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Lighthizer Continues to Favour Tough Action to Achieve WTO Reform

In a 12 March hearing before the Senate Finance Committee, U.S. Trade Representative Robert Lighthizer said the United States should continue to boldly use its leverage to achieve much-needed reform at the World Trade Organisation. Such leverage includes blocking the appointment or reappointment of Appellate Body judges, which if continued will effectively preclude that body from hearing and deciding cases once the number of active judges drops below three later this year.

Sen. Chuck Grassley (Republican-Iowa) kicked off the hearing by describing the Trump administration’s concerns about systemic and procedural problems with the Appellate Body as not new or partisan. He decried the ability of WTO members – including mainland China – to self-certify as developing countries  and criticised mainland China’s use of state-owned enterprises to buy private companies around the world as well as to subsidise its industries. Indeed, Grassley believes mainland China has not lived up to the commitments it made when it joined the WTO, as detailed in the Office of the U.S. Trade Representative’s annual report on mainland China’s WTO compliance, noting that “WTO rules have not effectively constrained China’s mercantilist policies and their distortion of global markets.”

At the same time, Grassley took the opportunity to stress the constitutionally mandated role of Congress to impose and collect taxes, tariffs and duties, as well as to regulate international commerce. While the senior senator from Iowa reiterated his willingness to assist President Trump and USTR Lighthizer with their efforts at the WTO and in negotiating “strong and enforceable” trade deals, he added that he will do so “with the understanding that erecting new market barriers with tariffs and quotas cannot be a long-term solution.”

Democratic Ranking Member Ron Wyden (Oregon) said he shared many of Grassley’s views but, if anything, was more passionate about problems with mainland China. In his view, the problems currently facing the WTO begin with mainland China. According to the Oregon lawmaker, WTO rules were drafted more than two decades ago when mainland China was an “economic middleweight” but the mainland has since become an “economic heavyweight” and much of its growth has come at the expense of the United States and in violation of WTO rules and the commitments it made in 2001. These violations include subsidised SOEs, intellectual property theft, forced technology transfers and government-led shakedowns of foreign investors, according to the senator.

Lighthizer said the WTO has shifted from a “forum for negotiation to one for litigation.” This development has had unfortunate consequences, according to Lighthizer, including the inability to develop new trade agreements and the undermining of the commitment to the organisation. Many members have high bound tariffs and other barriers and “it is difficult to see how pressure can be created to get them to reduce either.” Additionally, Lighthizer believes many members have gotten into the habit of ignoring their basic obligations, including the requirements that subsidies be notified and various transparency obligations be fulfilled. He also criticised the fact that many members self-declare to be developing countries “even though they are among, in many cases, the richest in the world.”

With regard to the Appellate Body, Lighthizer stated that this body often does not follow its own rules and reiterated the willingness of the administration to pursue a tough strategy in order to effect change. In response to a question by Sen. Rob Portman (Republican-Ohio) on whether the United States would consider replacing a consensus-based WTO with a majority or super-majority system, Lighthizer said that a super-majority “could easily work against U.S. interests” and instead favoured the pursuit of pluri-lateral negotiations like those on e-commerce.

Content provided by Picture: HKTDC Research
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