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Mostrando postagens com marcador US. Mostrar todas as postagens
Mostrando postagens com marcador US. Mostrar todas as postagens

domingo, 11 de junho de 2023

War In Ukraine: Putin Can’t Win — But the US Can Lose - Alexei Bayer (The Globalist)

 Global Conflict

War In Ukraine: Putin Can’t Win — But the US Can Lose

The destruction of the Kakhovka dam demonstrates that Russia is resorting to increasingly desperate measures. The question is how the West will respond.

The Globalist, June 11, 2023

A Russian tank wiht a soldier standing beside it

Russia’s latest atrocity – the destruction of the Kakhovka dam – demonstrates that the war in Ukraine needs to end quickly. Because Russia can’t win this war. 

If the fighting goes on even another year, the West may find itself losing – with dramatic repercussions for the United States’ leadership role in the world. Following the three failed early 21st century wars – in Afghanistan, Iraq and Syria – the global image of the U.S. was badly tarnished. Its ardent pursuit of global leadership had been dealt a triple blow.

A godsend for the U.S.

Against that backdrop, Vladimir Putin’s invasion of Ukraine was in many ways a godsend for the United States. 

In addition to tangible economic benefits – such as increased sales of liquified natural gas and arms – the United States has not only seen NATO revived and solidified, but broadened with the addition of Finland (and, soon, also Sweden). 

Given the brutality of the Russian attack, NATO member states are finally expanding their military budgets, which has been Washington’s long-standing demand.

Russia’s military machine completely demystified itself

What’s more, as the U.S. military leadership recognized early on in this conflict the insights gained into the (in)ability of the Russian military from its brutal, but largely inept actions against Ukraine are a tremendous strategic benefit to the West. 

Nobody had ever expected that, absent a major global conflict, the opportunity for such a “live” experiment would ever arise. Russia’s military machine has completely demystified itself.

On top of all that Ukraine’s heroic, battle-hardened military – after its potential victory – could become a highly valuable addition for the Western alliance as.

As if we are back in the early post-World War II era

In sum, the United States’ leadership position in the alliance has been bolstered and, most importantly, the country once more sees itself – and is regarded around vital parts of the world – as a defender of freedom, self-determination and rule of law. 

It is as if we are back in the early post-World War II era, when the United States was viewed with hope by people around the world. 

Vladimir Putin’s blitzkrieg having failed, one thing is for sure: No matter what the Russian propaganda may claim, Putin can no longer defeat Ukraine. 

He not only lacks modern weapons and advanced technology but, equally crucially, the Russian people’s lukewarm desire to wage a war of conquest is no match for the determination of the Ukrainians to defend their country and to liberate occupied territories. 

Towards a war of attrition?

However, unless things on the ground change dramatically, those facts of life do not mean that Putin is lacking the resources to keep on fighting indefinitely.

A war of attrition is what the United States and its allies seem to have in mind as well. Fearing to be drawn into the conflict, NATO under the direction from Washington has been providing weapons by dribs and drabs. 

Accordingly, NATO allies have been favoring defensive armaments and holding back more advanced systems. Even the F-16s, fighter planes developed half a century ago, have not yet been given to Ukraine, to say nothing of more modern sophisticated flying machines.

Considerable restrictions have been placed on the use of Western weapons, especially in attacking Russian territory, for fear of “provoking Putin.”

If Ukraine is not allowed to win decisively and if the war drags on for another year, the United States will risk missing out on the exceptional opportunities provided by Putin’s blunder and squandering many of the benefits it is now enjoying.

How many more atrocities?

In addition to the flooding that destroyed or damaged numerous settlements, the Kakhovka dam and power plant was vital for much of Ukraine’s south. Cities and towns, highly productive farms and industrial plants relied on the water and power from that source. Jobs will disappear and the region will lose a substantial portion of the population.

