Recovery – the world of trade and how will that look at the WTO

02.06.2020 Dianne Tipping

Australia, as well as many other countries of the world, are now in the recovery phase of the COVID 19 pandemic crisis - what does this mean for the economy? This remains to be seen, but I do not think it will be business as usual. However, I do know that trade will be one of the most critical steps that we need to manage.


Two factors will determine the strength of our recovery—one, how quickly the pandemic is brought under control. And two, the policy choices governments make.

Australia faces many challenges. We can encourage enterprises to grow quickly to take advantage of new markets, and adapt successfully in response to more significant disruption, with business regulations that are simple and outcome-focused, not complicated, and prescriptive.

We need to make businesses more internationally competitive and ensure those taking commercial risks are adequately rewarded. We need to focus on maximising growth, efficiency and productivity and encourage workforce participation.
From the early days of the Silk Road to the creation of the General Agreement on Tariffs and Trade (GATT) and the formation of the WTO, trade has played an essential role in supporting economic development and promoting peaceful relations among nations.

But, what is happening in the world with trade and how is the world’s trade body the WTO managing this disruption.
The World Trade Organization (WTO) is the global international organisation dealing with the rules of trade between nations. At its heart are the WTO agreements, negotiated and signed by the bulk of the world’s trading nations and ratified in their parliaments. The goal is to ensure that trade flows as smoothly and freely as possible.

Even as the WTO marks its 25-year anniversary in 2020, it possibly faces its biggest challenge ever. COVID-19 has hit trade hard in all countries, and now its Director-General has resigned one year early as well as other key personnel. Despite the organisation’s achievements it now faces many challenges if it wishes to survive in the coming years.

Even before COVID-19 hit, global trade was in trouble. Trade figures had been flat or even trending downward. The addition of a pandemic, however, has tipped the system into uncharted territory, with weekly downward revisions in trade flows and economic impact arriving from countries around the world.

Australia is not immune to trade issues - China’s decision to impose tariffs based on dumping allegations for our barley exports effectively wipes out the barley trade between the two countries.

Australia has submitted more than 10,000 pages of evidence to China in relation to the dispute. China argues Australian barley farmers are subsidised - including through drought relief - giving them an unfair advantage against China’s local producers by allowing them to dump cheaper barley into the market. Australian trade negotiators have rejected the allegations and will argue Australian barley farmers operate on commercial terms.

Australia has reserved its right to pursue WTO action. Trade disputes can take years to resolve at the global authority, and under WTO rules, members commit not to raise their tariffs above a certain level. But under exceptional circumstances, governments can break those limits to apply trade remedies. These include anti-dumping duties to defend against cheap imports; countervailing obligations to protect against subsidised imports, and safeguard tariffs in response to import surges. By alleviating the pressure caused by harmful foreign competition, these defensive duties are based on preserving the legitimacy of the system.

Between January 1, 1995, until December 10, 2019, the WTO was a relatively reliable referee. If one government felt that another had broken the rules, then instead of lashing out immediately on its own, it could complain to the World Trade Organization (WTO). After a first-round of independent arbiters judged on which side was in the right, WTO members could appeal to the Appellate Body, which would deliver the final verdict. However, the Appellate Body is now defunct as no new members have been appointed to the Body.

Without a referee, the danger is that trade disputes can become trade wars. The world needs a rules-based system for trade, and we do need the WTO; however, we believe now is the perfect opportunity to recalibrate the WTO and create a structure better suited for today’s trade agenda. We all need to be involved in this discussion and be ready and engaged on helping think through various changes to the WTO that might assist in making the organisation better equipped to manage the world of trade for the future.


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