WTO Director General Slightly Comforted After Meeting With USTR
World Trade Organization Director-General Ngozi Okonjo-Iweala told former U.S. Trade Representative Michael Froman that she had a meeting with USTR Jamieson Greer "yesterday that was a little bit comforting," but that the current 10% U.S. tariff on most countries, plus 25% tariffs on cars, steel and aluminum and some products from Canada and Mexico, and 145% tariffs on Chinese imports, if it lasts, will result in global merchandise trade falling by 0.2%. Before the actions, the WTO forecast a 2.7% growth in goods trade this year.
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"If you layer onto that the reciprocal tariffs along with uncertainty, we get a contraction of 1.5%, which is quite sharp," she said.
Froman talked with Okonjo-Iweala at the Council on Foreign Relations, the organization he now heads, while she was in town for the International Monetary Fund annual meetings.
The fact that the president is saying "that there is room for China and the U.S. to still negotiate" is hopeful, she said, as "decoupling is a serious concern for us."
If the world arranges itself into two trading blocks, global GDP will be lower and there will be double-digit welfare losses in the developing world, she said.
Froman asked the director-general, if countries lower tariffs for U.S. exports as part of a deal to avoid high tariffs on their exports to the U.S., will those reductions be offered to all countries, on a most-favored-nation basis? She said that WTO members understand that these reductions should be MFN, unless they have a free trade agreement covering substantially all trade. (They didn't talk about the Japan mini-deal, which was not a traditional FTA, but did lower some rates specifically for the U.S., to match offers Japan had made under the Trans-Pacific Partnership FTA.)
Okonjo-Iweala said that if the U.S. was able to negotiate tariff drops, and those were offered to all WTO members, that would be a good thing.
Despite the two biggest economies in the world flouting WTO rules on tariff rates and retaliation guardrails, Okonjo-Iweala pushed back on Froman's suggestion that the WTO is dead. She noted that the WTO does far more than tariffs, including a customs valuation agreement, trade-related intellectual property agreement, and a sanitary and phytosanitary agreement. (The administration feels science-based SPS rules are routinely ignored to protect domestic constituencies from U.S. agriculture.)
"People are saying the dispute settlement system is paralyzed -- no it’s not," she said. She said there are 47 disputes in process, and countries are turning to mediation, arbitration and dialogue, just as the U.S. said should have been happening all along. She said she agreed with the U.S. argument that dispute settlement had become too litigious. But she added that 95% of WTO member countries "still want to see the appellate body restored."
Okonjo-Iweala expressed dismay that the U.S. would seek a broad reindustrialization through protectionism, though she acknowledged that regaining some production capacity in overconcentrated strategic segments like semiconductors makes sense. She said her home country of Nigeria tried import substitution -- as did Brazil and Argentina -- and it didn't turn out well.
She noted that the U.S. has a trade surplus in services, and that services trade is growing far faster than goods trade.