OPINION:
Director-General Roberto Azevedo is quitting one year before his term expires. This could prove the death knell for the World Trade Organization, but if the Trump administration plays it right, the global trade body could be set on a more constructive path.
President Trump’s pugnacious policies — including tariffs on allies as well as malefactors like China — leave American diplomats bare-handed during the COVID-19 crisis. Beijing is using its considerable soft power to push its agenda to remake liberal international economic institutions in the image of its authoritarian models of governance and economics, while America has few willing friends.
During the Bush and Obama years, China ran circles around WTO rules; it shrewdly built massive legal firepower to contest Western complaints against its illiberal practices. In the process, it built huge dollar reserves to finance its Belt and Road initiative and grab a choke hold on important production of medical equipment and pharmaceuticals.
China offers assistance around the world to strapped nations combatting COVID-19, while America scrambles for supplies. And it seeks to impose tributary relationships to squash criticisms of its human rights violations and lack of transparency regarding the pandemic.
The Europeans are coming around to Mr. Trump’s way of thinking about China but would prefer to reform the WTO rather than confront Beijing directly on trade. In a body governed by consensus, China can rally enough developing countries to block real change.
COVID-19 may prove a hinge in history for the West’s supply chain dependence on China but not for globalization as a whole. Western companies may develop duel sources for many critical components and final products sourced in China, but other locations in Asia and Mexico offer low wages and opportunities for regulatory arbitrage, too.
As President Trump and Joe Biden compete to convince voters who would be tougher on China, they miss a critical reality. Voters from both political parties increasingly support foreign trade — it’s China they distrust. The key to their hearts and minds is to compel China to play by the rules or boot it from the WTO altogether.
Advocates of the appeasement — aka engagement dating back to the normalization of relations during the Nixon era and through Presidents Clinton, Bush and Obama — would have America pursue blind multilateralism and lose.
The Trump administration will learn in its confrontation with the World Health Organization that the Europeans may share American suspicions about Beijing but they lack the stomach to force an investigation that truly embarrasses China over its lack of transparency and the WHO’s complicity in the COVID-19 crisis.
The Europeans are not joining the administration in withholding support for the WHO. and we can likely count on China replacing the contributions the United States has terminated.
The Trump administration has blocked new appointments to the WTO appellate body, greatly handicapping the adjudication of trade disputes and putting the future of the institution at risk, and Washington can block the appointment of a replacement for Mr. Azevedo.
The United States could condition all those appointments on fundamental reforms in WTO dispute settlement and a concerted drive among Western industrialized nations to reorient trade from China — premised on numerical goals. And then in Chinese fashion, simply refuse to compromise.
Simultaneously, the United States can turn up the heat on China in several theaters — Hong Kong, North Korea, its human rights violations and bullying of neighbors in the South Pacific.
Match China’s hardball with pitching aimed at President Xi Jinping’s exposed elbow of vanity.
Chinese diplomats have been displaying profound arrogance of late — playing tough with nations like Australia that criticize Beijing’s handling of the COVID-19 crisis and that is not winning China any international popularity. Mr. Xi is convinced that embracing Western values helped collapse the Soviet Union and does not want a similar fate for the Chinese Communist Party, but he appears ignorant to the fate of other Napoleonic figures and the residual instincts for self-preservation among Western democracies.
All this would make an American confrontation in the WTO a reform or collapse proposition. China would have to either swallow hard and accept reforms, leave or watch the global trade body fail.
With solid reforms, the global trade body is surely worth saving. Without reforms, the Middle Kingdom isolates itself and hastens diversification of Western supply chains. Without the WTO altogether, America is much better off than going on in a system that stacks the deck in China’s favor and enrichens a self-declared enemy of democracy.
• Peter Morici is an economist and business professor at the University of Maryland, and a national columnist.
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