tv Peterson Institute Discussion on the State of World Trade CSPAN December 17, 2018 12:17pm-1:37pm EST
back sort of do the drawing table of lube in the new congress and try to fix some of the problems with obamacare. of course republicans before this, this latest ruling had failed in their attempt to completely repeal obamacare, and democrats particularly for the midterm elections fought on or ran for reelection and ran for a election based on promises to really defend obamacare, to defend americans rights to getting healthcare. both sides are talking about it. whether or not they are able to sit down together and work on a compromise in the wake of this court ruling is something that is tbd for the new year. >> host: jeff mason white house correspondent reported. always appreciate your time. thanks so much. >> live now to the peterson institute for international economics here in washington. remarks in the deputy director general of the world trade organization, alan wolff, we'll
be talking about the state of global trade head into 2019. live coverage here on c-span2. we expected to start shortly. >> to the peterson institute for national economics. i'm fred bergsten, the director, now director emeritus and senior fellow and happy to host today's session for every close and dear old friend alan wolff. alan wolff as all of you know is now deputy director general of the world trade organization, has been for a little over a year. this comes after a very distinguished career in government and in the private sector. allen was one of the world's leading international trade lawyers for many years, having in fact, prosecute some of the most pathbreaking international trade cases in the history of the gatt and the wto going back to kodak fuji, semiconductor
cases and a whole variety of other literally landmark international legal decisions. alan was the deputy u.s. trade representative in the u.s. government way back in the carter administration when he was one of the key architects of the tokyo round in the gatt which launched many of the pathbreaking changes in the global trading system. he also chaired the committee at the time which dealt with some overcapacity problems that have some similar residences today. -- resonances. alan was a pioneer as this in many the international trading system then and now. prior to serving at ustr and deputy ustr, was head of the office of general counsel at the
trade representative office in the ford administration after earlier and use treasury on a wide variety of international legal issues. while loitering here in d.c.,, alan is also chairman for many years of the four national foreign trade council. he was chairman of the board of institute for trade and commercial diplomacy and literally was one of the deans of international faith committee and the united states -- loitering. we were all delighted when he was appointed to his current position at the debbie dingell a year ago. today's topic is the status of the global trading system. as some of you may have noticed, larry kudlow, the presidents chief economic advisor, said in one of his recent press briefings that wto is dead. he went on to say, , this was after the g20 somebody in buenos aires, and the rest of the g20 agrees that the wto is dead.
now, kudlow perhaps, who happens to be a friend of mine is a lifelong free trader, a little hard to explain his current position, but lifelong free trader and so when he says it i think he says it with positive thoughts in my view he went on to say in the same interview, president trump is a trade reformer who wants to reform the international trade system well, we have nobody better than alan wolff to tell us is the wto dead or not, and is trade reform in the offing. alan, it's great walking back to our platform here in washington. [applause] >> pleasure to be here. a little known fact that after one dies, one's hair and nails
continue to grow. and i may be a living illustration of that fact. [inaudible] >> can't hear back there. is that better? welcome you actually missed nothing. [laughing] too many people, too many people apparently some very famous ones are questioning whether a liberal international order, which includes geopolitical as well as economics, can be maintained. individual reason for founding all this is, tends to be forgotten. back in 1947 with the gatt, the idea is memory does not exist beyond two generations. so on the occasion of george
herbert walker bush is death a couple of weeks ago, writing in the financial times, social order is to some extent self counseling. the longer people have, , the me they take it for granted. the story events that one against such complacency pass from living memory to folklore, to something more like rumor. i'm with that sentiment part of the way. another book is by robert kagan, the general grows back, in which he says that the last seven years were an aberration. that's not the norm. major countries go to battle with each other regularly. and free trade is not the norm, and ill liberal world is the
norm. and that we are in an extraordinary time, the u.s. as a hegemon coming out of world war ii, there were two wars separate largely of the great depression and the results were putting into place the international economic order that we have, but that is not the norm in human history. so i'm with him part of the way. what he says is if you don't tend the garden, the jungle does go back. in other words, what you have, tends to deteriorate in terms of a liberal trading order. i think there's a path forward. i think that many important people have seen a path forward, that reform is needed, and most
recently evidenced at the g20 ministerial in wayne is our ace, in which -- when is our ace, which they said the system is currently falling short of objectives and there's room for improvement. we therefore support the necessary reform of the wto to improve its functioning. a year earlier before buenos aires ministerial you whenever any of that. didn't exist. and last week in the last formal session of the year of the general counsel, 106 for most of the wto, they authorized a process of consultation to go forward with respect to reform. that is extraordinary. it is a seachange. what is required no is not where -- there's been plenty of lipservice paid over the years
