Dialogue on trade among Wendy Cutler, Pascal Lamy & Wang Huiyao

CCG | August 02 , 2021

[English]

【中文】

The recovery of the world economy has been weakened by theoutbreak of Covid-19 and its variants in many  countries. With the U.S. tentative return to multilateral cooperation, the new General-Director of WTO was finally appointed, indicating the reviving of the WTO from limbo. However, the rising regional free trade agreement seemingly take the place of WTO, plurilateralism taking the place of multilateralism. Changes have been made in the past couple of years.Many agendas are set for talk in the WTO ministerial conference (MC 12) this year. The Appellate reform, fishery talks, the digital trade, competitive neutrality, the problems of subsidies, which one of them should be prioritized on the WTO reform list? To what extent that we may reach consensus?On August 2nd, as part of its 7th Annual China and Globalization Forum, CCG hosted a dialogue on trade between  Wendy Cutler, Vice President of Asian Society Policy Institute; former Acting Deputy USTR and Pascal Lamy, former Director-General of the World Trade Organization,President of the Paris Peace Forum and Wang Huiyao, CCG President and Counselor to the State Council. The three distinguished speakers shared their insights on international trade, China’s accession to the WTO and its upcoming WTO reform, fairer vaccine rollouts, global mobility, US-China trade negotiations, EU-US-China trilateral relations. 

 

China and the US need to constructively approach WTO reform and upgrade

 

Wang Huiyao: Good evening and good morning, and good afternoon, depending on where you are, and welcome our guests, one in US another one in Europe. Thank you for tuning in for our audiences here in China and other parts of the world.

 

You are watching CCG’s special dialogue – “the multilateral trading system in global changing context” live from CCG head office. This is a part of our Seventh Annual China and Globalization Forum. This year CCG took the initiatives to organize the discussion on the recovery of the global economy, trade, mobility, China-EU Economic cooperation, global cooperation and China’s new development plan and China’s international communication. Also, our forum feature webinars focused on the China-US relations on the webinar as well as the multilateral trading system. So tonight, this forum will be devoted into the multilateral trading system and also, globalization.

 

Our annual forum actually achieved great success. As a matter of fact, we had more than 400 distinguished guests taking part, including nearly 30 ambassadors and over 100 senior diplomatists, country heads of international trade groups and the chambers and multinationals represented from international organizations, nonprofits and the governor representatives, as well as business leaders, scholars, and experts from academy, think tank communities to join our discussion. So, it was a splendid annual forum that CCG organized and we’re really pleased to host this concluding webinar tonight, which is one of the most important discussions. We already had two webinars during the previous two days. One July 30th, John Thornton, who was the Chair Emeritus of the Brookings Institution and Co-Chair of the Asia Society; Adam S. Posen, President of the Peterson Institute for International Economics; Amb. “Stape” Roy, a former US Ambassador to China; and Zhu Guangyao, a CCG advisor and former Vice Minister of Finance of China attended our first Sino-US webinar. Yesterday, we had our second webinar, inviting Susan Thornton, former acting Deputy Secretary of State for East Asian and Pacific Affairs and Ronnie C. Chan, Chair Emeritus of the Asia Society and Chairman of its Hong Kong Center.

 

Now, as final special dialogue, we are thrilled to have two distinguished guests to explore global trade with us today – we are honored to have invited Pascal Lamy and Wendy Cutler, our good friends.

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I’d like to introduce Pascal Lamy. Pascal Lamy is the president of the Paris Peace Forum, which is a very well-known and well-established forum in Paris. It’s getting into its fourth year now and he’s also a member of Jacques Delors think tank (Paris, Berlin, and Brussel). He was the longest serving WTO Director-General so far in the history of WTO from 2005 to 2013. And between 1999 and 2004 he was the EU Trade Commissioner. He began his career in the French civil service at the Inspection Générale des finances and at the Treasury, then became an advisor to the Finance Minister Jacques Delors, and subsequently to Prime Minister Pierre Mauroy. He served as Chief of Staff to EU President, Jacques Delors between 1984 and 1999.

 

So, welcome, Pascal. Pascal also has come to CCG Beijing office for quite a few times . I remember as early as 2019, you presented a speech at CCG on “WTO reform and the multilateral trading system” to which many of CCG’s colleagues and experts in this field attended. Last year, you also spoke at the CCG’s 6th Annual Forum of China and Globalization and later delivered a very good congratulative remarks for CCG’s Global Young Leaders Dialogue, which was launched last December.


 

Now, I would like to introduce another well-known speaker tonight, Ms. Wendy Cutler is the Vice President at Asia Society Policy Institute and the Managing Director of the Asia Society Policy Institute’s D.C. office. Also, in her own role, she focused on building ASPI’s presence in the nation’s capital on leading initiatives that address challenges related to trade, investment, and innovation, as well as women’s empowerment in Asia. She joined ASPI following an impressive career of nearly three decades as a diplomat and negotiator in the Office of the U.S. Trade Representative (USTR), where she also served as Acting Deputy U.S. Trade Representative. During her USTR career, she worked on a range of bilateral, regional, and multilateral trade negotiations and initiatives, including the U.S.-Korea Free Trade Agreement, the Trans-Pacific Partnership (TPP), US-China negotiations and the WTO Financial Services Negotiations. She has published a series of ASPI papers on Asia trade and many other global multilateral trading issues.

 

I also remember hosting Wendy when you came to CCG in January 2018, which was quite a few years ago, when CCG and ASPI jointly hosted the “US-China Economic Relations Roundtable” at that time. Later that year, we joined your breakfast meeting at Washington DC. hosted by ASPI and we had a very good discussion with  DC think tanks. I remember at that meeting you hosted in Washington, you invited many well-known US experts, including Katherine Tai, now the USTR, who also attended the CCG and ASPI event in D.C.

 

It’s also worth mentioning that back in April last year, both Wendy and Lamy participated in a CCG webinar “the role of WTO and global response to the Covid-19 pandemic”, so a lot has happened and lots has changed since then. So, let’s begin our discussion today and maybe can I start with Wendy? Since you are very familiar with the US government, and you are a former US government official, and particularly you looked after WTO and multilateral trading system for quite a long time, So, what are the US priorities for the WTO reform and the upcoming 12th Ministerial Conference. Perhaps you could start your speech first. And then we have Pascal to discuss.

 


Wendy Cutler
: Thank you very much. It’s really my honor to be here in another CCG forum, unfortunately it is virtual and I look forward to doing these in person again and I’m humbled to share the virtual stage with Pascal with me who has so much experience and expertise in this area as well as you, Dr. Wang, so I’m looking forward to a very robust discussion.

 

Before I talk a little about how I think the Biden administration is viewing WTO reform, the first thing is just to highlight three cornerstones of the Biden administration trade policies because I think that will help us understand their view on the multilateral approach as well as on the upcoming WTO ministerial meeting.

 

First, the Biden administration trade policy is very integrated with its domestic agenda so issues like covid recovery, climate change, and build back better (B3W), all these initiatives which are being pursued on a domestic basis are also being pursued on an international basis.

