USTR Froman Calls for "Pragmatic Multilateralism" in Charting WTO Course

20 October 2016

US Trade Representative Michael Froman issued a call for fellow WTO members to follow a growing trend of “pragmatic multilateralism,” particularly as they work to chart a path toward the organisation’s next ministerial conference in Buenos Aires, Argentina, and beyond.

Speaking at the Graduate Institute in Geneva, Switzerland, just days before a “mini-ministerial” gathering in Oslo, Norway, the US trade chief told a packed room of trade officials, academics, and journalists that “pragmatic multilateralism” would be essential going forward, while at the same time touting the potential of bilateral, regional, and plurilateral trade negotiations to feed into this process.

The US trade chief raised a series of examples – such as the WTO’s Trade Facilitation Agreement (TFA) – as clear cases of pragmatic multilateralism at work.

He also cited some ongoing negotiations for accords among subsets of WTO members – specifically the Trade in Services Agreement (TISA) and the Environmental Goods Agreement (EGA) along with a planned initiative on fisheries subsidies – as other promising instances of a new trend in trade talks. (See Bridges Weekly, 22 September 2016)

Going forward, he suggested continuing with this trend, warning about returning to the past practice of eschewing any plurilateral efforts in favour of multilateral-only approaches, in light of the deep-seated problems that plagued the WTO’s Doha Round trade talks.

The Doha negotiations were launched in 2001, only to collapse or see slow progress in the years since. Trade ministers at the WTO’s last ministerial conference in Nairobi, Kenya, ultimately agreed to disagree over whether the Doha Round’s mandate should be reaffirmed, while pledging their continued commitment to its actual subject matter. (See Bridges Daily Update, 19 December 2015)

“We all understand the economists’ admonition that the best and highest form of trade liberalisation is multilateral trade liberalisation, but that doesn’t mean that it is in our collective interest to tolerate years of deadlock or to resign ourselves to the lowest common denominator,” said the US trade chief.

Froman reaffirmed that while the multilateral approach is ideal, “plurilaterals” can also be a promising avenue for liberalisation and developing new trade rules which could then be channelled back into multilateral processes.

“What we cannot allow is for progress to be defined by the least ambitious, the slowest, the most obstructionist,” he said.

Among the key issues that Froman cited were labour and environmental protections, along with fostering innovation and the continued development of the digital economy, together with supporting smaller businesses and addressing the effects of having state actors own and run major businesses.

One area that drew particular notice during his speech was that of agriculture, including domestic support, an area where WTO members have said they are interested in inking a deal.

“We took an important first step in dealing with export subsidies in Nairobi. But one cannot deal with agriculture without taking on market access restrictions, which economists view as the most distortive of all policies,” he said.

Furthermore, efforts to reign in domestic support should address the programmes of all members. “If you’re a cotton farmer in Mali, it doesn’t matter whether the distortion comes from a subsidy in the United States and Europe or from a subsidy and the stockpiling of excess supply in China.”

The US recently filed a request for consultations with China on allegedly illegal subsidies for various grains, marking the first step in WTO dispute settlement proceedings. Sources say that the new dispute has added some uncertainty to how agriculture-related negotiations at the global trade body may proceed. (See Bridges Weekly, 15 September 2016 and 6 October 2016)

Chinese Ambassador to the WTO Yu Jianhua made an intervention during the event on the agriculture subsidies issues, suggesting that Chinese farmers receive less than US$100 per head, relative to the thousands received by American farmers. While the two officials then engaged in a brief discussion on the classification and potential trade-distorting nature of the subsidies, they ultimately both said that the legal dimensions of the issue were best discussed in further depth in a different setting.

Froman: “Get it done right, not fast”

The Oslo meeting later this week is due to bring together over around 20 ministers from various major players, including the US, for discussions on what direction and approach WTO negotiations might take ahead of the 2017 Buenos Aires ministerial and beyond. Meetings will also be held of the ministers from countries involved in the Environmental Goods Agreement (EGA) and Trade in Services Agreement (TISA) negotiations, both processes which are aiming for conclusion by December.

While the Oslo meeting is meant to help support the effort to “move from reflection to action,” after months of preliminary discussions on how to proceed in the wake of the Nairobi ministerial, the US trade chief suggested that this revamping of the WTO’s negotiating arm could be a long process spanning years.

“When I look at where we started eight years ago, after the failure of 2008, and where we are now, with the success of Bali and Nairobi, I am confident that if members continue to take seriously the challenge of charting a new course, they will succeed,” he said.

He suggested that the Buenos Aires ministerial, scheduled for later 2017, might be too soon for concluding this process – but that this “should not be a cause for alarm.

“This time, it’s important to get it done right, not fast,” he said, pledging the US’ support and engagement throughout the process, regardless of who assumes the country’s presidency in January.

Indeed, the direction of US trade policy both in Geneva and elsewhere in the short and medium-term has been a notable source of speculation, particularly in light of the heightened focus on trade and its potential downsides throughout the American election process.

The US election is scheduled for 8 November, with the months preceding it involving a rancorous debate on issues such as how best to boost the American economy – including through trade policy – and resolve concerns over deepening inequality. (See Bridges Weekly, 29 September 2016)

President Barack Obama will then leave office on 20 January, with the new president then choosing who to serve in their cabinet. The post of US Trade Representative is a Senate-confirmable position, with recent history suggesting that the process to find a successor to Froman could take some months to complete.

Trade, globalisation, and technology

While the event’s main focus was on the WTO, the broader trade landscape also drew interest from the audience – including the anti-trade rhetoric that has characterised the US presidential election; the prospects for ratifying a 12-country Pacific rim trade deal in that context; and the UK-US trade relationship in light of the “Brexit” vote from last June.

The connecting thread across all of these questions was the underlying tensions across various countries on the potential downsides of globalisation, trade, and technology, and how to address the potential increases in inequality that may arise.

“The challenge in our system is that you don’t get to vote on automation,” nor on the “force” that is globalisation.

“Trade agreements are the mechanism for shaping globalisation,” said Froman. Trade has instead become a “scapegoat” for a host of other concerns, including of “communities that have been left behind,” adding that he hoped the election debate in the US can lead to increased support for domestic policies that can better prepare and support people through change.

Responding to questions on Brexit, he noted that trade did not seem to be a factor behind the “Leave” campaign’s efforts, given their work after the 23 June vote in attempting to assure voters that the UK would not lose some of its essential trading relationships.

However, with regards to past comments by US President Barack Obama on what the UK vote to leave the EU might mean for a future US-UK trade deal, Froman reaffirmed that the ongoing US negotiations for the EU toward a Transatlantic Trade and Investment Partnership (TTIP) come first.

“I think what the president made clear is that TTIP has been our priority. I think the practicality of it, as well – leaving aside the legality of when it could sign its own trade agreement – the practicality of when the UK sorts out its relationship with the EU,” said Froman, noting that such issues may include who has sovereignty over tariffs and regulations and what the UK access to the single market will be like.

Until the UK-EU relationship is settled, he said, “it’s impossible to have a serious conversation about what deal you could have with the UK separately.”

ICTSD reporting.  

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