for a multilateral trading system and very little investment in it. there is an investment by business, there is little investment by most of the major trading countries. and i have a litany of those that i would consider under investors, since they respond poorly to my saying so i will leave it off the agenda for the moment. very optimistic. i came away from buenos aires a year ago ecstatic. euphoric. because the legislative function, the rulemaking function, the wto and wait for. the reform act joint initiatives that were resisted by a number, but those who want to sit down and talk of electronic commerce or investment or domestic regulation services, or micro-and medium small enterprises or how gender, how women can have greater participation in trade, they all
got to have -- their three-course gdp. not all the same selection of countries in each case, but three-quarters members, county for three-quarters of gdp came together and said we're going to discuss these things and see where the lead. my purpose today is to talk about, first, why optimism is justified, which i think it is. and then what some of the crises are and how to approach them. what wto reform can be all about. about. the measure of what remains to be done, and something about my personal experiences which make me quite hopeful about the wto. and attended to the text that i messed up this morning on my own laptop, i will forward it to fred and it will be available, is a list of areas in which the wto on a regular basis does a number of things that are of value to its members.
reasons for optimism, first, there was ricardian physics, namely, that open borders and rules-based trade, and the rules-based rules-based trade, i'm not sure david ricardo had that in that there are better for national economies on the whole, then protection. it's about efficiency, and efficiency as a gravitational force. it's what countries eventually i'll have to come back to. and it's truer today than anytime in the past especially in a digitalized world in e-commerce, and vastly more capable transportation systems. that efficiency drives economies and, therefore, countries have two eventually live with that reality. second, despite noteworthy exceptions, there is a widespread fundamental
understanding of nearly all the governments of utility of having a multilateral system, not just regional systems, , not just bilateral multilateral. they only way to get tears across the border with an agreed bounds, the only to have nondiscrimination, the only way to have products standards that work worldwide is to do it multilaterally. next, the wto of delivers benefits for the multilateral trading system that can't be duplicated through plural lateral agreements. for example, as i say nondiscrimination on a global basis, , agricultural subsidies cannot be negotiated among a few countries. they have to be negotiated more broadly. industrial subsidies have to be negotiated more broadly. fishery subsidies which is the one thing that was pledged to,
re-pledged every couple of years, that's been going on for about 20 years, fishery subsidies can't be negotiated by some plural lateral. has to all the major players in it. next, the wto the grievance keep the world from being we divided into trading blocs, and the rules of the multilateral trading system underpin the usmca, named nafta, the eurasian free-trade agreement, the new continental african free-trade agreement. they all are based upon the wto of rules. fifth, there's a common effort to improve the system, not scrap it. the sharpest critic of the wto whose name will be familiar to all of you said inmate at the oecd ministerial, if we didn't have a wto we would have to create it.
that's not anyone running for the door. in fact, no member is left and 22 are seeking entry currently. six, a multilateral trading system will prevail because nations have tried alternative models ignoring the market fail. the ussr is a marvelous example of failure. japan had to change and did. a number of countries in latin america changed for the better. in central asia that our economic reforms in the market oriented direction in quite a number of countries in moldova, in kazakhstan, in belarus, in uzbekistan. they are all moving in the same direction of wanting those who are not in come wanted to come into the wto, and moving towards market oriented reforms. if the country is large enough and might be able to try to move
towards -- but that goal is a dead end and mercantile has its limits, mercantilism has its limits, others don't play alone. ultimately it is self-defeating. seventh, without the rule of law there is chaos. trade depends upon certainty. certainty depends upon rules. there's no place where you can craft rules of general application other than in the wto. my conclusion, national policies will ultimately aligned themselves with economic reality. part two, the system at risk. you all know what the headline challenges are. one is the u.s.-china terror of war. neither side has come to my knowledge, claimed and
legitimacy under the international rules for the latest rounds of tariff escalation against each other. it's not in my position to condone or condemn any party, any number. but my neutrality does not extend to the wto, which i happen to favor, and i think that the rules have to play a role. when china came into the wto, and eu, european negotiator and a chinese negotiators were talking, and the eu negotiator said you drive on both sides of the road. what he meant was, there's market orientation and there's the party, nonmarket aspects. and person on the other side reportedly, the eu person told me, said we are always going to try on both sides of the road. okay.
