Ambassador, Former USTR Hopeful WTO Trade Dispute Settlement System Can Be Resolved

A former top U.S. trade official and a New Zealand ambassador were optimistic the World Trade Organization can work through issues over its dispute settlement body but warned about damaging consequences for world trade if it doesn’t.

In December, the WTO body that hears appeals will not have enough members to hear cases after the Trump administration blocked appointments to the body in July. Speaking during an Oct. 25 event hosted by the Meridian International Center, Rosemary Banks, New Zealand's ambassador to the U.S., said she was hopeful a solution can be found.

Banks said the WTO has “hit stalls … in the past, and we’ve gotten past them.” But she also said a non-operational dispute settlement body would cause significant trade disruptions. “If we come to the end of the year and we don't have a dispute settlement mechanism in the WTO,” she said, “nobody really knows how the rules-based system of the plurilateral agreements will hold up.”

Former U.S. trade representative Michael Froman said he thinks a solution will be found, adding that the WTO also needs broader reforms. “There's an emerging consensus around the world … that the WTO could use an update,” he said during the event. “I’m hopeful the parties will come to the table and figure out how to strengthen and improve dispute settlements.”

The two also spoke about the U.S.’s relationship with China and the broader Asia-Pacific region. Froman criticized President Donald Trump’s decision to pull out of the Trans-Pacific Partnership and said a U.S.-China trade deal needs to feature more than just Chinese purchases of U.S. soybean exports. He also said the U.S. needs to finalize trade deals -- specifically in the Asia-Pacific region -- to make sure it is “writing the rules” on trade instead of being subject to them.

“I think pulling out of TPP, in retrospect, will be seen as one of the most significant strategic blunders in at least American history,” Froman said.

Froman said the Trump administration has “gotten the attention of China’s leadership” through tariff threats but needs to focus on translating that leverage into a meaningful trade agreement with Chinese concessions. “Ideally not just one that’s a shopping list of how much China will buy of soybeans,” he said, “but also about whatever fundamental changes we need to have on forced technology transfers, intellectual property rights protection, subsidization.”

U.S. companies also have a part to play in limiting China’s unfair trade practices, Froman said, and cautioned against cutting off trade ties completely. “I think there is great opportunity for all American companies to bring innovation to help drive reform within China,” he said, “and hopefully to avoid a situation where we see a decoupling of China and the U.S.” A decoupling would significantly damage U.S. trade and business, he said. “When you start pulling that apart and begin to have an archipelago of standards, it’s much more difficult to do business.”

Banks said New Zealand is “conscious” of the U.S.’s trade issues with China but said New Zealand hasn’t experienced the same structural problems, mainly because of what New Zealand exports to China. The country mainly sells food-related commodities, Banks said. “We’ve had a different experience, to be honest,” she said during the event. “We haven't experienced the same kind of difficulties.”

But New Zealand is worried about its reliance on China as a trading partner, she said. “We have become probably more dependent on that one market than we would normally be comfortable,” Banks said. “And that’s why we’re hoping in the future to have an even better and further developed trade relationship with the U.S.”