The destructions of the dam and the massive human, environmental, economic and social calamity it will cause is a warning what the prolongation of the conflict will mean. There will be other atrocities which Putin will commit in his impotent rage against Ukraine which is refusing to submit to his will.

Ukraine’s ability to recover economically

But even if no other comparable war crimes will be committed by Russia, a long war will be a disaster for Ukraine, since it will impair it ability to recover economically. Some eight million Ukrainians are already refugees abroad — mainly women and children since draft-age men are not allowed to leave. 

As the war continues, many will choose to stay where they are rather than return, given that Russian bombings destroy more and more houses and factories in Ukraine. Their kids are already assimilating in their new countries. Exhausted and depopulated, Ukraine may become an enormous failed state in the heart of Europe. 

Many possible scenarios

There are many possible scenarios of what will happen to Ukraine if the war drags on. For example, Volodymyr Zelensky’s pro-Western government may fall and, Ukraine may turn on the West. It may look to form other alliances, notably with China.

Ukrainians know that they are fighting not only for their own independence but for the freedom, democracy and peace in the rest of Europe. To that end, they are losing tens of thousands of their best and brightest young men while the Western world remains on the sidelines. Eventually, this will breed resentment. 

NATO unity will come under strain

Moreover, in a long war, NATO unity will come under strain. As it is, Turkey and Hungary already pursue their own agendas. Right-wing parties have seen their strength grow in other European countries as well, and a Republican may win the White House next year. 

Eventually, the countries in Europe that are further away from the conflict may insist on freezing the conflict. On the other hand, Poland, the Baltic states, Finland and other frontline nations will be concerned with the future fate of Ukraine. 

They have been strong supporters of Ukraine in its resistance to the Russian invasion, but they will certainly not want to see Ukraine become a pauperized failed state in the heart of Europe. Before long, they may feel they need to get involved directly – if only to safeguard their own security.

This may be what former NATO Secretary General Anders Rasmussen had in mind when he warned that some alliance members may have to send troops to Ukraine. 

Conclusion

In short, Washington must make sure not only that Ukraine liberates its occupied territories, but that it does so quickly. Ukraine must get all the modern weapons it needs, including advanced fighter planes and long-range artillery. 

But if the war shows signs of stalling, both Russia and the United States may find themselves losing the war in Ukraine – with dramatic repercussions for U.S. leadership role in the world.


sexta-feira, 19 de agosto de 2022

China Is Winning the Economic Race with the US - Judith Bergman (Harvard Belfer Center)

 China Is Winning the Economic Race with the US – The Consequences Will Be Profound

by Judith Bergman

Harvard Belfer Center, August 17, 2022 

 

   The [Harvard Belfer Center] report, "The Great Economic Rivalry: China Vs. the US," predicts that at the current rate China will overtake the US economically within a decade.

 

   When it comes to trade, China has now displaced the US. "When this century began, China was knocking on the door of the WTO and the U.S. was the leading trading partner of most major economies. Today, China has overtaken the U.S. to become the largest trading partner for nearly every major nation... by 2018, 130 countries traded more with China than they did with the U.S....." — The Belfer Report.

 

   China's trade policies are not a matter of simply creating more wealth for China, but as with most things that China does, a way to increase China's power and other countries' dependency on it.

 

   Today, the U.S. is the world's largest debtor; China is the largest creditor.

 

   When it comes to manufacturing, China already displaced the US a decade ago.

 

   "China is now the world's largest manufacturer and exporter of scores of essential goods, including 90% of refined rare earth minerals, 80% of solar panels, 50% of computers, and 45% of electric vehicles." — The Belfer Report.

 

   Crucially, China is severely challenging the US when it comes to innovation.... In 2013, the US was the number one top innovating country, according to the Bloomberg Innovation Index, but by 2020, it was not even in the top 10, having fallen to number 11.... China's laser-like focus on frontier technologies has positioned it to dominate races like 5G and AI in the future.

 

   China is determined to see this development to its goal of becoming the dominant power in the world by 2049.

