U.S. Trade Chief Lays Out His Vision to Revive the Ailing WTO

(Bloomberg) --

America’s top trade official, Robert Lighthizer, laid out his vision for overhauling the World Trade Organization, which is confronting the most challenging period in its 25-year existence with a looming leadership void and the virtual paralysis of its core functions.

Lighthizer, a former trade lawyer who has led an aggressive campaign to reshape the WTO, argued in a Wall Street Journal op-ed on Friday that nations should replace the defunct WTO appellate panel -- where disputes are settled -- with a single-stage process “akin to commercial arbitration.”

President Donald Trump has referred to the WTO as the worst trade deal the U.S. has ever signed, largely because it allowed China’s centrally planned system to flourish in the global economy against nations espousing free markets.

Roberto Azevedo, the Brazilian national who has run the WTO since 2013, is stepping down at the end of this month, a year shy of his second four-year term. Eight candidates are vying to replace him, but Lighthizer hasn’t publicly endorsed anyone yet.

At the heart of the rules-based order for international commerce is the WTO’s ability to settle grievances between governments and the companies they represent. Lighthizer wrote that the WTO should establish “ad hoc tribunals” to resolve particular disputes in an “expeditious manner,” and rulings should apply only to the parties of the dispute.

In the absence of an appeals system, WTO members should develop a “mechanism that allows the WTO membership to set aside erroneous panel opinions in exceptional cases,” he wrote.

The article represents Lighthizer’s clearest explanation of how countries should fix the WTO’s dispute resolution process, which the Trump administration rendered inoperable in December by blocking new appointees to the appellate body at the Geneva-based organization.

Lighthizer’s op-ed criticized the WTO appellate body for curbing America’s trade defenses and evolving into a “high court empowered to create a new common law of free trade.”

‘Skillfully Exploiting’

“Our major trade competitors like China found they could use the Appellate Body as both a sword and a shield,” Lighthizer wrote. “Successfully challenging U.S. trade-remedy laws that prevent our market from being flooded with dumped or subsidized products, while skillfully exploiting the system to escape accountability for their non-market behavior.

The article is unlikely to appease most nations’ concerns about the U.S. decision to paralyze the appellate committee. More than two-thirds of the WTO’s 164 members have called for the immediate resumption of a process to appoint appellate panelists, and a smaller group signed onto a proxy arbitration system established this year by the European Union.

Lighthizer’s five-point plan for reforming the WTO also calls on members to:

• Establish “baseline tariff rates that apply to all” WTO members with minimal exceptions to address political sensitivities
• Eschew free trade agreements except for those aimed at fostering regional integration among contiguous states
• End special and differential treatment to countries with large or advanced economies
• Create new rules to “stop the economic distortions that flow from China’s state capitalism”

In an interview Thursday with Bloomberg Television, Azevedo said his successor needs to be catalyst for increasingly disparate views. “This is particularly important with the kind of environment we live in today -- a very polarized world, not only in terms of trade and economics but geopolitics as well.”

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