CCG speech series: Pascal Lamy —— WTO Reform and the Multilateral Trading System

On March 25th, the Center for China and Globalization (CCG) held a roundtable seminar entitled “WTO Reform and the Future of the Multilateral Trading System” at its Beijing headquarters. Former Director-General of the WTO and President of the Executive Committee of the Paris Peace Forum delivered a keynote speech and discussed the current crisis surrounding the WTO, challenges faced by WTO reform and ways to improve the multilateral trading system.

This event also featured speeches by Chong Quan, former Vice-Minister at the Ministry of Commerce and President of the China WTO Research Association, and Wang Huiyao, President of CCG and Counselor to the State Council of China.

Pascal Lamy served as the Director-General of the WTO for two terms stretching from 2005 to 2013, he is considered one of the world’s leading experts in multilateral trade and trade governance. Introducing the event, Wang Huiyao, CCG President, noted that this meeting was taking place at a critical juncture for the WTO, when calls for its reform are louder than ever amid rising trade protectionism and unilateralism. Despite recent shortcomings, the WTO has made huge contributions to the development of world trade as a force for leveling the playing field and pushing freer trade. Wang Huiyao commented that many around the world recognize the importance of the institution and therefore now seek WTO reform in order for it to more effectively regulate and promote free trade in the future. In this regard, Wang Huiyao said it was an honor for CCG to host Mr. Lamy, Mr. Chong and distinguished guests to delve into the issues facing WTO reform, how to safeguard multilateral trade and the progression of globalization going forward.

Former Director-General Mr. Lamy pointed to three key issues which have pushed the WTO into its current crisis. Firstly, that trade liberalization has resulted in an array of socioeconomic issues in many countries, especially those with weak social security systems, like the US. The opening of global trade created winners and losers; in this context, Mr. Lamy said, it is not surprising that President Trump leveraged this phenomenon in his election campaign and has pursed trade protectionism whilst in office. Secondly, the geopolitical rivalry between China and the US has begun to bubble to the surface. As an established power, the US can be seen to view the rise of China as threat, whilst China holds the US up as its competitor. Mr. Lamy highlighted that China’s new leadership is behaving more assertively and confidently in its position, therefore, pushing the US towards a policy of containment. Thirdly, the multilateral trading system has not been able to fulfill its core task of leveling the playing field of trade. The WTO playbook has not ensured that member nations can engage in trade in an equally competitive environment.

Mr. Lamy pointed out that whilst there was an attempt at WTO reform in 2008, thwarted by US and Indian opposition, at present there appears to be ample incentive and will to go forward with reform. There are now new attempts to adapt the playbook; addressing a number of urgent issues to enable WTO to survive this current crisis and go on to tackle issues of the future.

Although President Trump’s position on the WTO is not entirely clear, he has expressed in the past that if the organization is not reformed the US may withdraw from the institution, further increasing the urgency reform should be considered. The former Director-General put forward three short-term urgent areas for reform.

Firstly, the strengthening sanctions on unfair subsidies. Since the re-emergence and global expansion of large Chinese SOEs, many member nations feel the WTO needs to adopt stricter means to discourage SOE expansion and equalize trade competition between private and state-owned enterprises.

Secondly, the WTO dispute resolution mechanism. The US has is currently blocking the functioning of this mechanism by refusing to nominate judges to the appellate body, a clear sign it is in need of reform. Thirdly, member notification obligations need to examined, in order for the WTO to function effectively.

Mr. Lamy also suggested areas in need of reform over the long-term, including more disciplines on agricultural subsidies, the protection of consumers as well as producers, effectively engaging members in the multilateral trading system and reducing potential trade conflicts by mediating between nations.

Following Mr. Lamy’s speech, Chong Quan, former Vice-Minister at the Ministry of Commerce and President of the China WTO Research Association, addressed attendees. Mr. Chong emphasized that member nations around the world are seeking WTO reform: Canada recently hosted a ministerial meeting on this issue, China has announced three principles and five proposals for WTO reform and the EU has started a working group cooperating with others focused on pushing through modernization of the institution.

However, Mr. Chong, commenting on the difficulty he has picturing US cooperation on WTO reform, said that these negotiations will be arduous and lengthy. President Xi Jinping has expressed his willingness to safeguard the multilateral trading system of which China has been a key beneficiary.

Mr. Chong recognized that China’s position can often be misunderstood, suggesting that China strengthen its cooperation and exchanges with other member nations to increase mutual understanding and pursue WTO reform.

Following the speeches, participants took the opportunity to ask questions and hold discussions with Mr. Pascal Lamy on China’s role in WTO reform, resistance to WTO reform, the future of WTO and multilateral trade mechanism, and Sino-US trade relations.

Mr. Lamy stressed that China should provide as much content as possible based on the Premier Li Keqiang’s comments on “competitive neutrality” given its potential positive impacts over Chinese companies and its international image.

Mr. Lamy also suggested WTO’s reform would focus on the adjustment of the playbook, yet the pace of reform must be accelerated. A consensus on subsidy reform was reached at the Doha Round but is yet to be implemented.No progress has been made on this issue as the EU, Japan and the US oppose implementation for their own interests over the past two decades.

Mr. Lamy also expressed serious doubts that any progress would be made on WTO reforms at the G20 meeting in Osaka in June, as the hosts will want to focus on achievable goals and avoid contentious issues such as WTO reform.

Responding to the news that Brazil no longer wished to be considered a developing country, Mr. Lamy said that the WTO practice of defining countries as either developing or developed is no longer suitable for today’s circumstances.

Finally, talking about the Sino-US trade dispute, Mr. Lamy believed that it would reach a resolution through China agreeing to large-scale purchases from the US, ironically made possible due to the planned-style economy the US regularly complains of, and China addressing more complex structural economic problems put forward by the US.

Participants in the roundtable discussion included Sun Yongfu, Senior Fellow, CCG and former Director-General of the Department of European Affairs of Ministry of Commerce; Huo Jianguo, Senior Fellow, CCG and former President of the Chinese Academy of International Trade and Economic Cooperation, Ministry of Commerce; Jiang Shan, Senior Fellow, CCG and former Director-General of the Department of American and Oceania Affairs, Ministry of Commerce; Alan Beebe, President of the American Chamber of Commerce, China; Miao Lu, Vice President and Secretary-General, CCG; Kristof Tamas, former Director of the Migration Studies Delegation (Delmi), Senior Adviser to the think tank Global Challenge; Larissa Maria Lima Costa, Diplomat, Embassy of Brazil in China; Camille Bortolini, Commerce and Investment Specialist, Embassy of France in China; Thomas Langelaar, Counsellor of Trade Section, EU Delegation to China; Elizabeth Peak, Minister Counsellor, Embassy of Australia in China; Catherine Pierce, Trade, Technology & Transportation Unit, Economic Section, U.S. Embassy Beijing; Lyndon Radnedge, Head of Multilateral Trade Policy, Embassy of the UK in China; Anna Vitie, Minister Counsellor of Trade Sector, Embassy of Finland in China; Costa Fabrizio, Economic and Financial Counsellor, Embassy of Italy in China.