 

   What this new world economic order means for the future is probably difficult to imagine for the many who have grown up with the US as the leading world powerband the accompanying celebrated values of freedom, democracy, and capitalism, taken for granted by so many.

 

   China's economic rise and the US response -- or lack of such -- will determine the predominant values of the 21st century -- will it be China's authoritarianism and disregard for freedom, democracy, and human rights or those of the US and the West?

 

Today, the U.S. is the world's largest debtor; China is the largest creditor. When it comes to manufacturing, China already displaced the US a decade ago. China's trade policies are not a matter of simply creating more wealth for China, but as with most things that China does, a way to increase China's power and other countries' dependency on it. (Image source: iStock)

 

China has closed the gap with the U.S. "in most economic races, even overtaking it in some," according to a recent report from Harvard's Belfer Center for Science and International Affairs. The report, "The Great Economic Rivalry: China Vs. the US," predicts that at the current rate, China will overtake the US economically within a decade.

 

Measured by purchasing power parity (PPP) -- which compares national economies in terms of how much each nation can buy with its own currency at the prices items sell for in its market -- China has already surpassed the US to become the world's largest economy.

 

"When measured by PPP, in 2000, China's economy was36% the size of the United States,'" the report noted.

 

   "In 2020, the IMF found it was 115% the size of the U.S. economy, or one-seventh larger. While Presidents Obama, Trump, and now Biden have talked about a historic 'pivot' to Asia, the seesaw has shifted to the point that both of America’s feet are dangling entirely off the ground."

 

When it comes to trade, China has now displaced the US, according to the report:

 

   "When this century began, China was knocking on the door of the WTO and the U.S. was the leading trading partner of most major economies. Today, China has overtaken the U.S. to become the largest trading partner for nearly every major nation... by 2018, 130 countries traded more with China than they did with the U.S., and more than two-thirds of those countries traded more than twice as much with China. With the launch of the Regional Comprehensive Economic Partnership (RCEP) in January, China has also now surpassed the U.S. as the leader of the world's largest free trade block."

 

The RCEP consists of China, Japan, South Korea, Australia, New Zealand, and the 10 members of ASEAN and is expected to add $500 billion to world trade by 2030.

 

China's trade policies are not a matter of simply creating more wealth for China, but as with most things that China does, a way to increase China's power and other countries' dependency on it:

 

   "As Xi Jinping explained last April, China's strategy in thickening trading relationships is not just to spur its own economic growth. It is to increase other nations' reliance on China," the Belfer center concluded. "China's goal – in Xi's words – is to tighten 'international production chains' dependence on China... Xi's strategy is working—not only with others but with the U.S. In 2021, purchases of products from China accounted for nearly half of America’s $1 trillion trade deficit. Today, the U.S. is the world’s largest debtor; China is the largest creditor. "

 

When it comes to manufacturing, China already displaced the US a decade ago:

 

   "China has created a manufacturing ecosystem that allows it to dominate the production of almost everything," the report found. "Initially a low-cost producer of inexpensive consumer goods, China became the world's largest manufacturer in 2010 and accounted for 29% of global manufacturing value added in 2019 – a 20-point increase over 2000."

 

China accounts for one-third of global manufacturing today, while the US manufactures less than one-fifth. While the US was the primary trading partner for most countries in 2001, today China holds that position. As such, China has become the crucial link in the world’s critical global supply chains:

 

   "Despite the rhetoric about decoupling, foreign economies have become more dependent on China during the coronavirus pandemic, not less," the report noted. "China's trade surplus with the world hit a record $675 billion in 2021, a 60% increase from pre-pandemic levels in 2019... China is now the world's largest manufacturer and exporter of scores of essential goods, including 90% of refined rare earth minerals, 80% of solar panels, 50% of computers, and 45% of electric vehicles."

 

China has even replaced the US as the driver of world economic growth.

