USTR General Counsel Says EU, Japan, US Tackling WTO Reform to Address SOEs, Subsidies

The general counsel to the U.S. trade representative said that after five trilateral meetings with the European Union and Japan, the countries have reached "general agreement" on how the World Trade Organization should address subsidies and state-owned enterprises. He said it's not just U.S. blue-collar workers who have grown dissatisfied with globalization, and pointed to the new populist government in Italy, Brexit and the Yellow Vest movement in France.

General Counsel Stephen Vaughn gave specifics to the oft-repeated complaint that the WTO Appellate Body is engaging in gap filling where the founding documents were intentionally ambiguous because the countries had not reached agreement. He said that it's obvious that the U.S. would not agree to weaken its antidumping and countervailing duty laws during the Uruguay and Doha rounds, and yet it faces "a never-ending blizzard of attacks on those rules at the WTO -- and many of those attacks succeed."

He said that as long as other countries are able to chip away at AD/CVD law, they are less interested in trying to address their complaints in negotiations. "Negotiations imply compromise and a party that expects to prevail through litigation is not inclined to compromise," he said at a Hudson Institute event March 13 called "Can the U.S. and Allies Agree on WTO Reform?"

After Vaughn's talk, a panel of experts and a Japanese trade diplomat talked about where WTO reform might go this year. Takeshi Komoto, trade minister at the Japanese Embassy, said that the U.S. has a very strong opinion about the ways in which the Appellate Body has been operating, and "Japan would like to bridge the gap in views of members." He said he believes they will reach a solution.

Peter Rashish, director of the Geoeconomics Program at the American Institute for Contemporary German Studies, said that Europe is generally more comfortable with a strong judiciary in international trade, and therefore does not agree with the U.S. views of how the Appellate Body has strayed from first principals. Instead, the EU's proposals would give the Appellate Body more independence, by appointing panelists for eight years, and making it a full-time occupation.

In addition, Komoto said Japan is looking forward to commencing the U.S.-Japan bilateral trade talks. Although Japan has had a higher proportion of its steel exports excluded from Section 232 tariffs than most other countries, Komoto said in a brief interview after the panel that Japan wants the tariffs lifted quickly. Quotas are a non-starter, he said.