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World The Election Nobody is Talking About: Leading the WTO | Opinion

14:52  25 november  2020
14:52  25 november  2020 Source:   newsweek.com

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For months, the world's attention has been consumed by the race for the White House. Little attention, however, has been paid to another important international election—that of the next director general of the World Trade Organization (WTO), the only entity responsible for policing global trade. With the U.S. election in the rear-view, the question remains whether the West can champion meaningful WTO reform to address China's rampant trade violations.

Xi Jinping wearing a suit and tie: Chinese President Xi Jinping applauds veterans at a ceremony marking the 70th anniversary of China's entry into the Korean War, on October 23, 2020 at the Great Hall of the People in Beijing, China. © Kevin Frayer/Getty Chinese President Xi Jinping applauds veterans at a ceremony marking the 70th anniversary of China's entry into the Korean War, on October 23, 2020 at the Great Hall of the People in Beijing, China.

The global trading system has been in a state of paralysis for years. During both of his campaigns, President Trump railed against "calamitous trade deals," claiming that China's entry into the WTO was a mistake that jeopardized millions of jobs. He had reasons for concern. These include China's systematic discrimination against foreign products and producers, including the coercion of foreign firms to hand over intellectual property.

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Nevertheless, while the U.S. strategy has relied heavily on unilateral tariffs, Beijing has been building bridges around the world. Just last week, China signed onto the Regional Comprehensive Economic Partnership, an agreement spanning 15 countries that account for 28 percent of global trade. China's efforts to deepen economic integration with other nations often come at the expense of America's reputation as a global leader.

China's rise has exposed flaws throughout the international system, and the WTO is no exception. The WTO's current dispute settlement system is ill-equipped to address China's predatory economic structure. Similarly, overreach by the WTO's appellate body has emboldened countries to pursue deals through litigation rather than negotiation.

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Beyond its failure to produce a single round of multinational tariff negotiation since its establishment in 1995, the WTO also mistakenly leaves it to members to self-declare as either "developed" or "developing." China, the second-largest economy in the world, has outlandishly declared itself a "developing" country, enabling it to garner preferential treatment designed for emerging economies. This tactic further strains the WTO's credibility.

Which brings us to the election for the next WTO director general, which is decided not by vote tallies but consensus. Two candidates remain: Nigeria's Ngozi Okonjo-Iweala and South Korea's Yoo Myung-hee. The Trump administration opposed Okonjo-Iweala's candidacy in favor of Myung-hee, who has a track record of challenging Beijing and negotiating trade deals, something her opponent lacks. Although Okonjo-Iweala enjoys European, Chinese and developing nation support, critics have raised concerns about her objectivity given Nigeria's complicated economic ties with China. These include a number of Chinese loans to build airports and other infrastructure, some of which could fall into Chinese hands should Nigeria default on the loans.

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Although the director general lacks the authority to unilaterally impose his or her will on member states, this election comes at a critical moment. The organization's very credibility is at stake, and nearly every industrialized country, with the exception of China, is facing strong economic headwinds and an uncertain COVID recovery. The selection of a WTO director general who is perceived, fairly or not, as deferential to China would almost certainly perpetuate the current institutional paralysis and could result in further fracturing of the global trading system.

Conversely, and as more countries come to view China as more foe than friend, the selection of an experienced trade negotiator with credibility in Washington and experience wrangling Beijing could break the current logjam and result in a productive airing of grievances. While the United States and its allies are unlikely to win each and every trade dispute, history shows that China has a fairly consistent track record of complying with WTO rulings. Electing someone genuinely committed to reform and to addressing China's nonmarket practices, like Myung-hee, could therefore be the key to unleashing the world's collective economic engine.

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So, what should the incoming administration do?

First, resist the urge to reverse all of Trump's WTO policies. Instead, borrowing an Obama administration phrase, exercise strategic patience and evaluate where such policies provide U.S. officials with negotiating leverage. Specifically, regarding the WTO election, the incoming U.S. team should meet with both candidates to press them on their vision for reform, as well as their views on China's use of illegal subsidies and other tools to distort the trading system.

To convince the U.S., Okonjo-Iweala may want to state more forcefully that trade abusers like China must be held accountable for their transgressions. Any subsequent change in China's support for Okonjo-Iweala would betray Beijing's fears about increased trade scrutiny. If Okonjo-Iweala is no longer considered viable, the U.S. should move to rally support for Myung-hee, which may leave China as the outlier and further expose its unwillingness to negotiate in good faith.

Consistent with the last three U.S. administrations, the incoming team should also refrain from immediately supporting replacements for the WTO's appellate body. Naming replacements without negotiating any concessions would forfeit valuable leverage and diminish the chances of securing meaningful bureaucratic reform. Instead, the U.S. should enter into good-faith negotiations with other members to overhaul the dispute process within a defined period, lest these discussions drag on for years.

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Rather than relying on unilateral tariffs, the U.S. should seek to leverage the WTO's existing system to negotiate new rules that address Chinese violations. The U.S. government's chances of success would improve significantly if it acted together with allies who could serve as co-complainants. Initial disputes could focus on addressing subsidies for state-owned enterprises, as well as forced technology transfer.

Lastly, the U.S. should work with other advanced countries to eliminate preferential treatment for countries falsely masquerading as "developing," while also advocating that WTO members extend unconditional most-favored-nation treatment to each other. Both moves would help level the playing field.

The WTO election may not garner significant public attention, but its rulings impact major swaths of the U.S. economy. The incoming administration would be wise to promote enhanced U.S. leadership at the WTO, albeit with a close eye on China's grand ambitions.

Craig Singleton is a national security expert and former diplomat who currently serves as an adjunct fellow at the Foundation for Defense of Democracies (FDD) for its China Program. FDD is a nonpartisan think tank focused on foreign policy and national security issues.

The views expressed in this article are the writer's own.

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