 

   "Perhaps the most surprising fact for Americans who have not kept track of recent developments is that China has displaced the U.S. to become the primary engine of global growth. Since the Great Recession of 2008, approximately one-third of all growth in the world's GDP has occurred in just one country: China. Thus, when nations around the world assess their prospective growth in the year ahead, the first economy they think about is China. In sum, in the past two decades, China has joined the U.S. and the EU as the third backbone of the global economy."

 

Furthermore, in 2020, for the first time, China, not the US, was home to the largest number of the most valuable global companies on Fortune's Global 500.

 

"For the first time since the magazine began listing its Global 500 rankings, China topped the list with 124 companies—ahead of the U.S.'s 121. Twenty years ago, this list included only ten Chinese companies," the Belfer report noted.

 

Crucially, China is severely challenging the US when it comes to innovation:

 

   "The U.S. and China have been neck and neck in R&D spending since 2017, together accounting for nearly half of global R&D expenditure," the Belfer center concluded. "Measured by PPP in 2010 dollars, between 2000 and2019, U.S R&D expenditure almost doubled, growing from $360 billion to $610 billion. Chinese R&D investments, meanwhile, grew by a factor of 13, from $40 billion to $515 billion."

 

In 2013, the US was the number one top innovating country, according to the Bloomberg Innovation Index, but by 2020, it was not even in the top 10, having fallen to number 11. China still lagged behind at number 16, but, according to the report:

 

   "It is catching up. As our earlier report on the 'Great Tech Rivalry' noted, China's laser-like focus on frontier technologies has positioned it to dominate races like 5G and AI in the future. Moreover, in former Deputy Secretary of Defense Robert Work's apt summary, 'A lot of people still believe that all China does is steal technology and copy it. They still do that, and they're quite good at it. But also, their technological ecosystem and their innovation ecosystem is really, really good. And it’s getting better all the time."

 

While the report points out that China has not yet overtaken the US and that the dollar remains the world’s dominant reserve currency, accounting for 60% of foreign exchange reserves, in addition to a few other areas, it seems increasingly difficult to see how the US could possibly turn things around with the current trajectory. Especially because China is determined to see this development to its goal of becoming the dominant power in the world by 2049.

 

   "What this means for global geopolitics is profound. At the end of World War II and for the decade that followed, the U.S. accounted for roughly half of global GDP. From this position of dominance, the U.S. took the lead in... what became the global economic order. When establishing alliances like NATO... the U.S. could cover the costs without thinking about burden-sharing. But by the end of the Cold War in 1991, America's share of global GDP had shrunk to one-fifth. Today it stands at one-sixth.... China’s rise has created a new world economic order."

 

What this new world economic order means for the future is probably difficult to imagine for the many who have grown up with the US as the leading world power and the accompanying celebrated values of freedom, democracy, and capitalism, taken for granted by so many.

 

China's economic rise and the US response -- or lack of such -- will determine the predominant values of the 21st century – will it be China's authoritarianism and disregard for freedom, democracy, and human rights or those of the US and the West?

 

   Judith Bergman, a columnist, lawyer and political analyst, is a Distinguished Senior Fellow at Gatestone Institute.


quinta-feira, 2 de novembro de 2017

OMC e o futuro do comercio internacional: China como economia de mercado - WSJ

Um dos mais importantes artigos que já li no Wall Street Journal: simplesmente o futuro do comércio internacional com a admissão (ainda oficiosa) da China como "economia de mercado" na OMC, e um estudo dos casos sendo examinados sob o seu sistema de solução de controvérsias. Repito: IMPORTANTE, para os que seguem o comércio internacional.
Paulo Roberto de Almeida

Globalization in Retreat

How China Swallowed the WTO

By Jacob M. Schlesinger
The Wall Street Journal, November 2, 2017
The U.S. helped create the group to smooth global commerce and integrate a rising China. Instead, it’s become a battleground for intense national rivalries