the u.s. and the chinese are not driving a both sides of the road in a slightly different context, namely, some things are within the rules and some things are not within the rules. what should be done, the way to solution i would hope, the truce that exists, they taught, not the final outcome which no one can predict i don't think xi jinping can, i don't think donald trump necessarily can, but the middle position is for a truce, the détente, broadened the rules about what the u.s. ds is more within the rules and what the chinese side does is more within the rules. and that our efforts in that direction. the last great contest that fred and i and others here are veterans of the rise of japan. i only had to make brief
exchange with george bush 41. one was i congratulate him on one market opening with respect to japan, and he said, his response was that japan would never deliver on trade. he was wrong. but he never gave up. he was going to japan, and i called lloyd bentsen, adventure of the senate finance committee and said would you raise the following issue with the japanese prime minister, and he said he would and did. and asked the president to raise it. president did raise it. it helps ring about a solution. george herbert walker bush never gave up. the lesson is actually in this town for any subject, persistence. and persistence for opening markets is something that can't be forced one. the death of the appellate body
is the next crisis. in the united states we do not expect cabinet officers to stay beyond noon on january 20. none of them think that they just sort of have, i'm not finished with my work so i will just continue. it would be, they have to be asked to continue. the appellate body members continued beyond their term of office to render opinions. 163 countries say that's okay, rather practical. the u.s. says wait a minute, we the members didn't tell them they could do that. they are just doing it on their own initiative, and that's not acceptable. it's one of several counts, and/or multiple counts, of indictment of u.s. has of the appellate body has overreached. most of the countries actually
do not agree with the united states. they are not that concerned about this at all. they are concerned about the death of the appellate body because the u.s. locks appointments are not later than you for now and perhaps earlier that will not be an appellate body which i think is a shame because i think that there should be an appellate function and jennifer hillman has made some suggestions that i certainly can't endorse as a neutral member of the wto secretariat. but actually the eu is thinking about it. the canadians are thinking about it. there's a proposal on the table from a honduras. countries are beginning to come to grips with the fact that the appellate body is going away. one thing that i struck for my remarks, being too cute, was that one former member of the appellate body said that the
united states was a succeeding the appellate body. my own view is it's more of an assisted suicide, but the result is a saint and is not a good resale -- result for the system. something has to be worked out. this was not designed to be a system of rule by judges. it was designed to have a legislative function which didn't function. an executive function of sorts which didn't function, so the appellate body had, it was supposed to report to this settlement body, a political body, and they dispute settlement body in fact, does nothing except act as an employment agency for the appellate body. they have no other role in life. ambassadors do not attend the
appellate body, excuse become the dispute settlement body meetings, because they have no function whatsoever. it's a place where if you are lost you could say that was unfair. and if you want you can say that was a pretty good decision. has no effect. i don't know the fix for that. how you introduce a political element which every government has into a system that requires a policy element as well as legal decisions. after all, the appellate body and wto dispute settlement was to resolve disputes. and a role for the other elements of the wto including the members is necessary. there was a pragmatic decision as to how to do this back 23 years ago when the wto was
created at the end of the uruguay round. and i'm quite sure that there are pragmatic ways to solve the problem. and if i suggested one, that would rule it right off the lists are not going to do that at the moment. the motto of the city of geneva is -- after darkness, light. as a way to solve this and i believe that it is very likely that it will be solved. when? don't know. do we go over a cliff first? perhaps. but the fact, the approach of the end of the appellate body which could be much sooner than december of next year because if one of the remaining three is, refuses him or herself, there are not three members to make the decision, there is no
appeal. what happens when there is no appeal? the panel report is not final. the panel report not being final dump the country that wins says we won, conform to the decision to the country that loses says well, we are appealing. the countries as you know there is no appeal. whose fault is that? there's exactly what we have between the u.s. and china today, namely retaliation on both sides. i do not think we can return to the gatt system. what is viewed as -- there are at least three tests. one, i was silly for earlier, he was, worked on the domestic and national sans corporation and light howser worked there there. it's used measure that was gatt
