WTO seeks fix to ruptured dispute settlement process

With help from Doug Palmer

World Trade Organization countries are expected to get an update Friday on where negotiations stand to reform the dispute settlement system, a potentially make-or-break issue for the group’s next ministerial conference in February.

The USTR will hear arguments today over South Africa’s continued participation in the tariff-cutting African Growth and Opportunity Act despite concern from lawmakers over the country’s close ties with Moscow.

— Trade Ambassador Katherine Tai said a four-year review of the Section 301 tariffs on China could be completed by the fall, and that she remains “open to” the possibility of negotiating a trade agreement with the U.K.

It’s Monday, July 24. Welcome to Morning Trade. It’s a nerve-wracking week in the world of global trade so the team figured it’s a good a time to highlight how folks in the scene prefer to unwind. We reached out to Ed Gresser, a former U.S. trade official who served in both the Obama and Trump administrations, now at PPI. His favorite weekends are spent teaching vocabulary to teens at a Thai Buddhist temple in D.C. Occasionally, he relaxes with a drink preferably orange juice or red wine, he writes in. Cheers to you, Ed!

Write to us about your weekend plans, or send us your trade news at: [email protected], [email protected], and [email protected]. You can also follow us on Twitter: @_arihawkins, @gavinbade and @tradereporter.

UPDATE EXPECTED: Senior Guatemalan official Marco Molina is expected to brief WTO members Friday on his efforts to help forge a deal to overhaul the WTO Dispute Settlement Body. One big uncertainty in those talks is whether members will agree to revive the Appellate Body, which the U.S. effectively killed several years ago.

A group of WTO members asked Molina, who is Guatemala’s deputy permanent representative to the WTO, in early February to facilitate the dispute settlement discussions. That came on the heels of an informal process led by the U.S. last year to explore the concerns members have about the system and possible solutions.

Quick rundown: The Biden administration has so far kept mum about how it hopes to achieve its objectives to reform the WTO’s ruptured settlement body, but has called for a more efficient and transparent system that upholds the rules contained in the WTO’s written agreements, and doesn’t impose new obligations on members.

Bipartisan frustration with WTO: Washington threw a wedge into the dispute settlement system during the Trump administration by blocking new appointments to the Appellate Body. That followed a series of rulings that Washington believed went too far in restricting the use of anti-dumping and countervailing duties against what the U.S. government had determined were unfairly-priced imports. The Biden administration continued the blockade.

Washington’s newest priority: The U.S. also made a new demand in the past year after the WTO ruled against tariffs imposed by Trump on national security grounds. It now wants the revamped system to make clear that the WTO can’t second-guess such claims.

Slow and steady: Friday’s meeting gives Molina the opportunity to bring members up to date before the WTO takes its month-long break in August.

The Guatemalan diplomat told members in June that some of the 70 reform proposals under discussion have been moved from an initial “red table” to several “yellow tables,” meaning they have been fleshed out with more detail. Members were also starting to identify practical solutions that could be included in forthcoming “green tables,” which will be the basis for the text drafting exercise that will take place after the WTO’s summer break, he said.

But … the deadline looms: WTO members agreed at their 2022 Ministerial Conference they would aim to have a “fully and well-functioning dispute settlement system” by 2024. That deadline is broadly interpreted to mean the group’s next ministerial meeting in the United Arab Emirates in February, but talks could slip past that.

Ag talks inch along: Separately, the chair of the WTO agricultural negotiations gave little indication that the upcoming 13th Ministerial Conference in the United Arab Emirates would produce big agreements to liberalize farm trade. That remains a difficult area for the WTO.

WTO chief: Be ‘realistic’: WTO Director-General Ngozi Okonjo-Iweala urged members to focus on a narrow list of “realistic” objectives for MC13. That should include ratifying the agreement reached at MC12 on fishing subsidies, she said.

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October push planned: Senior capital-based government officials from all WTO members will be invited to Geneva on Oct. 23 and 24 to advance work in preparation for the ministerial conference. “If we get this right, it will be a boost for a successful MC13,” Okonjo-Iweala said.

AGOA HEARING TODAY: The premier of the South African province Western Cape, Alan Winde, Mauritian Ambassador Purmanund Jhugroo and Georgetown University student activist Daniel Hagos are all on tap to testify today at USTR’s annual hearing to determine whether to suspend, restore or maintain trade benefits for any individual country under AGOA.

Winde, a member of South Africa’s Democratic Alliance party, is expected to argue in favor of South Africa’s continued participation despite concerns raised in Congress about the country’s military relationship with Russia. No one from South Africa’s national government is scheduled to testify, although a high-level South African delegation was recently in Washington for talks with the administration and Congress about those concerns.

