Creeping ivory covers part of a stone-clad building in the tree-lined setting of China’s mission to the World Trade Organisation in Geneva’s Rue de Lausanne.
A red and gold-starred flag flutters in the wind, a symbol of the country’s new economic might.
“China’s accession to the WTO in 2001 was heralded by the international community as a victory for free trade and economic liberalization,” the ChinaPower Project, which is part of the Washington-based think tank, the Center for Strategic and International Studies, stated.
“During its arduous, 15-year accession process, China made extensive commitments to reform domestically and reduce trade barriers,” it added. “Yet, Beijing has not instituted deep, systematic reforms, and its mixed compliance with WTO dispute rulings has at times challenged the WTO’s underlying norms.”
Still, when the world’s second-largest economy became locked in a trade war with the United States that threatened global growth, it was logical for the WTO to play a crucial role.
US President Donald Trump might have disdain for the organization, but the general feeling was that concerted rounds of talks in Geneva, as opposed to White House-imposed tariffs, would result in a solution.
“Despite the challenges the US has had at the WTO, the WTO should be central to resolving US-China trade tensions,” Joshua P Meltzer, of the Brookings Institution, and Neena Shenai, of the American Enterprise Institute for Public Policy Research, said in a report released in February and entitled, The US-China Economic Relationship.
As the conflict dragged on that simply did not happen. In fact, the WTO was frozen out along with Washington’s “closest allies.”
Nearly a year later since the 26-page study was released, one of the great global institutions has been relegated to a bit player in a passion play involving two economic titans.
Trump’s go-it-alone approach and the failure of the WTO to evolve has left it sidelined. Last week, as the US and China were putting the finishing touches on a phase one accord, the organization literarily ground to a halt after the White House blocked the appointment of new judges.
At least three are needed for the Appellate Body, which acts as a supreme court for international trade and is the global arbiter in disputes involving billions of dollars. Just one judge is in place.
Two years after starting to clog up the process, Washington has finally paralyzed the WTO from making international rulings. The lower court can still hear cases but any decision would be put on ice if it goes to appeal and the Appellate Body.
“This [would leave countries and companies facing] the law of the jungle not the rule of law … the law of the strongest … and that will hurt us all,’’ Peter Van den Bossche, of the University of Bern in Switzerland and a former WTO Appellate judge, said.
At the core of the problem is what constitutes the status of a “developing country.” Singapore, Israel and, in particular, China are bracketed in that category.
Then, of course, there was the decision to abandon the “Doha Round” of negotiations in 2015. Since then, the WTO club of 164 member states has failed to produce an international agreement.
Critics have also accused the body of failing to challenge China’s unique blend of state-controlled capitalism, which they say has made a mockery of the rules-based system.
“We’ve been spoiling countries for a very, very long time, so naturally they’re pushing back as we try to change things,” Wilbur Ross, the US Commerce Secretary, said last week.
Yet others believe neutering the organization is not the way forward even though a consensus is required for sweeping reforms.
China has published its own proposals but they tend to revolve around the interests of “developing countries.”
Indeed, the subject is close to the heart of Zhang Xiangchen, Beijing’s ambassador to the WTO. After hearing the news of the shutdown, he started wearing a black-tie reserved for funerals.
“[Letting the] lights go out [at the Appellate Body is] no doubt the most severe blow to the multilateral trading system since its establishment [in 1995],’’ he said.
Bernard Hoekman, an economist at the European University Institute, went even further. “Where the United States is completely alone is the approach they have taken, [which] is to say: ‘We’re just going to blow this thing up.’”
In a move to limit the blast area, WTO Director-General Roberto Azevedo has called for dialogue to end the impasse.
He will hold talks with various nations including the US and the European Union bloc of 27 countries.
“To the extent that this is an extremely sensitive political issue for everyone, I have no doubt that these consultations will grab the attention of leaders worldwide,” Azevedo said. “I think what we need to do is not lose focus on finding the permanent solution while at the same time we’re working on some temporary fixes.”
The fear is that by the time that has happened, the WTO will be riddled with creeping ivory, suffocating an institution of last resort. Welcome, to “the law of the jungle.”