GENEVA—Inside the cement compound housing the World Trade Organization lies a colorful Chinese garden of cultivated rocks, arches and calligraphy. The gift from the Chinese commerce ministry symbolizes “world prosperity through cross-cultural fertilization,” according to a marble plaque.
It’s not the only way China has left its mark on the institution.
Sixteen years after becoming a member, the world’s second-largest economy is in an increasingly tense standoff with the U.S. and Europe that threatens to undermine the WTO’s authority as an arbiter of global trade.
The Chinese garden at the World Trade Organization’s Geneva headquarters. 
The Chinese garden at the World Trade Organization’s Geneva headquarters. Photo: Xinhua/ZUMA PRESS
 
Rather than fulfilling its mission of steering the Communist behemoth toward longstanding Western trading norms, the WTO instead stands accused of enabling Beijing’s state-directed mercantilism, in turn allowing China to flood the world with cheap exports while limiting foreign access to its own market.
“The WTO’s abject failure to address emerging problems caused by unfair practices from countries like China has put the U.S. at a great disadvantage,” Peter Navarro, a trade adviser to President Donald Trump, said in an interview. “The message to the WTO from this administration has been clear. Things have to change.”
Such criticism has percolated over many years in the U.S. with growing bipartisan intensity. Now it is coming to a head under the first American presidency of an open free-trade skeptic, in a case just starting to wend its way through the Geneva process. The issue: whether China has graduated to a “market economy,” a change of status that would make it considerably harder for other nations to block imports they believe are improperly aided by Chinese government distortions.
China has sued both the U.S. and European Union demanding the change, calling it “nonnegotiable,” and Chinese officials are likely to reiterate that demand when they talk trade next week with President Trump during his Beijing visit. Steelworkers have jammed the streets of Belgium and Germany protesting that ultimatum, while Europe’s parliament voted 546 to 28 to fight it, one Italian lawmaker saying acceptance “would be carrying out the suicide of the European industry.”

Focusing Eastward


As China’s share of global trade has grown rapidly...
Each nation's trade as a share of the global total
Exports
Imports
18
%
18
%
16
16
14
14
U.S.
China
12
12
10
10
U.S.
8
8
China
6
6
4
4
2
2
0
0
’15
’15
’05
’05
2000
1995
’10
’10
1995
2000
...the U.S. and other countries have ramped up accusations of unfair trading practices, and invoked those allegations to block Chinese imports.
Percentage of U.S. imports from China covered by restrictions
Imports affected by U.S. trade restrictions
9
%
China
Antidumping
8
S. Korea
7
Mexico
2016 estimate
6
2017 estimate
India
5
Japan
4
Canada
3
Antisubsidy*
Germany
2
France
1
U.K
0
$30
$20
$40
$10
$50
$0
billion
1995
2000
’05
’15
’10
*Countervailing duties
Sources: World Bank (exports and imports); Chad Bown, Peterson Institute for International Economics (restrictions)
“This is without question the most serious litigation matter we have at the WTO right now,” Robert Lighthizer, the Trump administration’s trade representative, told Congress in June. A China victory, he added, “would be cataclysmic for the WTO.”
Washington’s role challenging the WTO marks a reversal from the giddy mid-1990s heyday of globalization, and a reminder of how nationalism is increasingly the byword in global economic competition. When the WTO was forged in Morocco as a new international trade overseer, replacing the less-powerful General Agreement on Tariffs and Trade, the Cold War had ended and the U.S., as the sole superpower, saw a chance to weave economies together around American-style capitalism.
GATT and the WTO have, over the past seven decades, greased the wheels of interdependence. Under Geneva’s guidance, tariffs world-wide have plunged nearly 80% and trade’s share of the global economy has more than doubled. More than 160 countries representing 98% of world commerce are now WTO members, and most of the few remaining nonmembers—like Belarus and Timor-Leste—are negotiating to join.
The WTO’s defenders say it still plays an important role. Roberto Azevedo, the director-general of the WTO, credits his organization with preventing a recurrence after the 2008 financial crisis of the trade wars that exacerbated the Great Depression. “If we didn’t have the WTO, we would be in much worse shape,” Mr. Azevedo said in an interview.
Mr. Azevedo, who as a Brazilian trade diplomat successfully used WTO courts to challenge American cotton subsidies, plays down U.S. complaints that his body isn’t properly equipped to handle China. “We have 164 countries,” he said. “China is one of those countries that have their own practices, their own methodologies. The system was designed to respond to that diversity.”
A view inside the WTO headquarters.
A view inside the WTO headquarters. Photo: Laurent Gillieron/Keystone/Associated Press
But critics say the system is badly in need of an overhaul. After the violent 1999 street battles that killed the Seattle round and the effective 2015 death of the Doha Development Round, the world trade regime has now gone nearly a quarter-century without a comprehensive rules upgrade—the longest such period since World War II.
These failures have elevated the importance and prominence of the WTO’s judicial system, as countries concluded their only option for advancing their cause in Geneva was litigation, not negotiation.
At the WTO, disputes are handled before “panels,” not “courts,” terminology carefully chosen in deference to home-country political concerns about sovereignty. In a similar vein, judges are called “members,” and wear business attire, not robes, though they do preside from an elevated bench.
The courts are structured as an arbitration system, with a dispute-settlement panel and a more powerful appellate body. WTO officials call the process their “crown jewel” and say members comply with 90% of its rulings.
One of the most active litigants has been Beijing.

