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THURSDAY, OCTOBER 25, 2018
Click HERE for Monday's quote, also from Alan Wolff.
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U.S.-CHINA: A FOCUS ON THE MIDDLE GAME
"With China .... my focus would be on the middle game. What's the middle game? Let's get more of what's going on within the rules."
Alan Wm. Wolff
October 17, 2018
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Like the last TTALK Quote, today's is from Alan Wolff's presentation at the Global Business Dialogue event on October 17. Ambassador Wolff, now a Deputy Director-General at the WTO in Geneva, covered a lot of ground, more than we can do justice to even in two entries. If that is the bad news, the good news is that a full recording of his remarks is available on the GBD website, www.gbdinc.org, as is a transcript that will be uploaded shortly.
The trade tensions in the U.S.-China relationship, and implicitly other tensions as well, were among the more prominent elements in Ambassador Wolff's comments at GBD. He listed, for example, three major disruptive forces affecting the world economy. The rise of China was the first. The other two he mentioned were:
- "a new administration in the United States with a different outlook," and
- a basket of developments including income inequality, the rise of populism, and the effect of technological change.
To return to China and the middle game, here are some passages from Ambassador Wolff's presentation in which he elaborated on that thought.
On the Middle Game with China:
With China, no one knows the end game, I think. I don't think that the President of China knows how it all ends. I'm not sure the President of the United States knows how it all ends. My focus would be on the middle game. What's the middle game? Let's get more of what is going on within the rules. And I take it that what the EU, and the U.S. and Japan are working on in the trilateral effort they have, and what will be discussed in Ottawa next week in part, and what will be discussed about the EU paper that has been issued, are questions about, how do you get more of world trade covered by rules, rules that apply now?
I think that there are solutions to the U.S.-China middle game-not the end game, since we don't know where that ends-of trying to get détente, trying to get the wave and wave of retaliation and counter-retaliation calmed down a bit, maybe a truce, potentially, through agreements on reform. Because, actually, all the participants have a stake in the system. ...
Well, there's disruption now, and the question is, how do you move from disruption to something better? And, it's a possibility. There is a possibility of getting to a better place.
A Broader Context
At the outset, Ambassador Wolff put all the issues in a positive, can-do frame. "I'm very optimistic about the future of the WTO," he said. "And I'm optimistic about making it through the current difficulties." As for how things are working now, he stressed that the system is functioning. "Disputes are being handled ... [and] most trade is actually taking place within the rules," he said. He did not, however, minimize the urgency of the issues. "We have to work things out on the Appellate Body before it goes," Mr. Wolff said, adding that, in his view, "an appellate body function in the WTO is essential."
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There are positive elements to the competition between the United States and China. Of course there are. Capitalist systems are built on the idea that competition is the life blood of healthy economies. That said, there are issues in the U.S.-China debate that are threatening not just to the relationship between those two pivotal countries but to the multilateral trading system. That's point one. Point two is that U.S.-China issues are not separate from the future of the dispute settlement system, including, of course the Appellate Body. They are deeply intertwined with it.
The fact that there are current disputes over whether, in anti-dumping cases, countries can treat products from China as coming from a non-market economy underscores the inseparability of the China issues and the Appellate Body issues. Against that background we would highlight three thoughts.
Intended Ambiguity. There was a fascinating discussion last Wednesday of how the Appellate Body might deal with certain questions. In speculating on possible Appellate Body responses to different scenarios, Ambassador Wolff said there might be situations in which the Appellate Body decision could be, in effect, to send the issue back to the WTO membership. Illustrating that point with a reference to U.S. law, Ambassador Wolff said:
The U.S. Supreme Court will say in certain circumstances, "This was sort of an intended ambiguity, and you folks who are in the Congress, you work it out."
Realistically, the WTO membership would, in most such cases, probably not be able to come up with any new solution, not one in which all 164 members would agree. Thus the logic is that in such cases the respondent would prevail or rather the complaining party would not.
And yet ... We are keenly aware of our lack of expertise in this area, but we would like to suggest that the question, "Was this an intended ambiguity?" should be elevated to something more than an option. Perhaps it is a question that Appellate Body members should be required to answer in every case where it is arguably applicable.
Winging It. As noted above, Ambassador Wolff talked about the tit-for-tat tariff escalations between the United States and China in his opening remarks. It was in the Q & A session, however, that he linked those developments to WTO dispute settlement. And there was very little ambiguity in his comments on that topic. He said:
Pure unilateralism without a claim of cover will not be dealt with very kindly by any dispute settlement mechanism. So the current exchanges of volleys between two major members where there is no claim of any WTO provision that they are citing for the use of their measures, it seems to me it's very hard for a judicial system to say, "Oh, we'll invent a cover for it." So, you know, that's dangerous.
The Appellate Body. The mind loops back to Ambassador Wolff's statement that "an appellate body function in the WTO is essential," and it does so with the question, why? As we recall the goals of the Uruguay Round, making panel reports binding was one of them, not so the establishment of the Appellate Body. More recently, we have heard experts tell us that, as conceived, the WTO members who created it thought that the Appellate Body would be used only on rare occasions, not in virtually every dispute. And finally, the whole "gap filling" issue seems to be a problem arising more from the Appellate Body than from panel reports. And so we wonder, what would the system look like if it were redesigned without the Appellate Body?
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On Reform at the WTO is the page of the GBD website devoted to materials from GBD's October 17 program on the World Trade Organization, including the recordings of the various presentations. One of those recordings is entitled the Remarks of Ambassador Alan Wm. Wolff, and it was this recording that was the source for today's featured quote.
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©2018 The Global Business Dialogue, Inc.
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Tel: (202) 463-5074
R. K. Morris, Editor
Joanne Thornton, Associate Editor
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