 

Second, when it comes to trade policy, the new phrase in Washington is a worker-centric trade policy. I get a lot of questions on what that actually means. So let me share some of my sense with you, but I would like to admit firstly, I think it’s a work in progress and that how this policy kind of translates into concrete trade initiatives is still being developed. The basis for this policy is rethinking US trade policy as one that needs to change in order to benefit the working class, the middle class – to be responsive to their concerns and priorities and use trade to really improve not only the number of jobs for US workers, but also to improve the quality of jobs and again, not just US workers, but workers around the world. And to really use trade, the phrase that Ambassador Tai uses a lot is “to use trade as a force of good” to really uplift the situation and livelihood of workers as well as to promote more equality among workers, the middle class, et cetera. And the third kind of pillar of the Biden trade policy is to work with allies and partners. We just launched, for example, Trade and Technology Council with the European Union, which, for the purposes of today’s discussion, includes a working group and global trade challenges. But it also is centered on really being constructive and being engaged in international organizations multilateral institutions including the WTO.

 

So I think all three of the kinds of pillars are relevant to today’s discussion. And when it comes to the WTO, we did see some early moves by the Biden Administration to really show that they are back in the WTO, including very quick endorsement of the new Director General, not even waiting for the confirmation of Ambassador Tai but now we have a new director general at the helm. And I’m sure we’ll be talking more about Dr. Ngozi. Second, the United States has been very constructively engaged in the WTO agenda. Just last week,  for example, we joined the services domestic regulation plurilateral talks. We have been active members of the fish subsidies negotiations. And of course, we’re joined ranks with others in calling for a trip’s waiver for Covid purposes. So, I think that gives some indication of how engaged and committed we are. Now, that said, we still have not nominated nor confirmed an Ambassador to Geneva to the WTO and lots of our statements on WTO reform have yet to be translated into actual proposals that we put on the table, but I think that will happen in time. However, I also think it’s important when we think about WTO reform, and we think about the upcoming ministerial. This can’t just be about the United States and what the United States is going to do and are we conformed, are we committed and are we putting proposals on the table in order for the WTO to move forward and for the Ministerial to be successful? This is going to require contributions from all 164 members as well as the major trading countries, including Europe, China, and the United States.

 

With respect to China, I think that it’s going to be important for China to step up here and help move the WTO forward and update its rules. In particular I want to highlight the agenda in the WTO with respect to non-market economies and I think this is an area, looking forward, where we will need to find a way to work together if the WTO is going to be continued to be relevant. And I think there will be a lot of interest in this agenda as we get closer to the 20th anniversary of China’s accession to the WTO which will take place later this year.

 

Now, if I know I’ve been talking for a long time. Let me just make a few comments on the MC12 – the Ministerial conference coming up starting November 30th in Geneva. This will be the first Ministerial, if I’m correct, for the WTO in 4 years, it will be the first Ministerial that will be led by the new Director General Ngozi. And it’s going to be a challenge given where we are with Covid now, particularly if in-person meetings cannot take place in the lead-up to the ministerial and if the ministerial is not an in-person event or a hybrid event because as we all know for concrete outcomes to come out of WTO meetings, in-person meetings, side conversations and talks between smaller groups of countries are rather essential and no matter how great our virtual platforms are, they are limited with respect to behave in my view to be able to really negotiate the final issues, which allow actual successful negotiations to reach their conclusion.

 

The United States has been very cautious yet realistic about its objectives for the Ministerial meeting, partially taking into account where we are with Covid now and the possibility of in-person meetings. But I also think it’s important that we don’t set high expectations and then don’t meet them. It’s not in the WTO’s interest for any headline around this Ministerial to use the word fail, or not to have lived up to where it needs to be and so that’s why the United States is put forward what it calls a targeted approach, calling for a successful conclusion to the fishery subsidies negotiations, but also calling for some modest institutional reforms with respect to transparency to dealing with these self-declaration, LDC (less developed countries) issues, developing country issues another in other institutional reforms.So let me stop there, I think there’s a lot more to talk about but hopefully I’ve touched some of the issues which will be subject to our conversation this evening.

Wang Huiyao: Great, I think you have highlighted the importance of WTO. I’m very glad to see that Biden administration is now back to WTO, which you have illustrated and a quick approval of the Director General since Biden took office, also we see the new Director General has also appointed four Deputy Director Generals, one from US, one from China, and one from EU and one from Latin America, which are also quite well represented. Now, I agree that we should really focus on the future of WTO because I think in light of this pandemic, we need the world trade to reboot the global economy, particularly given the history – in the previous time, for example, the Second World War and the financial crisis, international trade has always been a big boost to the stability and global economy growth.Pascal, you are the guru on WTO, and you are the longest serving Director General of the WTO, you know EU and China well and you are a strong supporter of multilateral systems. Trump backed off for a while but now Biden has come back to it again. EU has been always there and China is also a strong support of the multilateral system.So, what’s your assessment? Can all the major players can play some more roles to shape the revival of the WTO and to gain confidence? After the Doha Round, we haven’t really achieved anything. What’s your take on this issue? Your opinion obviously attracts wide attention and has a big impact on views on globalization and recovery of global economy.

 

Reducing trade obstacles will bring global growth and prosperity



 

Pascal Lamy: Ok, I’m trying to answer your question and thank you for inviting me together with Wendy for this conversation. Short term, I think the main issue for us all remains. To exit this pandemic, sanitary-wise, economy-wise, policy wise, and this is not mostly a trade issue. Although, open trade and boosting trade can help boost the necessary recovery. There are a few issues that have to do with vaccine production and intellectual property, vaccine distribution. But this is not central to the multilateral trading system. If we look back at the sort of a bigger cockpit view. Why do we need a multilateral trading system? Why do we need a World Trade Organization? Basically, to reduce obstacle to trade. In so far, as a lot of us believe, that opening trade is a good thing overall, hence reducing obstacles to trade that prevent trade to be more open is what needs to be done generally. Now this is the big principle, which necessitates immediately a bit of a qualification, which is why I totally agree with what Wendy said about the US trade policy or the EU trade policy, or the China trade policy, being very much a domestic issue. And the reason why it is a domestic issue is that if opening trades works overall to create efficiencies, if the sum of wins and losses is positive globally, because efficiencies are higher, hence growth is higher. This is usually not true locally and the question is, what is the real impact of any country’s trade opening on X-profession, Y-workers, Z-consumers, which is something which is much more complex than the big picture? In other words, while opening trade is a global issue and hence necessitates a multilateral trading system, a lot of attention has to be taken locally in how you manage the distribution between winners and losers. Winners can be much more many than losers globally, but this may not be true locally and the reality is that in the West there has been for the last 10 or 15 years more debate about whether or not this will not lose our equation and this explains why trade policy is very much a domestic policy. I remember when I the Director General of the WTO asking the Minister if she could do this or that and the answer was, “come on, you’re asking me to negotiate with myself.” And my answer was “precisely this is exactly what I’m asking you to do, can you renegotiate with your own constituency, your mandate.”

