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Japan, WTO members pushing reform as US-China trade war imperils organization's future

World Trade Organization Director-General Roberto Azevedo speaks at an event to commemorate the 60th anniversary of the Japan External Trade Organization in Tokyo's Chiyoda Ward, on Nov. 8, 2018. (Mainichi/Akane Imamura)

TOKYO -- A group of likeminded governments including Japan and the European Union (EU) is moving to overhaul the World Trade Organization (WTO) -- reforms they believe are indispensable for the body's continuing relevance and the preservation of the liberal global trade regime amid the worsening China-United States trade war.

"The current situation at the WTO is no longer sustainable," read an Oct. 25 joint communique issued after a meeting of these 13 likeminded nations and regions held in the Canadian capital Ottawa. The statement also notes, "We are deeply concerned by recent developments in international trade, particularly the rise in protectionism, which negatively affect the WTO and put the entire multilateral trading system at risk."

Neither the U.S. nor China, currently engaged in a tit-for-tat war of high tariffs on agricultural and manufactured goods, was at the Ottawa meeting. The U.S. has accused China of violating WTO rules on intellectual property and inflicting economic damage on multiple nations, and President Donald Trump told Bloomberg in late August, "If they (the WTO) don't shape up, I would withdraw" from the organization.

In a Nov. 8 speech in Tokyo, WTO Director-General Roberto Azevedo also noted that many member states were calling for change. In a reference to the U.S.-China trade dispute, he also noted that "tensions have been rising, in recent months, between a number of major trading partners. The situation is of real concern."

On reform, the WTO is expected to include in a Nov. 12 joint statement a proposal to punish members that fail to report government subsidies for domestic industries as required under WTO rules. Under the penalties, governments that missed the reporting deadline by more than two years would be liable for increased financial contributions to the organization and be barred from holding important WTO positions. Those that did not submit the reports for a further year would be suspended from organization activities and forbidden from having a say in WTO meetings until the very end of proceedings, effectively barring them from discussions.

The proposal appears aimed at China, which has neglected to submit the government subsidy reports, and the U.S. has said it will sign on to the joint statement.

However, the Trump administration has shown no sign of being seriously committed to WTO reform. Under the organization's trade dispute resolution system, a case is heard by a first panel and then, if necessary, a seven-person Appellate Body. However, in a move that has angered European WTO members, the U.S. has continued to block new appointments to the appeals body. As a result, the Appellate Body is set to drop below its three-person quorum in December 2019 due to expiring appointments and other factors.

The WTO's Azevedo on Nov. 8 called this a "particularly pressing" issue, adding, "These challenges require an urgent response from members. There is a responsibility on the whole international community here."

However, Washington's import restrictions and anti-China tariffs imposed this year are being challenged before a WTO dispute resolution panel. One former organization official said it is strongly believed internally that the Trump administration is trying to defang the WTO in case the U.S. loses the hearings.

Meanwhile, there remains no sign of concrete measures against damage inflicted by intellectual property right violations by China, among other numerous problems that need to be tacked by the WTO. Getting both China and the U.S. to accept any reforms also promises to be a steep hill to climb.

(Japanese original by Kenji Shimizu and Akane Imamura, Business News Department)

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