle didn’t budge and China has dug in even deeper on its thinking about its economy in a global setting.
The WTO is based in Geneva, so it is pertinent to explore what the Europeans think about China these days. Italy’s textiles are all there. Germany is increasingly dependent on them for its automotive sector. All of Germany’s solar panels are made there.
“A big part of what I tried to do when I was in Geneva was to get them to come along to our way of thinking but they are incredibly resistant,” Shea said.
For instance, when the U.S. used Section 301 tariff actions against China in 2018, Japan and Singapore supported the move. The European Union opposed it and filed a brief against them.
The WTO later said those tariffs were against member rules and the Trump team ignored them.
“I tried relentlessly to get them to sign onto a statement that said WTO members have market economies and trade with each other based on market conditions. The EU refused to sign onto that,” he said, adding that while the EU is a big defender of reforming the Appellate Body — more hotel bar bureaucratic banter in our opinion — they have made it difficult to deal with the non-market practices of China.
“They wouldn’t sign on to market- oriented conditions because it implied that China could not be a part of the WTO,” he said. “I think they were in the middle of trying to get their investment agreement with China then. I think EU trade policy is driven by German multinationals who often act as a brake to do something collectively on China. The way China has recently responded to EUs sanctions on individuals because of Xinjiang might change it. We will see.”
Shea says Biden should continue pushing the WTO to require members to reveal where their subsidies are coming from and if they are going towards goods geared for export markets. He said Biden should also push the WTO to say that members need to adopt market principals.
When the world’s No. 1 economy is an open democracy with largely free trade, and the world’s No. 2 is an authoritarian system with largely managed trade, something’s got to give.
He said that we used to refer to China’s meteoric rise as the handiwork of China Inc., a collection of private and state run companies growing at leaps and bounds and breaking into world markets. Every American teen has a China app on their phone — TikTok. Your neighbor’s solar roof is probably made in China.
Shea said that it is better to refer to them all simply as CCP, Inc.
“If China was once typified by relatively clear demarcations of state-owned and private-owned businesses, well in this new era the lines are blurred,” he said. “It is difficult to delineate with any precision where firm autonomy begins and CCP influence ends.”