 

That’s a general introduction and the reality is that we have a relatively open world trading system that has worked for the last decades. Trade is more open today than it was 10 years ago and 10 years ago, it was more open than 20 years ago, yet there remained a number of issues, in terms of leveling the playing field, i.e. ensuring as much as possible, a fair competition between producers so that the benefits of trade opening of competition can flow to the benefit of consumers. There are basically in my view, now, in the world of today which is quite different from the world of yesterday, two major issues on the substance of what needs to be done, multilaterally to level the playing field. One has to do with competition and another has to do with how you handle precaution. Competition is about ensuring that producers complete on a fair ground i.e. without trade distortions, which classically are quantitative restrictions, tariffs and subsidies. Quantitative restrictions and tariffs are, in today’s world, not a major issue – they’ve been delt with in the past whereas subsidies and notably because of where China is in the world economy, remained a problem. And I think the main issue for the multilateral trading system and for the WTO as far as leveling the playing field is concerned is what the Chinese leadership calls competitive neutrality. 

The reality is that China is a different economic political organization than the rest of the world, which is organized globally, liberal Market Capitalism. The reality is that China remains a Communist Country, whose view is that holding a 30% of the production system in the hands, the party of the state, is the right way to go. This is very different from the rest of the world and it’s probably more different now, at least for the last 10 years, than it had been in that in previous years after China joined the World Trade Organization. So on competitive neutrality – how to ensure that competing on the Chinese domestic market and on an international market with state-owned enterprises who are state-owned because they need the state’s support from the Chinese leadership that attributes to the benefits of this vast state-own sector is an issue, which of course, many other countries have to deal with. The EU and US probably are more outspoken than others, in the fact that they see this problem with competing with state-owned enterprise as an issue and this necessitates further adjustment of the rules of WTO as far as subsidization is concerned, but there are many other countries that have the same view. So, as far as the purpose of organizing a level playing field where a fair system is concerned, I think the issue number 1 is to strengthen WTO rules on states, this is not the only issue.

 

Another one, which is more recent has to do with what I call precaution. Precaution is when you protect your people from risks whereas protection is when you protect your producers from foreign competition, precaution is now raisingIt’s about environment. It’s about health, it’s about safety, it’s about security, it’s about privacy. And this leads to a more fragmented, a more important part of regulation in the economy. And a regulation that is more fragmented given that the way you protect your people from risk is very often correlated with ideology, culture, religion and history. And this is a major issue for the future.

 

So this is what I see as the two main issues plus an issue which is quite dear to my heart, which unfortunately in my view, does not get the level of attention, which it should from countries’ negotiations and trade negotiators. It is the WTO itself as a process, the way the organization works needs a lot more attention and needs a lot of reform. Because contrary to less a priori modern organization, the WTO as a machinery to legislate, regulate globally is not what it should be for a number of reasons, which I think needs to be addressed. I deeply believe that the machinery needs attention if we want the WTO to be able to be up to its task in the future. Over to you Henry.

Wang Huiyao: Great, thank you Pascal. I think both you and Wendy as you have outlined your perspective on the WTO reform and the future reshaping of WTO. You also mentioned about China as well. CCG recently organized an event, discussing the 20th anniversary of China joining the WTO where former China’s WTO chief negotiator, Minster Long Yongtu and former Deputy Director General of WTO, Minister Yi Xiaozhun and many other experts came. In regard to the WTO, trade has greatly benefited China but also the world – China’s export to the world has increased 7 times, but China’s buying from the world has increased to 6 times also and even more so on the service trade. So it’s a multi-party win-win situation. Not only China’s trade as a developing country has increased hugely but also China has contributed to one third of the global GDP growth now. I agree with both of you that this reform is related to domestic policies as well. China has lifted 800 million people out of property which cut  70% of the global poverty – this was 10 years ahead of UN’S SDG agenda on poverty alleviation. So, it shows that the system in China works for itself.  Pascal mentioned there is a big portion of SOEs but for any disaster relief and for lifting property and others, SOEs in China have to be in the front and deliver many social responsibilities. So I think this hybrid system that China has seems to be working for itself, but of course you raised a good point about competitive neutrality, which is also a concept that is being a widely discussed in China as well. There is room for the future improvement. As Wendy knows well, China also shows great desire to join TPP and CPTPP now. The Ministry of Commerce has put the CPTPP agreement on its website, showing that here is the objective and standards that we need to look forward in the future. I’m sure Wendy helped with the design of the architects of CPTPP.

I want to raise another question – I remember last year, during CCG’s webinar  about multilateral trading system reform to which both of you attended, and also including Alan Wolff, the Deputy Director General of the WTO and quite a few other experts from China. We mentioned about WTO reform- there’s a lack of leadership which was very obvious last year. Now, US is back, everything is on consensus. We need strong leadership, can China, EU and the US take really concerted efforts to make WTO work? I mean Wendy, you have written recently, saying that maybe we could have a US, EU and China forum on multilateral trade system, that is a great idea to pursue. Also, last time,  we discussed that maybe Secretarial  Office of WTO should play more active role like WHO and many other international  organizations. With so many member states, too many rules, it’s that hard to make a decision now. And fairly, we need some lower hanging fruits to conclude, like this fishery substitute discussion that has been going on and maybe now it’s high time for us to conclude on that. Also, WTO can do something on the plastic emission to the ocean. I remember I went to the WTO Public Forum in 2019 where I gave a talk there on this initiative, both Ambassadors from EU and China and many other countries were very supportive. Further, digital economy and trade, investment facilitation, globalization of the investment are things that we can push forward. Wendy, maybe we can have a further discussion on those issues and you can share your opinion?


China’s accession to the WTO is a contribution to the global economy

Wendy Cutler: Thank you, maybe before I get to your question, just a couple of comments. I couldn’t agree more with Pascal that we really need to look at the WTO machinery and institutional issues, because they are so interrelated with the inability of the WTO, to produce successful negotiating outcomes. So the approach that the WTO followed for its early years with respect to consensus, to arrive at decisions, to focus on this MFN principle that all benefits from a negotiation should be applicable to all members, and the issue of frankly LDC self-selection – I think all 3 of these issues are perhaps outdated now and they seriously need to be looked at.

And Henry, you mentioned the fish subsidies negotiation – well, one of the major stumbling blocks in that negotiation, frankly from the US perspective, at least, and Europe and other countries is this whole issue of developing countries, including China, wanting to be treated as developing countries and therefore not assume full obligations. And so I just wanted to make the link between these institutional issues, which sound very wonky – they are so interrelated with where we see the WTO today. So it’s important that we look at these issues and, in my view, I think the only way forward is to allow for subsets at WTO members to meet, to negotiate, to agree on outcomes, to share the benefits just among those parties, but at the same time to invite other parties to join and to offer them the technical assistance that might be needed to get them to be in a place where they can participate.