Clogging the Courts


A growing number of those disputes have landed before the WTO...
Disputes involving the U.S.
Disputes filed with the WTO involving China
As respondent
Third party
Complainant
Complainant
Third party
As respondent
35
35
30
30
25
25
20
20
15
15
10
10
5
5
0
0
’17*
’15
’05
’00
’10
1995
’15
’17*
1995
’10
’05
’00
...helping feed a backlog, which is straining the WTO's legal system, extending the duration of cases, and fueling dissatisfaction with the process at a time when challenges rise against China. Complaints can take more than four years to be resolved.
Active WTO disputes per year
Length of dispute process, 1995–2016
Actual avg.
Official deadline for each step
40
35
From request to panel
30
25
From panel to report
20
Appeals (2-3 mos.)
15
Agreed time to
implement agreement
10
Compliance panel
5
From compliance
appeal to final report
0
12
6
18
0
months
’15
’10
2000
’05
’17*
1995
*Through October †Through September
Sources: WTO (dispute counts, disputes per year); Louise Johannesson and Petros C. Mavroidis (length of dispute process)
China’s 2001 WTO entry was a transformative moment. Negotiations took 15 years—longer than those creating the WTO itself—and included more strings and conditions than had been imposed on any other member. The shared, underlying assumption was that China’s economy was undergoing a historic transition from state-run to market-oriented, and that WTO membership would ensure, and accelerate, that evolution.
Most countries combine their WTO diplomatic corps with delegations to other global bodies in Geneva. Beijing built a mammoth stand-alone “Permanent Mission of the People’s Republic of China to World Trade Organization” about a mile up the shore of Lake Geneva, flying the large red flag with yellow star.
The Chinese government was at first shy about using the WTO courts, modeled after the unfamiliar Western legal system, and filed just one complaint in its first five years after joining. But the surge in Chinese exports following its WTO entry, which suddenly made it the world’s largest exporter, thrust Beijing into the center of the legal system.
Since 2007, China has been party to more than a quarter of all WTO cases, as trading partners scrambled to erect barriers protecting their industries while demanding better access to China’s markets.
Facing such pressures, Chinese officials set about to master the process. China sought out disputes in which it had no direct stake and joined more than 100 as a “third party,” giving officials access to proceedings as observers. The Chinese offered large stipends to prominent American and European trade-law scholars to teach seminars in China for young bureaucrats. They retained top U.S. law firms. Steptoe & Johnson LLP became the go-to firm for combating a new American policy imposing extra-steep duties on Chinese imports aided by allegedly illegal subsidies; one member of the Steptoe China team had staffed the WTO appellate body for six years.
Chinese steel is among the many trade items in dispute between the U.S. and China.
Chinese steel is among the many trade items in dispute between the U.S. and China. Photo: Wang He/Getty Images
Beijing’s lawyers started notching notable court wins over the Americans who shaped the system. In a series of rulings from 2011 through May 2017, the appellate body concluded that Washington had cut too many corners in asserting that the state underwrites Chinese exports. Those decisions, covering four dozen industries, from off-road tires to wind towers to, literally, kitchen sinks, raised the bar for U.S. policy makers trying to block Chinese imports. And they complicated American efforts to impose higher duties on Chinese goods.
WTO defenders note the U.S. has still won the vast majority of cases it has filed in Geneva, and say it should be pleased that China has chosen to pursue its trade grievances through global arbiters.
“Since our accession to the WTO, China has always followed the WTO rules,” Cui Tiankai, China’s ambassador to the U.S., said in a recent interview with a Chinese TV station. “Sometimes we don’t have 100% agreement with them, but still we play by the rules. I hope America could do the same.”
