“To move forward on modernizing the WTO rules, we must first address China”

Der Reformbedarf der Welthandelsorganisation hängt oft mit politischen Strategien Chinas zusammen, erklärt der Handelsexperte Daniel S. Hamilton. Der Distinguished Fellow der Austrian Marshall Plan Foundation spricht im Interview außerdem über das seit Ende 2019 blockierte Berufungsgremium der WTO und deren Umgang mit erzwungenen Technologie-Transfers und dem Diebstahl geistigen Eigentums.

Von Robin Fehrenbach

Mr. Hamilton, the WTO urgently needs substantial reform to fulfill its purpose of defending principles for international trade. Let’s start with the most obvious task on the agenda of the new Director-General Okonjo-Iweala which is to restore the very important role of the Appellate Body. How could its gridlock be solved so that the trade dispute settlement among its 164 members can be managed again?

The Appellate Body stopped operating in December 2019 because the United States refused to agree to re-appoint incumbent members or to appoint new members. Much critique was leveled at the Trump Administration, but the Biden Administration has underscored that U.S. concerns are bipartisan. The core U.S. complaint is that the Appellate Body has engaged in judicial overreach, interpreting its mandate beyond what WTO members agreed with when the Body was established in 1995. Moreover, the United States is not the only WTO member with this concern.

Any solution to either re-constituting the Appellate Body, or a possible successor, must be grounded in the original 1995 expectations – that such a body would play a limited role in dispute settlement, looking only at the case in front of it with a view to legal errors, not revisiting the facts or trying to establish legal precedents for future cases via its findings. Some member states have additionally argued that the Appellate Body should be supported directly by the WTO Secretariat rather than by its own staff, which have been accused of paying insufficient attention to WTO member states rights. Jeffrey J. Schott and Euijin Jung of the Peterson Institute for International Economics have analyzed the WTO cases brought against the United States and find that the problem of judicial overreach seems to surface primarily in a subset of U.S. losses in antidumping and countervailing duty (AD/CVD) cases that target specific methods of calculating dumping margins. They suggest to exempt AD/CVD cases from appellate review (while still subjecting them to dispute panel rulings) as a way to address U.S. concerns.

Modernization of the WTO set of rules also needs to take place with regard to industrial subsidies, forced technology transfers as well as digitization – just to mention the most pressing issues. Could you elaborate on these topics?

In order to move forward on modernizing WTO rules, we must first address the China problem, because many of these issues turn on Chinese policies.

Twenty years ago, we made a bet: admitting China into the WTO would induce it to become a “responsible stakeholder” in the rules-based trading order. We must have the courage to admit we lost this bet. China’s forced technology transfers, its unprecedented intellectual property theft, and its enormous government subsidies, among other policies, threaten to undermine trust in the WTO and its mechanisms. The United States, the EU and Japan have had an ongoing dialogue on how to address their concerns about China and the WTO. As Jennifer Hillman and others have argued, they should now bring those concerns forward by gathering a broad coalition of countries to file a common, comprehensive case at the WTO. A broad-based coalition would have leverage over China, whereas individual entreaties would not. It would signal faith in the WTO’s ability to address challenges to the rules of the global trading system. A case of this type would also be a means to identify more clearly where current rules fall short, and how they could be changed. China would face a choice: either to adjust to the WTO system, or to leave it. The best case result would be common agreement that both China and the global trading system benefit from China’s WTO membership, including meeting the responsibilities associated with it, and that some WTO rules need adjusting going forward.

Twenty years ago, we made a bet: admitting China into the WTO would induce it to become a “responsible stakeholder” in the rules-based trading order. We must have the courage to admit we lost this bet.

How is it possible to collectively make the WTO as a multilateral institution stronger, more agile and better adapted to the realities of today just as the newly elected Director-General pointed out in her first official statement?

The WTO could be stronger and made more fit for purpose in a number of areas. One would be to strengthen the role of the Secretariat by modifying the consensus rule on administrative issues, and to complement member-state reporting on their policies and compliance with WTO agreements by giving the Secretariat its own independent analytic capabilities. Reforms should build on innovations adopted in several WTO bodies to open and encourage greater participation by stakeholders in committee meetings, including business, regulators, and other international organizations.

The WTO should also be open to plurilateral initiatives by subsets of member states, provided that any agreements that result from such initiatives be open to other WTO members who agree to abide by their conditions. Further, there should be more independent criteria for determining countries eligible for “special and differentiated treatment.” At the moment countries simply declare whether they qualify or not. The dispute settlement system must be reformed, as mentioned earlier. And we must address China’s failure to follow through on the commitments it made when it joined the WTO.

Dr. Daniel S. Hamilton is the Austrian Marshall Plan Foundation Distinguished Fellow and Director of the Global Europe Program at the Woodrow Wilson International Center for Scholars. He is also Senior Fellow and directs the Foreign Policy Institute’s “The United States, Europe, and World Order” Program at Johns Hopkins University’s School of Advanced International Studies in Washington, DC. Here you can read his full biography.