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Hello from Washington, which is US election day! Today we bring you the final comment on President Donald Trump’s final steps in the trade war – even if the Republicans lose the elections, of course, they’ll stay in office until January. There may be other trade movements that need to be reported.
Our Hand note Covers last week’s move by the US to block Ngozi Okonjo-Iweala’s rise to the top job of the World Trade Organization, and asks: What’s next for the global rules-based trade order? The result, as you suspected, depends on the election result, but even then the answer is not clear. Our Policy monitoring The US announced late Friday that it would lift some tariff preferences for Thai imports while ours Chart of the daydeals with China’s coal addiction.
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Washington has signaled that it will prefer South Korea’s Yoo Myung-hee for top jobs
We at Trade Secrets have the runners and drivers fully covered to take on the top job at the WTO. But in what may have been a swan song for Donald Trump’s trade war, the smooth bureaucracy of Washington’s multilateral trade body was again thwarted.
Last week, the US threw a wrench into work by refusing to join the other 160 or so members in endorsing former Nigerian Treasury Secretary Ngozi Okonjo-Iweala for the top job. The result? At the moment, it is impossible for Okonjo-Iweala to proceed – the new Director General must have the consensus of all members.
What does the US want? The US sales representative Robert Lighthizer stands out among the top Trump officials in Washington – he is widely regarded as a smart and strategic operator who really knows the trade inside out. He is committed to a certain idea of how global trade is supposed to work, and he does not fluctuate from it. He’s not a free trader, he wants to protect certain domestic industries – especially manufacturing – and he likes to use old and unorthodox trading tools embedded in US trade law to achieve his goals.
All of this makes this US move more confusing. To try to figure out Lighthizer’s schedule here, let’s see what happens next. The members of the WTO will now meet on November 9th. By then, we should know the results of the US presidential election. If Trump wins and Lighthizer maintains his position of power, we will have a vacuum at the helm of the WTO until a new leader is appointed that the US likes.
Blocked: former Nigerian finance minister Ngozi Okonjo-Iweala © Fabrice Coffrini / AFP / Getty
The US is among the loudest voices calling for reform of several elements of the WTO, including establishing the Appellate Body and improving the tools at its disposal for dealing with non-market economies like China. To carry out these reforms, the WTO needs a Director General. It is not in the US interest not to have a solid director general. It is also not possible – politically and diplomatically – that all other countries only agree and give the US what they want in the context of a multilateral institution alone. And so we have a stalemate in Washington.
Washington has signaled that it will favor South Korea’s Yoo Myung-hee. The Secretary of Commerce was known to US officials as early as 2006 when they renegotiated a free trade agreement with South Korea, and since then appears to have been valued by Trump administration officials, at least in part for her position on the status of developing countries.
One of the major US trade-related mistakes is the use of developing country status in trade negotiations by countries that do not consider the US to be developing countries. The status of a developing economy gives countries special trade privileges under the global trade rules that enable them to maintain tariffs and other trade barriers to help domestic industry. China is Washington’s flagship for this crime, but Singapore, Qatar, the United Arab Emirates and South Korea were attacked by the US in the summer of 2019. Shortly thereafter, Seoul gave up its preferred trade treatment, which was welcomed by the US.
The folks in the aisles of the USTR may not have forgotten Yu’s involvement in this move. Last week, Clete Willems, a former Trump official, said Yoo had “shown tremendous leadership in really getting Korea to essentially abandon developing country status.” Her willingness to address this US pet problem has earned her many admirers in Washington.
But other countries mostly support the other candidate. If the US doesn’t back down, the WTO will be inoperable. It is currently run by a coalition of four Deputy Directors-General who are serving in a preliminary role. As Jennifer Hillman, a former WTO official, puts it, it “got the trains running on time for now” – but those in a supervisory position do not have the power to reform the organization.
WTO officials hope they can sit on their hands and wait for Democratic challenger Joe Biden to come to power. However, it is not certain that he would support Okonjo-Iweala. When Trade Secrets asked the Biden campaign who they wanted to support in choosing their candidate, they declined to comment.
If Trump wins? The stalemate continues and reforms seem increasingly impossible. Years ago, WTO members failed to agree on a new director general and so divided the four-year term of office between two candidates. But Hillman points out that two years in the top job isn’t long enough to make big changes – and that a country that supports a particular candidate usually works behind the scenes to get consensus on them.
So the best scenario for a quick appointment of a new WTO chief is that Biden is elected and his team agrees with the consensus of the other members. If that doesn’t happen? It is a very dark future for the WTO.
China’s President Xi Jinping has set a “net zero” deadline of 2060 for emissions, but new coal-fired power plants are constantly being built. At a time when the world is standing out from coal – and Beijing has announced it will eventually do the same – China still makes up the vast majority of new projects commissioned worldwide.
“Coal is so important in China from an energy and security perspective, and local governments don’t believe it is possible to get rid of coal right now,” said Yang Yingxia, senior fellow at the Boston University Institute for Sustainable Energy. “I don’t think the Chinese government has a clear sense of how to achieve carbon neutrality by 2060.”
A worker unloads pineapples from a truck in Thailand. The US suspended duty-free access to its markets for more than $ 800 million worth of Thai products. © Brent Lewin / Bloomberg
Late on Friday evening, the US suspended duty-free access to its markets for more than $ 800 million in Thai products, including frozen melons and mangoes, artichokes and various spices, claiming Thailand had not given US pork products market access.
The USA removed the list of Thai imports from its “General System of Preferences” program at the end of December, which allows products from certain countries to be imported into the USA duty-free.
The US agency said in a statement that the amount that the US has removed from the tariff exemption program corresponds to about one sixth of Thai imports into the US.
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