The losses rankled the Washington trade community. In May 2016, aides to then-President Barack Obama cited two rulings favoring China as part of a broader list of grievances designed to block the reappointment of a South Korean judge on the appellate body.
At a tense meeting at WTO headquarters, the U.S. delegate told fellow trade diplomats that the judge, South Korean law professor Seung Wha Chang, had shown a pattern of judicial overreach and suggested that he had acted as an “independent investigator or prosecutor” on behalf of parties such as Beijing.
It was seen as a surprisingly hostile act in the genteel Geneva community. Thirteen veteran WTO jurists complained the U.S. had traversed “a Rubicon that must not be crossed,” putting “the very future of the entire WTO trading system at risk.” Mr. Chang himself responded through an interview with a Korean newspaper, saying he had been made a scapegoat. He added that the U.S. may have wanted him removed before the trade court heard a pending challenge to American restrictions on South Korean washing machine exports., an insinuation U.S. officials have rejected.
The WTO includes more than 160 countries representing 98% of world commerce.
The WTO includes more than 160 countries representing 98% of world commerce. Photo: Denis Balibouse/REUTERS
The Chang tensions exposed a bigger problem: The WTO’s failure to complete negotiating rounds aimed at updating rules for 21st-century business has forced judges to use often-outdated 1990s guidelines in settling disputes. That has fed complaints that the WTO courts were relying increasingly on their own interpretations of those rules, engaging in judicial overreach and activism.
Peter Van den Bossche, a Belgian judge on the appellate body, wrote a 2015 essay warning of the “dangerous institutional imbalance in the WTO between its ‘judicial’ branch and its political ‘rule-making’ branch,” that could “drastically weaken” the system.
Since the WTO doesn’t have detailed rules governing Chinese-type state-owned-enterprises, some observers say jurists have had to make decisions case by case.
The Trump administration has escalated the Obama administration’s battle over the appellate body, blocking appointments of any new judges and sparking fights even with members sympathetic to the U.S. campaign against China. By year’s end, the seven-member appellate body will have three vacancies, heightening worries about its ability to manage a mounting backlog and a looming “tsunami of cases,” as one judge warned in a recent speech. At an Aug. 31 meeting of the committee overseeing the courts, the U.S. said it would block any attempt to fill those slots until its “longstanding” complaints about the courts were addressed.
That’s just one of many ways Mr. Trump is testing the WTO. He’s staffing his trade team with longtime WTO detractors. As private lawyers, both Mr. Lighthizer and Gilbert Kaplan, nominated to be the Commerce Department’s trade point-man, helped shape strategy for U.S. industries combating Chinese imports after its WTO entry. Both won protections from the U.S. government—Mr. Lighthizer for steel pipes, Mr. Kaplan for various types of paper—that were later deemed improper by the WTO appellate body for taking too many liberties in asserting Chinese misbehavior.
There’s no sign Mr. Trump intends to follow through on the idea he once floated during the 2016 campaign of pulling the U.S. out of the organization. But aides have said they are exploring a number of policies that openly challenge the WTO’s authority, reflecting their skepticism about the body’s ability to handle China. They have openly discussed imposing sanctions unilaterally against China. Commerce Secretary Wilbur Ross in April launched an official study of “the structural problem” of the WTO and its courts, arguing the body has “an institutional bias…toward the exporters rather than toward the people that are being beleaguered by inappropriate imports.”

