The BL Interview. ‘Countries need to avoid measures that could have domino effect’

“Trade war is kind of a thing that you know when you see it. We are not there yet,” believes Roberto Azevedo, Director General, World Trade Organisation.

In an interview with BusinessLine on the sidelines of the WTO informal Ministerial Meet hosted by New Delhi, Azevedo talks about a whole range of issues including the threat posed to the WTO by the US unilateral trade actions, the Appellate Body crisis and the way out, the utility of the Mini Ministerial meet and lack of consensus on new issues. Excerpts :

How serious is the situation triggered by the unilateral trade measures applied by the US on some countries including India?

There were announcements of measures on steel and aluminium by the US and these were not taken well by the affected countries. Some said they could apply counter measures. Now what those counter measures would be and the extent of that is difficult to tell.

If you look back in history, when you have these kinds of tit-for-tat situations, it tends to escalate. Because you apply a restrictive measure that you believe is legitimate, when the other side responds with something you say you would do it as well. Then it goes on and on. Others too are affected by the situation. Once you begin to get more players and more measures in place, you don’t know where it is going to go. That’s why I said there is a potential for escalation. How big an escalation and how widespread it would be is hard to tell.

Are you in touch with countries in your effort to control the escalation?

I am talking to them. I am trying to understand what their concerns are and if there are ways of mitigating them. More importantly I have been telling them to be careful with whatever they do to avoid a spiral of measures that could have a domino effect. That would be a losing proposition for all.

Is a trade war about to begin?

I don’t want to get into a semantic definition of what a trade war is. I think in general terms a trade war is the kind of thing that you know when you see it. I don’t think we are there yet. We have not seen yet these measures and counter-measures automatically happening. It may come but I don’t think we are quite there yet. But as I said that there is a risk that we may go down the path.

The US has justified these measures by saying that these are part of its domestic rules. Will this argument hold at the WTO?

Every country follows their domestic disciplines. The question is whether it is compliant with WTO legislation. The only body that can say whether compliance exists or not is the WTO panel. Every time a member imposes a measure it presumes that it is consistent till somebody challenges that. The only way to challenge that effectively is to do it under the dispute settlement mechanism of the WTO.

With the US blocking the appointment of judges in the Appellate Body, are there talks of an alternative mechanism?

In Geneva, members are thinking about roughly two types of ideas. One is on the kind of things that can be done to break the impasse and resume the nomination process for Appellate Body. The other set of ideas is an alternative to what we have today. In other words, if this impasse continues to the point that the Appellate Body work is compromised, are there other things that they could do to make the system continue to function in a way that will be acceptable to them?

Can Article 25 of the DSU, which offers an alternative to the dispute settlement body, act as a substitute?

It is very difficult to have a perfect substitute or alternative to the Appellate Body. Article 25 is a possibility that allows two parties to take arbitration directly to the Director-General instead of the DSB. The D-G provides the means by appointing the arbitrators and setting up the system so that the parties can have an arbitration between themselves based on mutual agreement. I heard that some members are thinking of using that as some kind of mechanism that could be helpful in the context of a improper functioning of the Appellate Body. How exactly it would be done I don’t know. This is precisely what they are talking about.

Do you go back from India with the sense that there has been some movement in the negotiations?

This was not a negotiating meeting. We had a situation in Buenos Aires (Ministerial Meeting) where we did not have many negotiated outcomes. The conversation today was do we have ways of finding solutions? There were suggestions of things that could be done. Discussions happened at the political level in a meaningful way. But there was no attempt to have a breakthrough. We were basically testing if others are willing to take part in discussions that would go in a particular way.

We need to show flexibility. There is a kind of flexibility that you find in the Trade Facilitation Agreement where developing countries have identified commitments they can take on immediately and ones where they need time and technical assistance for implementation. There are also flexibilities in the format of conversation, whether all countries participate or only some.

Now there are some new initiatives in the WTO in e-commerce, investment and MSME, where some members are flexible in the beginning because it is open-ended and anybody can participate and anybody can leave. They are still deciding what would be the topic of the conversation and whether there would be negotiations in the future or not. I think the only way to have comfort and move forward in negotiations is if everyone is reasonably sure that they would not be asked to undertake things that they cannot undertake.

The groups already exist. They have been having meetings. More than half the membership is participating in the meeting.

What I heard here was that some said that we need and want the Doha issues (flowing from the on-going Doha Round) but we also want to talk about some of the new issues that are important for us. Others were saying that we want to have a conversation on the Doha issues but we are not ready yet to have a conversation about the issues those groups are talking about. There was no attempt to find any kind of agreement.

Some people argue that sometimes to make things move you need more items on the table. If something is very difficult for me in one particular area and I can show to my constituency that there is a positive result for me in another area, it could makes it easier for me to move. But some others argue that the additional things could complicate matters for the Doha Round. I don’t know what the situation would be like.

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