The second point, Henry, you mentioned about China’s accession to the WTO, I am a firm believer that it was the right decision for the United States at that time to be a supporter of China WTO accession when I look at the important legal and regulatory changes that China made at that time, how it opened and reformed its economy, and as you mentioned, how it became a global trade force, and it’s brought benefits to the international trading environment.

I don’t disagree with any of that, but I also think now, here we are in 2021, changes need to be made, updates need to be made, if indeed this system can be credible and can continue to function as a major force in the WTO rulemaking process. When China joined the WTO, I don’t think there was any expectation that there wouldn’t be updates to the WTO rules and in fact, there was a new round that was launched at that time under the leadership of Pascal and me. I think the expectation was that rules would be updated there’d be new market access commitments. We would you know continue to update the subsidies rules or introduce rules on state-owned enterprises. But we all know the history, none of that’s happened. So here we are, and the status-quo in these issues just doesn’t work anymore. So looking ahead again, I think it’s critical that China join others that want to see some changes in these rules to better reflect and govern the types of trade practices, that China and frankly some other countries as well, or pursuing in 2021, looking to the future. Now, with respect to your question. Where can China, the US, the EU and any other major countries cooperate, when we look at this WTO agenda? Where can we collaborate? Or where do our interests align? There are some areas. I think number one, fish subsidies is an area where we should be working together. I think it’s very important that an agreement be reached on fish subsidies for the WTO’s credibility is going to almost be the litmus test for MC12. If there’s not a fishery subsidies negotiation, then I think the headline is going to be – the WTO can no longer produce negotiated agreements. I think here we need to have an honest discussion about the special and differential exceptions but we also need to make sure it’s a meaningful agreement that it just it doesn’t just lock in the status-quo. We should all be taking on obligations, which actually address a real problem and that is over fishing and over subsidization, which has a severe environmental impacts.

I think in the area of e-commerce, we have some shared interest. If we put some of the big issues where we have differences, like free flow of data or data localization, particularly there are areas with respect to trade facilitation and digital trade are where we have shared interests. And maybe those are areas where we can work together.

On Covid recovery, I know there are differences between our governments, but I also think when you look at just the trade aspects, there are areas where we can work together. The United States now is in support of a TRIPS waiver, but it’s a TRIPS waiver for vaccines. I don’t think this will be the end-all-be-all issues for Covid, I think it’s just like one part towards the covid response. But China supports this initiative as well, and I think we could work together with the authors of this initiative to try and limit it and make it workable so we could have a meaningful outcome in this area. 

I would finally just put on the table, I think it would be important for the multilateral trading system if the United States and China can find a way to start taking, I would call them baby steps, towards lifting some of the tariffs that we have in place against each other’s imports. Whether we could just limit that to the medical sector, pick out some environmental products, or just reciprocally lift some tariffs, I think that could be a real shot in the arm for the WTO going forward because we both know the history here, let’s be honest, these tariffs are not helpful for either country and they undermined the relevance and the credibility of the World Trade Organization if the two largest economies have such substantial trade barriers in place between each other’s imports.

US-China tariffs are not helpful for either country and their credibility in global trade

 

Wang Huiyao: Thank you Wendy. Your last statement is highly expected and extremely welcomed by the business community because lifting the tariff imposed by Trump Administration on China and also if China can lift some of that in response, would be a really great idea to show that both the US and China are supporting the multilateral trading system and supporting free trade and free flow of goods. So that is absolutely important that I totally agree with you, I think that is really what we need. On the other issues, I think we probably really need coordination between the major trading powers like the US, China and EU.

 

Pascal, you have spent so many years in the WTO managing that organization, what do you think about this appellate body reforms, you know we still haven’t got that fixed. Just now, Wendy mentioned about this patent. To get the COVID-19 really lifted China and US need to agree to relax their patent and intellectual property protections. Also, you know that the EU has proposed proposals related to carbon issues. So perhaps you could elaborate and give us some comment on these questions?

 

Pascal Lamy: Thanks, let me touch a few of these points. I generally very much agree with the points which Wendy has made. First on this issue of China joining WTO and its 20th anniversary. As you know, there’s now a narrative in the west that suggests accepting China was a mistake and they think those who supported it – and I rank among them – were stupid enough to be cheated by China. This is absolutely wrong. I totally agree with what Henry said, you just have to look at the numbers. When China joined WTO, its external trade surplus was around 10% of GNP, it’s now around zero or 1%. How do you move from 10% of your GNP external surplus to 0 or 1%? There’s only one way to do that, which is to import more than you export. And this is what has happened. This is the answer – China’s accession to the WTO was a big contribution to the world’s economy. So number-wise, it has worked, that’s not the problem, that’s not the point. Where there is a problem, which I think we have to recognize, looking back 20 years ago, when this deal was done, is that the assumption at the time. I remember my conversation for closing the deal between China and the European Union with Premier Zhu Rongji, who I think is no secret was a reformist, the assumption was that – as time goes, long term, China would converge with the dominant global market liberal system. And this is what did not happen, or more precisely, it happened roughly during the first 10 years with China joining WTO and then in the next 10 years, which was the last decade, China diverged from this convergence road, which started with Deng Xiaoping deciding China will rejoin the world economy. This is where we have the problem. I think the real problem with WTO versus China or China versus WTO is that China professes an exceptionalism as compared to global market capitalism, which then creates issues in terms of competition. This is why we need better, more precise rules on what we are going to call state aids. We Europeans know this problem, when the common market was created in the 1950s, part of our economies were still more nationalized than others. And the deal that was done at the time, notably between Germany and France. France had 30% of its economy nationalized, Germany had 5%, and Germany said, I’m OK to open trade with France, but provided we have a system that regulates state aids with a specific body which was the European Commission in charge of controlling whether states aids or not an unfair competitive advantage. So that’s where we have an issue, it’s not about joining, it’s about the fact that 20 years after China joined, China is more of an exception vis-à-vis with the rest of the world than it was at the time.

 

As far as the issue of leadership is concerned, which you mentioned, I totally agree that there is a leadership issue. The solution to this leadership issue lies in changing a principle, which is that the WTO is member-driven. Member driven is a reason for poor leadership. Not that it should not be member-driven at all, what in my view should happen is what happens in other normal international organization, is a better balance between the authority of the members and the authority of the Director General and the secretariat. This member driven system should be changed to co-driving the organization by members on the one side – they decide, not the Director General, not the secretariat. But the Director General and secretariat must be able must be given the authority to make proposals to identify issue, to look into options like any other international organization. This rebalancing is something which is necessary and the WTO would be much more efficient if it recognizes that this member-driven system is partially transformed into Director General driving again, the legislator will remain the member states at the end of the day.

 

On the issues looking forward, I agree with what Wendy said about the digital, with what she said about fishery subsidies. It’s only now a question of what are the exceptions in the name that artisanal poor fishermen should not be submitted to these rules and the question is, what’s the border between artisanal and coastal fishing for poor fishermen and big fish, big tun,  in the Pacific, big China, big Korea, big Japan and this is an issue that still needs to be solved.

