WTO crisis exacerbated by pandemic politics

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Claire Citeau is executive director of the Canadian Agri-Food Trade Alliance (CAFTA)

Washington’s appeal of a softwood-lumber ruling in favour of Canada is the most recent example of the crisis facing the World Trade Organization and the urgent need to preserve order in the global trading system.

According to a three-person WTO panel, the United States was operating in contravention of global trade rules when it imposed duties on Canadian softwood-lumber exports in 2017. But since there is no quorum to hear appeals, both the ruling and the plea to overturn it will go into a void.

“These duties have caused unjustified harm to Canadian industry and U.S. consumers alike, and are impeding economic recovery on both sides of the border,” Canada’s International Trade Minister Mary Ng said in a recent statement.

In reality, the U.S. appeal is merely a you-shame-us, we’ll-shame-you manoeuvre. The appellate body that has backstopped the WTO’s global rules-based trading system for decades essentially ceased to exist last December when the Trump administration refused to appoint new judges. Those missing judges would have ultimately decided on the ruling to reverse the softwood-lumber tariffs and hear the U.S.'s rebuttal.

The softwood standstill comes as the WTO finds itself in a crisis state exacerbated by pandemic politics. When China and the U.S. began threatening and later implementing retaliatory embargoes setting off a trade war that is still in progress, the WTO’s response amounted to little more than a whisper. On Sept. 15, the WTO ruled that the tariffs Trump imposed on Chinese goods stood in contravention of, and were “inconsistent” with, international trade rules. Trump administration officials belittled the ruling and chastised the WTO for its inability to handle the tariffs imposed by China.

Now, as much of the world cautiously works to keep markets open amid COVID-19 and governments are grappling with how best to forge ahead, the WTO could play a key role in healing a battered global economy. But that can only happen if it can find a way to restore predictability, transparency and enforcement to the global trade network.

The WTO gives Canadian agricultural producers and food exporters most-favoured nation (MFN) treatment in 163 countries, representing about 80 per cent of the global economy. As the fifth largest agri-food exporter in the world, trade remains a key engine of growth for the economy. We export more than half of what we produce every year, supporting a million jobs across the country and contributing billions of dollars annually to the Canadian way of life.

Recently, however, more than 90 governments around the world introduced at least 200 import/export restrictions and other measures that have affected trade, including Canada’s agri-food sector. The fear for free traders and especially for an export-dependent sector such as Canadian agri-food is that these are merely the opening moves of an increasingly protectionist trajectory.

Despite its leading role in the global food trade, Canada is not self-sufficient and cannot take its own food security for granted. Unfettered and predictable two-way trade and diversity of markets is the best protection against supply shortfalls, natural disasters, diseases and price shocks.

But without an appellate body to enforce the rules, there are, in effect, no rules at all. Governments will be free to make decisions that are politically popular, but harmful to both their national and global economies. There is hope, though.

Canada is playing a leading role in WTO reform efforts. A small but influential consortium of 12 countries, plus the European Union, known as the Ottawa Group, has been focused on finding ways to modernize the organization. The group, which includes Canada, Japan, Brazil and Australia, met last week to discuss concrete actions to support open trade, strengthening the system and economic recovery.

This is encouraging news, if these reforms are handled correctly. The Ottawa Group urgently needs to restore WTO’s dispute-resolution processes, reform and revitalize its multilateral negotiation process, and push for the restructuring of its governance model.

The failure to continue to advance trade liberalization also needs to be addressed. The WTO hasn’t advanced free trade in a meaningful way in more than a decade. It also needs to bring its governance structure into the 21st century and do a far better job showing the value of the role it plays in the global trading system. The WTO’s Doha round, the name of the latest phase of negotiations aimed at revising trade rules and lowering barriers, stalled in 2008, along with its needed reforms in agricultural trade so important to Canada and its trading partners.

Currently, politics and protectionism are preventing the WTO from doing its job to improve market access at the global level, especially as the persistence of technical trade barriers continue to thwart agri-food exporters even after tariffs have fallen to zero. As a result, most countries, including Canada, have increasingly turned to bilateral and plurilateral negotiations to secure free-trade gains in markets around the world.

Harvest season will be soon over. But for farmers, trade and geopolitics will continue to be as important as the weather.

As Canada plots its path to a steep economic recovery, it’s vital to ensure that the WTO gets reformed in the spirit of multilateralism and rules-based trade. We should embolden the Ottawa Group in this direction.

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