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Infighting Heats Up as the WTO Edges Closer to Paralysis

Bryce Baschuk

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Things are getting ugly at the World Trade Organization and a soap opera-like atmosphere has descended on the normally staid institution on the shores of Lake Geneva.

An internal war is raging among the members and the director of the WTO appellate body who have begun airing their dirty laundry in public. This is a panel that mediates disagreements between countries involving billions of dollars in international commerce, and it’s been at the heart of calls for reform from the Trump  administration.

In recent weeks the chairman of the appellate committee, Thomas Graham, has called for the removal of the division director, Werner Zdouc, a 56-year-old Austrian who has become a lightning rod of criticism for the institution’s dispute settlement system.

That sparked Graham’s colleagues to write a letter in which they rejected allegations about Zdouc’s “competence and neutrality” and pushed back on allegations that they supported Graham’s call to remove Zdouc from office.

On Wednesday, a senior trade official sought to clarify the matter. The official told Bloomberg that Graham’s colleagues did not share his desire to oust Zdouc — unless — all 164 WTO member nations supported such a move, which they do not.

The official said members may consider Zdouc’s removal in the context of a bigger package of WTO reforms, but those conversations are still very preliminary. In the meantime, Director-General Roberto Azevedo has no plans to interfere with the work of the appellate body, which is supposed be independent, the official said.

The whole fight could be moot anyhow.

Next week the WTO appellate body won’t have enough active members to rule on new cases. That means the world’s trade referee will cease to function properly at the very moment when it’s needed most.

Charting the Trade War

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Today’s Must Reads

U.S.-China deal | The U.S. and China are moving closer to agreeing on the amount of tariffs that would be rolled back in a phase-one trade deal, Bloomberg’s Jenny Leonard and Niu Shuping report. New Nafta | Mexico is considering a U.S. proposal to remove protections for biologic drugs from a renegotiated Nafta trade deal, a plan that could help clear a hurdle to an agreement. Trump-Abe deal | Japan’s parliament approved a trade pact with the U.S. that opens the country’s markets to American beef and other agricultural products. Tech war chest | The U.S. has been warning other countries not to buy telecommunications gear from China’s Huawei and ZTE. The government will soon put real money behind the effort. Solar burst | Tariffs  will cost the U.S. solar industry $19 billion in investment and lead to more than 62,000 lost jobs by 2021, according to a clean-energy trade group.

Economic Analysis

Risky strategy | Failing to introduce state aid rules in the U.K. will likely reduce EU market access for British products. Tech tax | Canada still plans to enact a digital services tax for tech companies despite U.S. threats to launch tariffs against France over a similar tax.

Coming Up

Dec. 5: U.S. trade balance Dec. 6: France trade balance Dec. 8: China trade balance Dec. 9: Germany trade balance

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To contact the author of this story: Bryce Baschuk in Geneva at bbaschuk2@bloomberg.net

To contact the editor responsible for this story: Brendan Murray at brmurray@bloomberg.net, Zoe Schneeweiss

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