 

I see environment as a major issue coming in so far as climate change is now the number one issue of the international agenda globally. This necessitates urgent, bold action which has to translate into implicit or explicit carbon price rise. As long as there will not be a global agreement, a global implicit or explicit carbon price at around €100 to €120, which is what economists tell us that would be the right price for internalizing the negative effects of production systems and reducing CO2 emissions, there will be different ways to address this problem, depending on countries and constituencies, hence, a necessity to adjust these different systems – this is what you mentioned, Henry, why the European Union has now embarked on the CBAM (Carbon Border Adjustment Mechanism). This not a new instrument, contrary to what it sounds, but a carbon-border adjustment mechanism in order to avoid that a very high price of carbon in the European Union. I think yesterday the price was €52 a ton, which is far from the highest price as compared to US, China or elsewhere. These very high price does not lead to carbon leakage, ie. EU producers moving their production out of the European Union in order to benefit from a lower carbon price. So this is a major issue and I have proposed in a series of briefs which I have co-authored that allow countries to have different views on how to increase carbon price weather it’s through tax, whether it’s through permits emission exchanges, whether it’s about regulations and to compare the way they progress in order to smooth the inevitable trade friction that differentiated carbon pricing in different countries will be.

 

On TRIPS and Covid, I basically agree with what Wendy said. My own view for what it is worth, is that there are already sanitary exceptions in the TRIPS agreement that provided for compulsory licensing in case of health emergency. We have a clear case of health emergency, what needs to be done is to make sure that the existing compulsory licensing systems works whereas some view that it doesn’t work quick enough. I think it’s not a question of overhauling the agreement. It’s a question of looking at how these exceptions, which are already provided, there are already wavers to intellectual property in the agreement in case of health emergency. The question is, do these processes, as they are structured in the TRIPS agreement allow for quick implementation of these compulsory relaxation whether for domestic production or whether for imports?

 

Finally, on your question about the appellate body, Henry, there is a structural problem and there is a more-easy-to-fix problem. The structural problem takes us back to the issue of whether WTO is able to adjust, to reform, and to adopt new updated rules. As long as the rules remain what they were in the 90s, you will always have a growing gap between reality and old rules and inevitably in a dispute settlement system. It belongs to the judges to adjust to this reality – old rules and new realities can only be reconciled within a dispute settlement system by judges interpreting old rules so that they can match new realities. So the real solution to fix the problem, whether or not the dispute settlement engages in judicial activism, is to restart, reboot, rework the rules-making system so that the gap between reality and rules is narrowed. This will leave much less room for judicial activism or pretended judicial activism.

 

This second part of the problem is probably not that difficult to fix. I believe the US is not always wrong when they say that sometimes some rules of the WTO were incompetent in a way that can be criticized. If the US would say that about cases they won, it would be more convincing than US saying there’s only problem when they lost cases. If you only criticize judge when you lose cases and never when you win, there’s something there which is a bit strange. But let’s leave that aside. There are, in my view, many ways to fix these problems if the willingness of US is to rejoin the dispute settlement system. There are many ways to address these problems and by the way the US are not the only country that believe that from time to time, that the judges may err in interpreting WTO rules.

 

These takes me to my final point, which I believe, that three of us can agree that the US, China and EU working closely is the key to fix this problem. The European Union’s difference to China and the US is that it’s not a full-fledged sovereign, as we all know. The sovereignty about the European Union depends on which topic you consider, but trade is one, trade is an area where EU has authority, has sovereignty, has size as well as US and China. And I think this inevitably should lead to fixing a number of these problems within this sort of G3, not that they should decide for others, but if there is a consensus between US, China and Europe, I would be very surprised if this would not transform quite into a WTO consensus. Go back to you.

 

A US-China-EU trilateral summit will be of great significance for the multilateral world

 

Wang Huiyao: Thank you Pascal, for your not only very stimulating but also forward-looking comments and recommendations. First, I want to thank both Wendy and Pascal for praising China joining the WTO and also, I think that was a  right decision not only for China but also for the world. I think we have a consensus on that, which is great. Wendy has mentioned that a US-China-EU trade forum, Pascal even talked about a US-China-EU summit on trade too, which would be really great. These are three strongest trading blocks and if they can talk and reach agreement among themselves, I’m sure we have an enormous impact on WTO and that is really very good.

 

I just want to clarify one thing, Pascal, you mentioned about that 20 years ago when China joined WTO, a lot of people think that China someday could become one of them, China is going to converge to be a Western-like democracy. But China has its own 5,000-year history, and has its own logic, development rhythm and DNA. Just like Deng Xiaoping said – it doesn’t matter whether it’s a white cat or black cat, as long as it catches mice. China now has 1. 4 billion people and has really improved the livelihood of these people. The per capita was 1,000 and now is 10,000USD – that’s an enormous lifting. So I think maybe we have to look at this co-existence, and maybe find a way to work with each other. I highly agree with both of you that EU, US, and China should have a trilateral talk on the trade for the WTO, which will make things much easier, and is something we need, particularly in the COVID time. We need high-level dialogue particularly in those areas that are so vital to the global economy. I think EU, the US and China can contribute significantly to the stability and prosperity of the world. So I think that is really a great idea of our discussion tonight – let’s have a G3 summit.

 

Now I’d like to continue with Wendy if I may. I know that you are the chief negotiator of TPP for many years. You have concluded the talks on TPP a number of years before Trump pulled the US out of it. There’s a prevailing theory that TPP was designed by the US to contain China, maybe with Pivot to Asia. You are the person that negotiated TPP, and now China is interested in joining the TPP, which now is called CPTPP – not only China, but also the UK, Korea and many other more countries want to join now. So what do you think about the TPP? Also, there’s large regionalization, we have RCEP, CPTPP, and other FTA among regions. How is that going to impact WTO?

 

Wendy Cutler: In terms of all of these regional trade agreements or bilateral trade agreements, if the WTO was really actively engaged in rulemaking and delivering successful outcomes to unimportant negotiating topics, the appetite for regional and bilateral trade agreements wouldn’t be as high as it is now. So, the two are interrelated. The theory is that if you do bilateral free trade agreements and regional free trade agreements, that those should provide momentum, and kind of push WTO in the direction to do more and that should contribute to liberalization. I think maybe it’s not playing out that way. But in my mind within the next year, at this Ministerial, if WTO isn’t successful in delivering some meaningful outcomes and getting itself back on the map, then you’re going to see more and more trade move to regional and bilateral trade agreements.

Now with respect to TPP, all I can say is that when I worked on it, I would have never predicted we would be in the situation where we are now, where the US is out of TPP, Japan lets other countries to conclude TPP, and now China seems to be more interested in joining CPTPP than the United States. So sometimes my head spins when I think about all of this, but I also think that the story is not over either. Now you know it’s interesting with respect to TPP and the United States, the debate has not gone away. In fact, some prominent senators and other congressmen, some noted foreign policy types in the administration and others – they’ve been pretty vocal about seeing the merits of TPP-like approach and questioning Trump’s decisions for the US to exit the TPP. So the debate continues and if you carefully look at statements from the administration with respect to TPP, they are almost endorsing the approach of working with like-minded countries to set rules standards and norms while also distancing themselves from the actual contents of what was in the TPP. So I don’t think the debates are over in the United States, but I’m also pragmatic and I’m a realist. I don’t see a scenario in the near term, where the Biden Administration, given all that’s on its plate, and the domestic toxic nature of TPP announces one day that we’re going to rejoin. I kind of don’t see that happening in the near term. I think what’s more likely is that the United States works with other like-minded countries in the region to conclude a narrower sectoral type of deal, perhaps in the digital trade area, and perhaps that could build momentum for the United States to participate in other negotiations in the region.