Mauritius expressed concern in its pre-hearing brief about a provision in the 2015 AGOA reauthorization act that requires the president to deny trade benefits for a particular country once it exceeds a high-income threshold.

“Mauritius is of the view that this is not an appropriate yardstick to determine whether a country should be graduated from the scheme,” the country said in its brief.

President Joe Biden terminated Ethiopia’s trade benefits last year because of human rights concerns. Hagos has family in Ethiopia’s northernmost region, Tigray, which was the site of an armed conflict from November 2020 to November 2022. Despite the end of hostilities, there remained “a consistent pattern of unabated, state-backed human rights violations & acts of violence occurring in Tigray throughout 2023,” Hagos said in comments filed with USTR.

Other witnesses include Karl Von Batten, a representative for the government of Somalia, which formally applied earlier this year to join the AGOA program.

USTR will stream the hearing on its website, beginning at 10 a.m.

TIMELINE FOR 301 TARIFF REVIEW: The Biden administration expects to complete its four-year review of the Section 301 tariffs in “fall of this year,” USTR Katherine Tai told the Senate Finance Committee in written responses to questions.

The USTR is in the midst of a review on the effectiveness of tariffs that Trump imposed of more than $300 billion worth of Chinese goods in 2018 and that the Biden administration has kept in place.

Tai’s timeline for completing the investigation in the recently released responses is her clearest yet. It raises the question whether the review will be completed before President Joe Biden hosts the APEC summit meeting in San Francisco in November, which Chinese President Xi Jinping could attend.

On the U.K.: In another of the written questions, Rep. James Lankford (R-Okla.) pushed Tai on whether the U.S. might negotiate a tariff-cutting free trade agreement with the U.K. – something the administration has so far resisted.

Tai responded that her office has been discussing “a range of issues” with the U.K. under a bilateral trade dialogue, including labor, the environment, trade facilitation, supply chains and China’s non-market policies and practices and economic coercion.

“I remain open to the best mechanism to formalize this bilateral trade engagement between the United States and the U.K., whether through a trade agreement or other tools,” she said.

PROBE INTO FORD MOTOR: A licensing agreement between a Chinese battery company called CATL and the automotive manufacturer Ford Motor Company is facing renewed scrutiny from House Republicans, after lawmakers launched an investigation Friday.

The probe is led by Jason Smith (R-Mo.), the chair of Ways and Means, and Mike Gallagher (R-Wis.), from the Select Committee on the Chinese Communist Party, and centers on whether Ford is creating jobs for Chinese nationals, and CATL’s alleged ties to forced labor.

More GOP backing: “Shame on Ford for doing this,” said Rep. Carlos Giménez (R-Fla.) who slammed the deal in a Fox News interview over the weekend. Gimenez said he was concerned about tax credits Ford could be receiving in relation to the Inflation Reduction Act.

SMOOTHING THINGS OVER: Treasury Secretary Janet Yellen wrapped up a visit to Vietnam on Friday where she “expressed satisfaction with Vietnam’s progress on currency issues,” after talks with the country’s central bank governor, and celebrated a new economic partnership to fast-track Vietnam’s clean energy transition. Vietnam pledged to refrain from “competitive devolution” of its currency in an agreement with the U.S. in 2021.

USMCA DAIRY DECISION ON HORIZON: A second USMCA panel ruling in the long-running U.S. dispute against Canadian market access barriers is expected in coming months following oral arguments between the two sides last week. The two-day hearing gave both governments an opportunity to “answer any final questions before the panelists issue their findings,” Becky Rasdall, vice president of trade policy and international affairs at the International Dairy Foods Association, said in a statement.

— Deputy Canadian Minister Chrystia Freeland said Friday she believed a deal could be struck to address U.S. concerns about Ottawa’s plans to proceed with a digital services tax, Doug reports.

— The U.S. and Bahrain reaffirmed their commitment to freedom of navigation in international waters, and ensuring safe passage for commercial shipping in the Strait of Hormuz in a joint statement released Friday.

— Secretary of State Antony Blinken said the U.S. is looking to Turkey to encourage Moscow back into the Black Sea green deal that Moscow blew up earlier this week in a move that’s roiled global wheat markets and escalated military tensions in the region, per our Meredith Lee Hill.

— Group of Seven nations, the European Union and three other countries are preparing to appeal to Beijing for help to prevent North Korea from evading U.N sanctions using Chinese territorial waters, Reuters reports.

THAT’S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: [email protected], [email protected] and [email protected]. Follow us @POLITICOPro and @Morning_Trade.

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