inconsistent on its face, just inconsistent. what happens if that decision were replayed today, not that it would but it comes up again? and the u.s. says the rule makes no economic sense. with the u.s. comply with the negative decision of a panel that was nonbinding, that it could block the panel, but would it now as it did earlier simply repeal the measure? i don't think so. if the, there were a decision against the united states with respect to the definition of public body when the u.s. said the chinese is subsidizing, and the panel says we can't see that, we don't see that, or the appellate body said it. with the u.s. refrain from taking any further action against what it considers a subsidy? in other words, is there the
same self-restraint? if u.s. lost a 232 case, national security, on steel and aluminum, with the u.s. automatically comply today? that's the gatt system. you lose, you change a law, you repeal it. i don't think those conditions exist at present. so the whole notion that will go back to the gatt, i don't think so. there are a variety of other alternatives. plan b is in from asthma. we can talk about that in a bit. so u.s. has not said what it takes to resolve the appellate body and pass. as i said i think an appellate function was necessary for consistency of decisions and to deal with egregious errors. because who will be egregious errors. but we are not there yet, but
the conversations have begun today in geneva. consultations are starting today and tomorrow in geneva with interested countries, member countries, as to what they think should be done with respect to the appellate body. so we are beginning. so the next section is the reformation. why did i think the ministerial in buenos aires a you a go so good? i mentioned the new initiative, the joint initiatives, a way to begin the process of thinking about rulemaking as well as the u.s. showed up. that was not a foregone conclusion in early december a year ago. we didn't know whether lighthizer was going to come, and he did, and he said that needs to be reform of the system. it was a three minute intervention because they were all three minute interventions. but he said there should be
differentiation among developing countries. self-definition, 120 countries of the wto membership are self designated as developing countries, including singapore and several rich middle eastern countries. and they want to keep it that way, mostly i think. china has said it's a red line. we are a developing country. some others don't agree that every country is a developing country for all purposes. also he said you should not gain through litigation what you could not have gotten through negotiation. clear enough point, then reiterate in the last week by dennis shea, u.s. ambassador to the wto. and should live up to your notification responsibilities. so transparency, which u.s. has
now table the proposal, cosponsored the eu and japan and costa rica and several, argentina included. so it's the first initiative for changing the rules that has now been tabled, and we will see how it turns out. papers have been tabled. as i mentioned the canadians have detailed papers. the eu has a detailed paper. china does. it, reform will be at least considered i would think we will take place. it's a good time for an acceleration. i know peterson institute has done a lot on the subject, but it's a good time to think about what should the reforms be. going beyond the ones i have just mentioned, if you have a
system of governance, usually it has actually three branches, no matter what government it is. some of them tend to be concentrated in one person. i have visited of those places but you have an executive function. who is going to monitor? who is going to make sure there is compliance? who is going to administer the agreements? it's a worthwhile question. that wto system is. ambassadors will chair a clue. the ambassadors under some constraint because they are listening to what's happening in the room and just sort of summing it up, but who's going to try the system forward? who initiates a new ideas? now devolves upon individual members. legislative functions, how do you go about rulemaking? does consensus mean unanimity?
one alumna of the wto officialdom has said it can't mean unanimity. you can't have added one owe six for countries all say we support that, but you could have a degree of self-restraint. we're not going to take it all hostage, and we used hostagetaking in this country. lighthizer was held up for some months, taken hostage. justice merrick garland is not seen sitting with the supreme court today. hostagetaking is not unknown to us and it certainly is not unknown in geneva. the attitude of me before you,
of linkages, is going to have to give way to an idea, a cultural shift to making every country give a net positive contribution. i work with cotton development assistance, ddgs. i think i'm not as ddg on the because no one wants to remember the name of a a ddg. they come and go. but ddgs share nothing with one exception. on behalf of the director general i chair the development assistance consultative form on cotton. four countries are the driving force behind this initiative. they are extremely poor. they are not very good at growing cotton. they might not like that in the press, but they see a need to improve their yields. they see need to improve their incomes.
