Trade agreements to replace WTO
11.12.2019, 11:54

Trade agreements to replace WTO

World trade organization (WTO) lost its role after its enforcement arm, the Appellate body, forfeited its function to render any judgments. United States has blocked the appointment of new judges to replace those whose terms have expired yesterday. As of today, the only one acting judge remain in the Body while at least three needed to enforce trade ruling.

European Union called the shutdown of the World Trade Organization's appellate body is “a very serious blow" for the global trading system. The EU Commissioner for trade, Phil Hogan, said “this is a regrettable and very serious blow to the international rules-based trade system, which, for the past 24 years, has relied on the WTO’s Appellate Body – and dispute settlement generally."

Europe will propose ways of implementing sanctions on those countries that are violating trade rules and adopt illegal trade measures as well as sanctions for blocking the renewal of Appellate body. That will mean sanctions against the United States responsible for WTO’s enforcement ruling paralysis.

The EU backed by Canada and Norway is trying to create a temporary replacement panel with the same structure as the Appellate Body. China, Russia, and a number of other countries are considering whether to sign on.

WTO Director-General Roberto Azevêdo has insisted that the demise of the Appellate Body does not mean that the organization’s existing rules no longer have force. “WTO disciplines and principles will continue to underpin world trade. And members will continue to use WTO rules to resolve trade conflicts — in regular WTO bodies, through consultations, via dispute settlement panels, and through any other means envisaged in the WTO agreements,” he said last week. His claim, however, are more inconsistent when no enforcement is in place. The function of WTO without it make no real sense.


Trade agreements are not to be disputed

Trade agreements are the only real arrangement of world trade remaining so far. Does it mean they could not be violated? No, they could and will be if one of the parties consider it effective. “If you have no rules, everyone can do what they want and that would be really, really bad, not least for the smaller and developing countries,” European Union Trade Commissioner Cecilia Malmstrom said last summer.

One can expect more trade tariffs will be imposed by countries with mature domestic market like the United States, China, the United Kingdom, Japan and the European Union. Other countries have to ally their terms or struggle to continue exports.

The United States President administration seemed to be reluctant to the WTO’s fading relevance. Trump has made it clear that he disdains the idea of international regulation of US trade policy. Not only has the US delayed the appointment of the judges to WTO’s Appellate body, but also has cut the funding for the Body, slashing its budget by 93%.


Why WTO has been dumped?

The WTO rulemaking requires full consensus that allows any of 164 members to disrupt any proposal. As a result, such issues like regulating electronic commerce were not resolved. China was allowed to apply relaxed trade rules as for the developing countries despite the size of the world second largest economy.

It seems the almost 35-years era of WTO is ending and will be replaced by the trade agreements without any independent recognized ruling. The other way is to introduce some kind of international court ruling. Regional enforcement vehicles of international trade matters will not be effective. 

Meanwhile, trade wars could unwind to a hurricane with the United States in the eye of it.


Disclaimer:

Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.

Indiscriminate reliance on illustrative or informational materials may lead to losses.


© 2000-2020. All rights reserved.

This site is managed by Teletrade D.J. Limited 20599 IBC 2012 (First Floor, First St. Vincent Bank Ltd Building, James Street, Kingstown, St. Vincent and the Grenadines).

The information on this website is for informational purposes only and does not constitute any investment advice.

AML Website Summary

Risk Disclosure

Making transactions on financial markets with marginal financial instruments opens up wide possibilities and allows investors who are willing to take risks to earn high profits, carrying a potentially high risk of losses at the same time. Therefore you should responsibly approach the issue of choosing the appropriate investment strategy, taking the available resources into account, before starting trading.

Privacy Policy

Use of the information: full or partial use of materials from this website must always be referenced to TeleTrade as the source of information. Use of the materials on the Internet must be accompanied by a hyperlink to teletrade.org. Automatic import of materials and information from this website is prohibited.

Please contact our PR department if you have any questions or need assistance at pr@teletrade.global.

Feedback
Live Chat E-mail
Up
Choose your language / location