 

But I’m a firm believer in the United States, we need to get back in the trade space in the region, helping to shape the rules, the norms, and the standards. It’s happening without us, we’re not benefiting from it. I think in the United States, when Trump left TPP, the feeling then was the TPP would die, a quiet death, and the RCEP would not proceed. But clearly the opposite happened, CPTPP is still in effect, the UK now is formally in accession negotiations. RCEP will come into effect early 2022, and I think that’s going to have a real impact on trade, supply chain, and economic integration in the region. So it’s time for the United States to get back into the trade game in the Asia Pacific region. But this doesn’t preclude our ability also to engage and lead in WTO. The Biden administration has a lot on its plate, particularly with respect to COVID economic recovery, infrastructure competitiveness. But if we lose the opportunity to engage on trade in the region, it’s something we might look back on as being a major mistake and something that when we’re ready to come back, it will be such a different Asia and our ability to be a real player and to influence the rules, norms, and standards will be minimized.

 

The core of coexistence lies in competitive neutrality

 

Wang Huiyao: Thank you, Wendy, for your comment on that. I agree that the US needs to be back on one of those original trade or even digital agreements. It’s better than not coming back.

So, Pascal, you used to be the European Commissioner for trade as well. At the end of last year, China and EU have signed comprehensive investment treaty between the two parties. But somehow this has been slowed down again. Actually, the European business is still very bullish in China. We have seen numbers coming from the EU Chamber of Commerce that the European investment in Chinese is increasing, we see all the auto sector, pharmaceutical sector, or even the aerospace sector do more business in China than in their own countries now. So how do you see the prospect of China and EU business?

 

Another question proposed to you is that you are the president of Paris Peace Forum, which is really a great multilateral global governance platform, on which you have been spending a lot of efforts. I also see you leading a lot of discussion with the new WTO and WHO Director Generals for quite a few rounds already. So how do you think that Paris Peace Forum can promote the future globalization? Pascal, please.

 

Pascal Lamy: I’ll answer these questions. Let me come back to the point you made about China as a different system. I agree that those who thought 20 years ago that China would converge with the dominant system in the world, at least economically, let’s leave aside the political regime. We’re not right. So the name of the game is not about convergence anymore. It’s about coexistence. This is what we have to do. We have to better organize the coexistence of a specific China with the rest of the system. It’s not about regime change, it’s not about the rest of the world telling China to change your doctrine, shrink your state-owned sector because a state-owned sector is not good for China, which personally I believe but that is for Chinese to decide. So whatever decision the Chinese leadership and people take on how they organize their economy, this is their business. But once the Chinese sovereignty decides that they want to have 30% of their economy under state control, because these companies have to be supported by the state, then you need to accept that others do not proceed the same way, and that there has to be disciplines on state aids. So, again, it’s not about telling China how you run this business. Once China decides to have a massive part of its economy under party and state control, this is a competitive disadvantage for others, which needs to be fixed. So it’s not a political issue, it’s an issue of your own economy and the way you want to run it but this should not put the others at a comparative disadvantage, hence the importance of this competitive neutrality whether on the Chinese domestic market or when we others compete with Chinese businesses in international markets.

On TPP, I very much agree that the TPP is the best in class for the moment. If you look at what is the most modern way to address both protectionism and precautions’, including all these trade environment, trader heads, trader safety, TPP is the best benchmark on the market. The paradox being is that it’s a creation of the US, the whole software of the Trans-Pacific Partnership is a US software, that coincides with the way the US sees the world, with the way the US sees manufacturing, service center, intellectual property. It’s incredibly US minded. And Australia, New Zealand, Japan and others have accepted that. The paradox is that the US is not part of  this incredibly US-minded very good agreement. That’s sort of a mystery of history, at which historians will probably comment 50 or 60 years from now. I think that the way forward is probably that you should do with TPP like what we’re doing with WTO. I move away from the single undertaking and accept that TPP is with bits and pieces and that some of these bits and pieces can be joined either by the US, China or the UK. I think this is the pragmatic way to go, but it remains as a lead agreement, especially by the way if you compare it to RCEP. RCEP is very much a sort of old-style agreement that deals mostly with manufacturers, tariffs, and quantitative restriction. It’s a large agreement, and hence it’s important, but it’s much shallower in terms of discipline on how you’re wrong, and on economy in order to benefit from open trade than the TPP.

 

As far as the EU-China investment agreement, I remember what was signed at the end of last year between US and China was not a trade agreement. It was an investment agreement that basically allowed you to catch up on what the US had gotten from China in terms of openness for investing in China. You’re absolutely right that for the moment, this will not be ratified by the European Parliament, because of sanctions and retaliations about orders in Hong Kong and so on. So let’s be pragmatic on this. Nothing prevents both China and the EU to effectively implement this agreement without this agreement being ratified, if we are serious about the fact that there are benefits on both sides. It will not be ratified so it will not be legally binding as a treaty that should be legally binding, but nothing prevents both sides to move in reality towards the content of this agreement. I think this is the way to go.

 

On your last question about the Paris Peace Forum, Henry, the Paris Peace Forum, of course, is not a trade forum. And it’s probably not fit to be a trade forum, because the Paris Peace Forum is about getting things done. It’s about getting projects done, it’s about moving global cooperation into new areas by new stakeholders, whereas multilateral trading system is still something that has to a lot do with regulation. And the Paris Peace Forum is about cooperation between non-state driven, non-sovereign partners like NGOs, like big business, big academic institutions and big cities whereas trade is still regulated by sovereigns. So this is not a big competitive advantage. But what we can do is mix what we do, in order to try and address this looming, if it was not already there, the vaccine apartheid between North and South, on this planet, which I personally believe, is a dramatic problem that will slow the exit of this economic crisis stemming from the sanitary crisis for one or two more years. And we’re trying to gather with the World Bank, and the IMF, who’s taking a leading role in trying to address this issue of a better north-south production and distribution of vaccines, including a force with WTO and WHO, including four people – David Malpass, Kristina Georgieva, Ngozi, and Doctor Tedros. They are the ones who are trying within the Paris Peace Forum to push to cooperate, including in trying to get through the next G20 commitments about more production and more distribution of existing non-used vaccines, which I believe is really a major issue that we have to address extremely rapidly. I believe this new north-south structure will divide this world and we will see the consequences of that in major negotiations like the ones being prepared for Glasgow, on climate change, for instance. So I think this is a big, big problem. Not that our trade issues are not important, but for the moment, there is something more important, which is this vaccine production and distribution, which is a major economy issue.

