The World’s Tariff Referee Gasps for Life

(Bloomberg) -- Tariffs get all the headlines in President Donald Trump’s two-pronged attack on the global trading system. The other disruptive part of his plan is quietly playing out far from the Group of 20 leaders’ summit this week.

While U.S.-China talks will dominate the G-20 in Japan, World Trade Organization reform is on the agenda. Some leaders are expected to press Trump to end his obstruction of the trade world’s de facto supreme court -- the WTO appellate body. The timing is critical for several reasons:

• If the U.S. succeeds in paralyzing the appeals panel by blocking new nominees, as is expected by year-end, it will effectively declaw the main forum for trade dispute settlement and usher in an environment where economic might equals right.
• The Geneva-based WTO has other problems: an anemic negotiating agenda, flagrant non-compliance, escalating unilateral tariffs and a growing use of national security exemptions.
• "We are facing a number of very critical systemic issues at the WTO," Director-General Roberto Azevedo told reporters in Geneva last week. A WTO report released Monday underscored his challenges.
• Ensuring the stability of the rules-based trading system is considered crucial for most nations -- particularly the U.K., which is banking on the WTO to stave off the potential for an economic Armageddon under a hard Brexit.
• WTO members this week will ask the U.S. to justify its $16 billion bailout for American farmers caught in the trade-war crossfire to see if it violates international rules

Charting the Trade War

As Trump and Xi Jinping prepare to meet this week at the G-20 summit in Osaka, their trade-war stalemate has caused China’s share of the U.S. trade deficit to shrink to the smallest in seven years.

Today’s Must Reads

• China’s imports falter | Trump cites China’s exports as a sign of what’s wrong with the world. Now Chinese imports look problematic
• Trump-Xi expectations | Don’t expect the U.S. to compromise on its demands for meaningful Chinese economic reforms, officials say
• Thai factories slump | Thai manufacturing output declined in May by 4%, the worst since 2014 and exceeding economist forecasts
• India’s opportunity | Borrowing a script from Vietnam, India is weighing tax incentives to attract companies avoiding China

Economic Analysis

• The global outlook | As U.S. tariffs pose a big risk in the second half, here’s a country-by-country assessment of the world outlook
• China’s long march | China weighs its short- and long-term policy options as hopes dwindle for a speedy end to U.S. tariffs
• Africa’s lower tariffs | Africa doesn’t need to follow Asia’s growth model. More prosperity lies in producing more of what it consumes

Coming Up

• Tuesday: CPB world trade volumes for April
• Tuesday-Wednesday: WTO members to press U.S. on its farm bailout
• Friday-Saturday: G-20 leaders meet in Osaka, Japan

--With assistance from James Mayger.

To contact the reporter on this story: Bryce Baschuk in Geneva at bbaschuk2@bloomberg.net

To contact the editors responsible for this story: Richard Bravo at rbravo5@bloomberg.net, Brendan Murray

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