Who Wins at the WTO

The success rate of WTO members in filing claims, or defending against them, at the dispute panel level


Won claims it filed against
another member
Won claims filed against it
U.S.
E.U.
Canada
Korea
Mexico
Japan
Brazil
Argentina
India
China
60
40
20
80
0%
Note: Includes cases from 1995 through Feb. 23, 2016; countries shown were involved in at least 10 cases.
Source: Louise Johannesson and Petros C. Mavroidis
Research shows WTO courts tend to favor countries suing to challenge trade barriers over those defending them. In a study of all WTO disputes litigated from 1995 through early 2016 for the Journal of World Trade, Louise Johannesson and Petros Mavroidis concluded the plaintiffs won 71% of the claims filed at the panel level. But their data also show the U.S. is one of the most successful plaintiffs, winning far more of the cases at the panel level that it initiates than China does.
A looming challenge to the WTO is the pending case determining China’s official status in the world trading system—whether members are now required to treat it as a “market” economy. The debate is complicated because there appears to be no clear answer in WTO rules, which some participants say were left intentionally vague in the agreement governing China’s entry.
Beijing reads the pact as having automatically guaranteed it market status 15 years after its December 2001 accession. The U.S., Europe, Japan and others say the change was intended to be a privilege contingent on liberalization promises Beijing has yet to keep.
The penalty China pays for its WTO label as a “nonmarket economy” is high, as would be China’s benefits for wiping it away. The “nonmarket” designation makes it easier for trading partners to impose inflated tariffs on goods they conclude have been “dumped”—or sold below “fair” value. That’s because prices and costs are seen as so distorted in a “nonmarket economy” that other countries are given wide latitude to determine on their own what they consider “fair.” That contrasts with a stricter burden of proof and analysis required when leveling the same charges against a “market economy.”
A flip from “nonmarket” to “market” would boost EU imports from China by as much as 21%, or $84 billion, according to a 2016 study by CEPII, a French-government affiliated think tank on international economics. The same report noted the U.S. uses the nonmarket discretion more aggressively than the EU, both slapping penalties on a greater portion of Chinese imports and applying a steeper rate. The study concluded that Washington applied an average duty of 162% against Chinese goods, compared with a 33% rate for market economies.
China has waged a diplomatic campaign asking nations to grant it market status, winning over more than 70 countries, mainly in Africa, Latin America and Asia. On Dec. 12, 2016—the day after the 15th anniversary of its accession—Beijing filed separate complaints in Geneva against the U.S. and the EU demanding similar treatment from them, arguing that the stance of the two Western powers “nullify or impair benefits accruing to China.”
The European case is moving first, and a panel was appointed in July with veteran arbiters from Jamaica, Switzerland and New Zealand. The deliberations are likely to take more than a year, but interest is already intense, an unusually high 20 countries registering as “third parties,” including Ecuador, Russia, Tajikistan, and Japan.
WTO defenders and critics alike say the Geneva courts are the wrong way to resolve what are ultimately political and economic questions left ambiguous in the underlying rules.
“That gray zone is the key point of tension,” says Chad Bown, a WTO expert at the pro-free-trade Peterson Institute for International Economics. “How you deal with that is ultimately going to determine whether the WTO system in its current form can hang together or not.”
Write to Jacob M. Schlesinger at jacob.schlesinger@wsj.com