Fairer vaccine production and distribution is the most urgent global issue

 

Wang Huiyao: Thank you, Pascal. I really congratulate you on the leadership of the Paris Peace Forum. You have such a great rally power with the WHO, WTO, and the World Bank and IMF. You already had quite a few webinars on global cooperation to which I attended. On another note, maybe we could add AIIB in the future agenda, because the infrastructure would be a new area. I see President Biden is paying attention, EU is paying attention, and China is really also doing a lot of work. So that could be one of the things that the WTO, World Bank, or AIIB can work together. But I agree with you on the TPP. I’m quite pleased to see both Wendy and Pascal having high credit for the TPP as a higher standard for future global trade to operate on, and maybe sets a good example for the WTO reform. If we’d put in a piece of that for the reform, that would be great. I’m glad that CCG has been promoting China joining CPTPP. It’s a mini WTO. Since China joined WTO, China abolished thousands of outdated rules and regulations and that pushed China forward. We need some new targets to aim for, and the CPPTPP could be a high standard for our reform as well.

Now for the last round, we collected some questions from our experts and media. But before we do that, I’d like to pose another question to Wendy on the Sino-US trade relations. We’ve been talking about 2018, 2019, the peak of the US-China trade war, when President Trump put such a large tariff on China. There’s still some 300 billion there that have not been lifted. So what do you think about the Phase One and maybe, Phase Two? In near future, can we talk about lifting those trade sanctions? I see that the USTR, Kathrine Tai, has made a phone call with Vice Premier Liu He, and the Minister of Commerce as well.  There’s also the Alaska meeting between the top diplomats, followed by the Tianjin meeting last week between diplomats – what about having a meeting between ministers of trade or commerce or USTRs to solve these trade sanction issues? As you also mentioned, particularly on urgent medical supply issues, we shouldn’t leave levy taxes on either side. We should really show our support and give some new incentive for the WTO Ministerial meeting. Your comments about Sino-US trade relations, Wendy, please.

Apply pragmatism to US-China frictions and tensions

Wendy Cutler: That could be a subject to its own webinar, haha, but just a few thoughts here. You know it’s interesting during the Trump Administration, I think US-China trade friction was the front and center in our overall relationship and in the Biden Administration, trade is part of a whole host of issues that are being reviewed internally. So the Biden administration is still undertaking it’s review, we don’t know where they’re going to come out on tariffs and sanctions as well as the Phase One agreement and Phase Two issues. We’ll have to see how that transpires.

My personal view with respect to tariffs though, is we should find some baby steps we could take, meaning, as you mentioned, I think the United States now, we have over $300 billion worth of tariffs in place against Chinese imports, China has $110 billion worth of tariffs imposed on US imports, there is room for small steps to be taken, and then we can see if that works and maybe then build on it overtime – but I think we need to be realistic and pragmatic. Both sides have their own domestic audiences that they are responding to. This would happen, let’s be honest, not in a vacuum but in the context of this broader US-Sino frictions and tensions. So that would be number one on the tariffs.

With respect to Phase One implementation, my personal view is, under the circumstances, China is doing a pretty good job in implementing the rules part of the agreement. They’re falling short when it comes to purchases, but with respect to agriculture purchases, Beijing is doing the best in meeting those targets. Those detailed targets will expire at the end of this year, but the agreement itself stays in place until either side notifies the other it wants to exit. What will be critical is when we look at these so-called Phase Two issues, which were never addressed, as the Phase Two negotiations never started, I think the question is how best to address those issues. And some of them, particularly issue of subsidies and related non-market economy practices, I think the best venue, if the WTO really worked well to address these, would be the WTO. We’re not going to address these issues bilaterally and successfully, and it’d be important to bring in other countries. So I would hope that China would be positive about addressing these issues in negotiations in the WTO. If the Chinese delegations in Geneva continued to refuse to open the door to negotiations in these areas, the US and other countries have no choice then but to look at alternatives and the alternatives, I think will be what I would call defensive measures, strengthening their own toolbox. We’ve already seen the EU do this recently on subsidies, on competition policy. There’s legislation in the United States to strengthen and expand our countervailing duty legislation and so that is going to be the response if the WTO can’t move forward and tackle some of these difficult issues.

 

Global minimum taxation for multinational companies is good news

Wang Huiyao: Thank you. I think that that’s something I think we all need to talk about and I’m glad to see that Phase One went relatively well. I totally agree with you that we should start the lifting some of those tariffs imposed on each other so that we can move from there and even remove most of it or even completely. So we need to talk as we need to start somewhere.

Pascal, you are in the EU, in the center, in Paris, knowing all the important issues. I notice that the OECD lately proposed the global corporate minimum tax, which has actually been proposed by G7 and then by G20 as well. 130 countries went along with it and on which in principle, China has also agreed. And what about this digital tax issue? The EU used to ask big tech companies to pay heavy tax. Maybe you can share the EU perspective.

Pascal Lamy: The area of a global taxation for multinational companies, is one of the very rare good news we’ve had for the last years in terms of international cooperation, which, generally speaking, has been a pretty immobile. There are very, very few issues, where we can see progress in international corporation. This is one and we owe it mostly to the Biden administration. These issues about avoiding multinational corporations to practice what diplomats kindly define as excessive tax harmonization, and I love this way they call it. I think this is an area where we’ve had progress. And it simply stems from the fact that the importance and the growth of these multinational companies, including in the digital sector, where they are making hundreds and hundreds of billions of profits without paying taxes, is something that has become unsustainable for political reasons everywhere. But to be frank, Henry, this is an exception. We need much more than that, especially in trying to move out of this global crisis.

We need much more than that to re-dynamize international corporation. I think the G20 is an available space to do that, not that it is a full-fledged institution, not that the G20 members have the legitimacy to speak for the rest of the world, but this is the place where I feel we should focus our mind, including, by the way, I very much agree with what Wendy has just said about fixing the US-China trade frictions and tariffs. I think the most urgent thing is to try and divide, for the next Italian G20, apart from what I’ve said on vaccines, a few low hanging fruits that would not be too difficult to address and that would have signaled a relaunch of international negotiations and cooperation on trade. What we need for the moment is to de-freeze this US-China-EU triangle in order to move things forward and I agree with Wendy that the most obvious area to do that is not a major problem but has become a symbol is that whether the WTO can decide and move forward in this fishery subsidies, which is a low-hanging, if not fruit, fish, at least fruit, which I think we really should focus on. And on this, to be frank, we need China to engage. China, fishing-wise, is not anymore, a developing country. I know that for reasons and principle, China will not recognize this, and this is not about China recognizing your big principle, it’s about China accepting to join a system of disciplines, which I think is really needed to preserve the fish resources for the future and it’s as much of a great environment problem. So if China still has trade problems with the West, please, China, look at this with environmental glasses.