what is the net positive contribution when they have nothing in terms of a market to offer others? their net positive contribution as they think about of what thd that would help them, and they help others actually do the right thing. there's a room full of people, preface and use countries and international organizations, pakistan, egypt, brazil, china, u.s., eu. they are all there spend an entire day with one purpose. how can we help you better in your development? at the net positive contribution by some of the poorest to make the system work. we talked a bit about settlement. leadership. i have been criticized by only three members, so far, of the wto. the eu, china and united states
-- [laughing] and i may add the developing countries shortly to my list, of those who are unhappy with what i have to say. the u.s. did not disappear from geneva. it is probably the most active. it is certainly second to none in terms of activity in geneva tabling proposals, making the system work. it is very active. that doesn't mean that u.s.-china exchanges in the general counsel don't take place. they do. if the u.s. is there. dennis shea when he's in washington i'm sure says that and gives chapter and verse of what the as is done, proposals in the technical barriers to trade committee, proposals and agricultural, proposals in other activities. the u.s. is a period but the u.s. would not claim that it
doesn't differ from prior administrations. it is not acting, it doesn't say we are the guarantor of the system. don't worry about a thing. none of you have to do anything else. we will take on the burden, we will try the process, we will come up with a trade initiative. not so. what is needed is collective responsibility, collective leadership. and it is beginning to happen in ottawa, and october, 12 countries and the canadians met to talk about how to make the system better. it is beginning to happen, and it is what is actually essential. if the u.s. is changing how it approaches the wto, it has to be the others who come forward to think about how they might help make the system work. and they are doing it. it's at the beginning stages. and in my view again they have to make a net positive contribution.
policy space. when i travel on behalf of the wto and a visit with governments, i i make it a poit to speak to students in universities who are international specialist. i mean, that's what they're headed towards. i was concluding the talk on the trading system and the central asian country, and the first question was from a student, ddg, what is the wto going to do about the death penalty? and i explained that actually we don't regulate -- the wto of ist regulate domestic behavior, domestic policies. it doesn't in end in private. it doesn't in in any. one common misperception is somehow, among those who care about the environment, wto is in the way. it isn't. actually very rarely does any
complaint come up with respect to the environment and blessed it is designed as a protectionist measure that as a measure for the environment, then it does get involved. and there was a program on trade and environment of the public form in october. there's a current concern with excessive subsidies in agriculture and in industry. it is a matter of creating employment in one place at the cost of another. in the u.s. system there is occasional criticism of one state, grabs a plant from another as they compete with each other with domestic subsidies. the eu deals with code. globally is in a question of uploading the burden of adjustment from one place to another. so that, i was in djibouti two weeks ago for a conference,
actually sessions and you look at the wind window of your hotm and are very large ships, tankers and freighters and warships because of piracy. and djibouti has major camps, major installations. china, the u.s., japan, france, italy, germany, and i may be missing one, but six of them. and why, besides fighting terrorism, what's the problem that got them there? fisheries subsidies. you take away the living of somali fishermen and they turned to other oceangoing activities, which were grabbing of the people's ships. so these things, they have repercussions, and the only thing that the wto members have pledged themselves is to solve
the fisheries subsidies problem by the next ministerial. and i hope they do. a lot of what the world trading system is about is leaving policy space for domestic activities, , but i have another assignment potentially for the peterson institute, and that is, to what extent can policy space be a developmental tool for e-commerce? we had jack ma, ali baba, speaking at the forum in october in geneva, and he said, as did two young on to pursue as can country can we do platforms that are provided by others by the google's and by microsoft and by others, including ali baba.
