Trade Chiefs Discuss WTO Reform, Without China and the U.S.

(Bloomberg) -- A group of global trade chiefs is meeting to start setting a reform agenda for the World Trade Organization, though it’s unclear how far they can take the effort with the U.S. and China excluded from talks.

The discussions Thursday in Ottawa aim to identify ways to modernize the global body that all -- or at least most -- of the WTO’s 164 members can agree to at some point in the future.

The trade gathering comes at a precarious moment for the WTO, which is struggling to contain an escalating trade war between the world’s two largest economies. In the past month, the European Union, China and the U.S. have all advanced disputes at the WTO over new American metal tariffs, European retaliation and Chinese intellectual-property practices.

“We’re convening a very important meeting of a group of 12 countries that represent every continent -- all of whom believe in a rules-based international trading system,” Canadian Trade Minister Jim Carr told reporters in Ottawa Wednesday. “We begin from a group of nations who know that this system is better than no system but we have to improve it. So we are having the first step of a larger conversation.”

Though neither the U.S. nor China were invited to the meeting, President Donald Trump’s economic battle with Beijing and his criticism of the WTO has in large part sparked the conversation about improving the Geneva-based trade body.

Trump has threatened to withdraw from the WTO, repeatedly attacked the organization as being biased against U.S. interests and is slowly strangling the appellate body, which mediates trade disputes that affect some of the world’s largest companies.

WTO Director-General Roberto Azevedo will be among the list of high-level officials attending the Ottawa ministerial, along with European Trade Commissioner Cecilia Malmstrom and Mexican Economy Minister Ildefonso Guajardo. “Without action to ease tensions and recommit to cooperation in trade, we could see serious harm done to the multilateral trading system,” Azevedo said in a speech last week.

Carr began the session Thursday saying the nations would discuss what they want the WTO to look like in the 21st century, and work backward from there to determine the changes needed. Trade rules are crucial for investor confidence, he said, particularly in comparatively small countries like Canada.

“It is clear that the WTO is facing serious challenges,” Carr said Thursday, adding: “The problems facing the multilateral trading system were not created by any one WTO member. They are not new and they cannot be solved by any one member.”

Appellate Body

The top agenda item will be the WTO appellate body and exploring ways to ensure it won’t be paralyzed by the Trump administration.

Over the past year, the U.S. has refused to consider any appellate body appointments because it says the forum’s current members have strayed from their original mandate. The three judges remaining are the bare minimum required to adjudicate appellate cases. The terms of two of the three expire in December 2019, which would leave the body paralyzed.

Trade ministers in Ottawa plan to address U.S. concerns and consider whether WTO members can offer better guidance to the appellate body about how it should address specific issues.

The agenda for Thursday also includes a discussion of common goals for improving the three core areas of the WTO’s work -- negotiation, dispute settlement and the implementation of WTO agreements. In addition, trade ministers will discuss ways to lighten the appellate body’s load by using alternative means of dispute adjudication and narrowing the scope of their dispute proceedings.

Participants expect the meeting to produce a joint communique, which could be considered at the Group of 20 leaders summit next month in Buenos Aires.

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