Fisheries subsidies is the low-hanging “fruits” to move forward WTO reform

Wang Huiyao: Thank you, Pascal. China, per-capita wise, actually, is still relatively low compared with all the developed countries. But as matter of a fact, China, even though they are in line with many developing countries, they didn’t really enjoy the developing countries’ benefit in the WTO, we have forgone a lot of that benefit already. So I think that is something that we can think about term-wise but I don’t think it was really an issue of substance.

But anyway, we are coming to the final part we are going to conclude soon. My staff just told me that there are about almost 400,000 viewers watching us online worldwide and so you’re really getting a lot of attention.

First, I have a question from Professor Tu Xinquan. He’s a CCG Non-Resident Senior Fellow and he’s the Dean and Professor at the China Institute for WTO Studies at the University of International Business and Economics (UIBE). He expressed that we expected the Biden administration, which pays more attention to the multilateral system, would support the restoration of the operation of the WTO appellate body. However, a little difference has been seen in the attitudes of the Biden administration compared with the Trump era. Is the US going to completely abolish the appellate body or is it using it as leverage to obtain special policy objectives such as freer use of anti-dumping and countervailing rules?

Another question is related to the fishery discussions. Hopes are high on negotiating on the fishery subsidies at the 12th WTO ministerial conference. But that said, the US recently proposed to add the use of a forced labor in the negotiations. Does this signal US’s intention of making the success of negotiation more difficult or using it to obtain concession from other countries?

Some other questions from media. China Daily – What is the biggest challenge for international trade in the context of COVID 19? How should we tackle it?

CPPCC (Chinese People’s Political Consultative Conference) Daily – recently, the Executive Meeting of the State Council of China has decided to further deepen the reform of cross-border trade facilitation and improve the business environment at ports. These measures mainly include 27 specific contents in five aspects. Would this be positive signs of China’s moving forward in the multilateral system? One thing has been highlighted, that is, we need to optimize the “Authorized Economic Operator” (AEO) system and provide more facilitation measures for authorized enterprises. How to evaluate this? What areas need to be further strengthened?

South China Morning Post: The fisheries subsidies issue is currently the sole active area of multilateral negotiations at the WTO, how possible do you expect that a WTO fisheries pact can be reached by the end of the year? What are the stumbling blocks and how to deal with them? Are US-China tensions going to remain a key factor for the talks?

 

Wendy Cutler: Let me respond to a few. First, with respect to the appellate body, I think you need to give the administration more time. They’re clearly reviewing the issues related to dispute settlement in the WTO. I would also note that the appellate body issue was an issue of concern even before President Trump took office. and I would just echo what Pascal Lamy said a little while ago that, this is not just s US concern, but other countries are concerned with the operation and the overreach of the appellate body. So I think we need to give the administration more time. My hope is that, with time, they will put concrete ideas on the table, on how their concerns can be addressed, as opposed to what officials in the Trump administration did, which was just to sit on the sidelines and complain about the system. So again, let’s give it more time.

With respect to trade and Covid, one issue we have not covered and I just want to put it on the table is the whole issue of export restrictions, which really needs to be looked at. The WTO rightly allows for export restrictions to be imposed, but there are certain principles, including these measures should be temporary, and they should be transparent. And if you look at the recent study coming out of Saint Gallen University, they closely catalog all the restrictions that are put on medical-related goods, medicine, as well as food, and noted hundreds of measures now have been in place for over one year. So I think that this is an area where more discussion and focus, more transparency should be put on, to make sure once these restrictions are put in place, they don’t remain in place forever.

Finally, on the fisheries negotiations. I’m hopeful that there will be a concrete outcome of the ministerial meeting in November. But this is not a given, there is a lot of work still to be done. While a lot of progress has been made, there are still some potential stumbling blocks and those include exceptions that developing countries, including China, want to take from the obligations. The WTO is in a summer break now, they’ll have three months to continue negotiations in this area. And I’m hopeful given the high stakes of reaching an agreement, that parties will come together and find not just a solution, but a meaningful solution that really contributes to what is a growing global problem.

Wang Huiyao: Thank you Pascal, please, your final comment.

Pascal Lamy: On international trade and COVID-19, as I said previously, I don’t think it’s a major trade problem, nor do I believe that the solution to producing more vaccines and distributing them better is a trade issue. But for a limited aspect, it’s about whether and how you can oil the compulsory licensing system that already provide waivers for intellectual property in case of a health emergency. So it’s not a major trade issue, but there is an issue there that needs to be considered. I do not agree that the main bottleneck to producing or distributing more vaccines lies there. Although I believe that if there is a necessity to recourse more easily to the existing system of compulsory licensing, this should be looked up.

On measures for trade facilitation, imports or otherwise, I think China is right. There still remains, although we have a trade facilitation agreement since the end of 2013 – and I remember that because it took us four years to cook it in the WTO at the time. Whereas there are obvious, huge potential for trade facilitation in digitalization of trade procedures, import and export certificates, import licensing, proof of origin. The digital technology can help a lot but there still is a handicap for notably small businesses, and I think in doing more what China does, in easing its port handling procedures, is doing it exactly right.

And finally on fishery subsidies, I again totally agree with Wendy. The answer to the question, which was raised, which is what stands on the way to an agreement, I think the simple answer is the following: we need stronger disciplines that prevent subsidies that lead to overfishing, but we also need to preserve small artisanal coastal fishing operations. That’s the key. In simple words, we need disciplines for everybody, but not for small fishing boats, artisanal, not industrial; coastal, not high sea; small, but big boats. How small is small remains to be negotiated, but I think there is a political willingness to form an agreement. How small is small is something which trade negotiators can fix rather easily. So that’s my view, that’s where the problem lies, and where the solution lies. There is a solution in defining how small is small. Over to you.

Wang Huiyao: Thank you, Pascal. We have almost come to the end of our webinar as well as our special webinar series for the 7th Center for China and Globalization Forum. I really appreciate this discussion tonight, which is very stimulating, very constructive, and also full of ideas and suggestions. We have covered many issues: WTO reform, COVID 19, the future of multilateralism, even issues as concrete as TPP, fishery subsidiary and Paris Peace Forum. This is an open dialogue we have, it’s really a frank discussion, and has stimulated many thoughts. I really appreciate that we have come to some kind of consensus that maybe we should lift some of those tariffs even from a minimum level, and that China joining WTO is a good thing. Of course, we will still need to make progress and reform, but China joining WTO is not only good for China but also for the world. Finally, I really appreciate that all three of us mentioned about a US-EU-China trilateral summit on trade or COVID 19-fighting. I hope that we have offered policymakers some interesting alternatives as well. So once again, I want to thank Ms. Wendy Cutler, Vice President of Asia Society Policy Institute, former Acting USTR and Chief Negotiator of TPP, and also Mr. Pascal Lamy, the President of Paris Peace Forum who used to be the longest-serving WTO Director General, and also former European Commissioner for Trade. We also thank our viewers. We have almost 400,000 viewers online across China and the rest of the world and that’s spectacular. Thank you all very much and we hope to see you again sometime.

 

Note: The above text is the output of transcribing from an audio recording. It is posted as a reference for the discussion.