we need the platforms or else we can't develop things. in belarus they have very popular apps. i don't know that there they wd have that popular app for their cell phones and list they had platforms of which to develop them. so in the world of e-commerce does the sort of the alexander hamilton notion of protection work. i don't think so. but it deserves some attention because that cry on the lips of a number of folks in the, from the south of this southern hemisphere is we need policy space, which means don't put any obligations on us. let us do whatever we want. the soviet union and its member countries had policy space for 80 years before it disappeared. at its economy collapsed. so it depends what you do with policy space. some of the koreans had policy
space, and the japanese did, and it worked very well here and there are a number of other countries have of policy space. it didn't work well at all because domestic policies actually matter. next to last, mind the gap. this can be very brief. the uk treasury said in its memorandum that was originally secret and now not so much, if we get, we, uk after brexit, get an agreement like norway, we lose 2% of our gdp by the year 2035. if we get as sc did kind of equipment like that canned agreement we list 5% of our gdp by 2035. if we go to the wto, bless it, blessed be its name, we lose 8% of our gdp and some say 10%. what i would be interested again up pi ie challenge, is what's in
the gatt? we will never have global single market, that's for sure nobody wants it. but clearly we can do better. you are missing elements that could improve its, the loss of gdp for the world is close to $90 trillion like 2035, by not being a single market. we will not be a single market. which is for the sake of comparison, all of gdp all of africa today is 3.3 trillion. so lots of $90 $90 trillion, ts a big deal. and what needs to be done, services will be one area, but what needs to be done to close that gap. lastly, one of the exciting parts of my job is dealing with countries that wish to exceed their why did he want to exceed? a a number of them are conflict
affected, afflicted. the last two and were liberia and afghanistan. liberia have both ebola and a civil war. afghanistan still has the occasional problem. they have the leading evangelist for coming into the wto, because they want to improve their economies, gain some stability and get peace. it's all about peace which is what that gatt was formed for in 1947, to underwrite piece. ..
in a forum we had in geneva in october and i said -- he read a great statement and i asked him, could you sum up, and he didn't really want to do that but he said in very halting english, he said excuse me, i learned my english in prison, seven years in prison. he was leader of the military that got more or less to where it is today but was in favor of reconciliation and put that program into place, and he said we want to integrate into the world economy to raise the level of the standard of living of our peoples in order to attain peace. syria is in the list. and i was -- the way the sudan
ambassador and by the way, sudan, south sudan was sitting next to each other on the podium, which was interesting, but the baambassador of sudan sd if there is trade, there will be peace. so back to where we began, it's sort of to these countries, it is 1947. they want a shot at establishing peace for themselves and they want to do that through economic development and they want that economic development to come through integration into the world economy, and it's always a very good feeling to be in one of those meetings where the value of the system is very real to some countries that really desperately need it. thank you very much. [ applause ]
>> thank you very, very much. that was terrific. thank you for your optimism. optimism in this field at this time is very welcomed. thank you for your reminder of trade, peace and the like and thank you for some of the challenges you laid out, including the institute, your $90 trillion number is staggering but it's worth assessing. we did a study about a year ago,
updated our study on the impact of globalization on the u.s. economy which showed that not only did we gain about $2 trillion a year from the globalizati globalization, going all the way to a global single market could gain the u.s. another half trillion dollars a year. i don't know if that's truly on a global basis but we'll take another look. thanks very much. let me ask one or two questions and i'm sure the audience will have questions. you quite rightly said that the u.s./china confrontation is at the heart of the reform question, reform of the wto. elaborate a little bit on how you think that part of the reform process might work out. we know the basic issues between the u.s. and china, and china and maybe the rest of the world
trading system. can we build on the subsidy code, you and i had a big role in negotiating, can we build on it, extend its reach, improve its implementation, is that a big part of dealing with the subsidy piece of the reform question? state-owned enterprises. that's another big piece. trans-pacific partnership which is going ahead now without the united states has some breakthrough language and new discipline on state-owned enterprises. can that be brought into the wto system and used for that piece of the equation. the technology transfer piece which is another big component. there are elements of that in china's own documents to the
wto. can that be built on, enforced better, utilized more broadly. the question is, are there already the pieces of the reform package that can be built on, broadened, and crucial part of it, are both china and the united states as you see it ready to go down that path in minia meaningful way? >> the subsidies have been thought about for a long time by us and our forebears and our successors. there are only two ways to deal with them. one is a right of response. when do you get to respond if you play back the growth and you
