The World Trade Organization (WTO) is pleading to its member-countries to talk it over before an actual trade war occurs between the world’s largest economies, which could result to a breakdown of the multilateral trading system.
WTO Director General Roberto Azevedo said WTO member-countries should go back as far as 70 years when the multilateral trading body was created with the objective of promoting the recovery of the global economy, as well as provide greater political stability.
“This logic, which has prevailed for 70 years, seems to be questioned recently, whether intentionally or not,” he said.
“We’ve all seen the headlines in recent days and weeks about the rising trade tensions between a number of major economies. The situation is of real concern, as there are signs that this may only be the beginning of these tensions,” Azevedo added.
The WTO chief is referring to the virtual trade war between the United States and China—the world’s top economies—resulting to imposition of left and right barriers to free trade. “An escalation of reciprocal trade restrictive measures would stop this recovery in its tracks, with consequences for jobs and GDP growth that would harm us all,” he said.
Azevedo said it is urgent for the clashing economies to “try and avoid this escalation.” He argued that, if the trade war persists, it will be difficult for the world to step back and resolve the situation.
“There may still be time, but we need open communication lines and a true disposition to find constructive solutions. This is one of the most urgent challenges before us today,” the WTO chief said.
For him, it is important for WTO member-countries to preserve the “spirit of international cooperation, and not confrontation,” for them to revert their full trust on the multilateral trading system. He also said governments must understand the broader economic context of why the WTO was created, so as not to lose its confidence in the system it embodies.
“While we need to respond to the immediate threats that we see, we also need to develop a deeper understanding of the longer-term shifts. This will allow for a clearer sense of how we can respond,” Azevedo said.
US President Donald J. Trump has recently enforced stiffer tariffs on steel and aluminum products in a move that further emphasized the Washington leader’s protectionist stance. He authorized the imposition of higher tariffs on steel at 25 percent and aluminum at 10 percent in spite of strong opposition from his fellow Republicans and the United States’s trading partners.
The move was seen to impact global trade of steel, as the US is the world’s largest steel importer. In 2016 it accounted for about 8 percent of steel imported globally, with the volume it imported at least 15 percent higher than that of Germany and South Korea, second- and third-largest steel importers, respectively.
As a countermove, Beijing is not taking Washington’s economic barriers sitting down, and vowed to retaliate if the United States carries on with its plan to impose tariffs on more Chinese goods. The world’s two largest economies drew near to a trade war after China issued a statement that it “doesn’t hope to be in a trade war, but is not afraid of engaging in one.”