said ah, we see a number of factories coming out of the ground, they're not producing yet, but they're whatever, 80 to 100 factories to produce flat panels, if you're aware of that, there's some transparency, then you ha you have a -- have to consider a policy response. one is nothing. that's one end of the extreme. the other is let's punish our consumers once the industry is severely injured by putting on duties when it's not going to bring back production. so two ends of the spectrum. sam gibbons, chairman of ways and means a ways back, said trade problems are like
glaciers. you don't look out your back window one morning and say oh, look at that, there's a glacier in my backyard. you can see it coming a long way off. and you have a choice, you deal with it in one form or another and when's the point that the international system would say, a, you can deal with it and b, what's the point that it looks a lot like a phrase from the 1930s when a country says we're going to achieve -- we're the major market for x product in the whole world and we're going to achieve 70% self-sufficiency by the year x, which means you out there are going to lose your market. when do you respond? and we're not very good at
anticipating events that are going to be a shock to the system, and we don't have domestic adjusting, one response is we're going to lose that industry because they're better at it and more power to them and that's great, but we're going to have an adjustment mechanism at home. we don't do either. we sit there and we wait until the problem is not only an economic problem or a political problem and that's where we are today. transparency would help, and the chinese just notified i guess this morning a whole raft of subsidies in the agricultural area so they're bringing notifications up to date in that ar area. disciplines on state-owned enterprises, certainly there are a number, there are at least 12
countries plus the eu out there who have given this subject a lot of thought, so the chinese say that that's not an issue, but they have to, i think everyone has to come to grips with it. one thing i'd say sort of on the pro-china side which there was not going to be a lot of voices speaking on the pro-china side, chinese agriculture is -- has about 500 million people living in the countryside on small holdings, i was told by the chinese, and 200 million are below poverty level which in china has to be very, very low. what i would ask the chinese is what can you do to alleviate the problem that doesn't export the problem to us in any area, industry or agriculture, because we can understand you have some
problems. they cannot have all those people move all at once to the cities. they can't consolidate the land. they are not putting enough investment in to ease the problem so it's a money issue as well. there is room for a dialogue. the way in the tokyo round, there was a breakthrough because bob strauss said we're not going to attack the cap and you couldn't move a millimeter in the negotiations unless he said we're not going to attack the cap. and the reform came in the european union on the cap due to domestic pressures, but it did come, and you have to decide can you take, can you absorb the adjustment costs while you're waiting for the gross domestic
pressures to come along or do they have to be assisted. so there is a more intelligent way of going about any of these current issues, and some degree of understanding of what we face in the united states with respect to displacement of employment has to do a little bit with exchange rates going back a ways. some understanding on our part what the chinese really need would help, i think, move the two parties towards a solution. but i think within the rules is part of it. it's not all of it. it's part of it. >> one of the questions, then i will open it up, in your plea for optimism, you mentioned among other things the prospect of some new plural lateral
agreement. you mentioned e-commerce. would you elaborate a little on that? where do we stand now on the several plural laterals that have been under way for awhile, trading services, environmental goods agreement, is that a source of momentum for new liberalization and maybe rule making, and where do we stand on the key aspects of that dimension of the trade equation? >> the -- on e-commerce my understanding is they're very close to getting to the point where there can be some text, which is a major step forward. not everybody wants to go there, but the fact is those who want to have -- want to address the problem, and they don't agree on specifics, i mean, the eu will have different concerns than
china and the united states on free flow of data, they are -- >> but they are all three in that negotiation? >> the chinese, i believe, didn't sign but they're active. i mean, the u.s. only signed up to one but it's active in all of them. i don't think the chinese are going to be left behind in any of these. i think in e-commerce, the issues are going to start to be joined before too long with text. so forward progress, but there will be some difficult areas. it's not all going to be about electronic signature. there are some basic things out there that have to be addressed. >> how about some of the others, services, environmental goods, are those things moribund? >> well, the environment, no
one's mentioned it in the 15 months i've been there in terms of ega, the environmental goods agreement. it's just disappeared entirely. there's not an upswelling of boy, is this a great time with an upsurge of populism to liberalize trade further. we're in a rule making stage and e-commerce is about rule making. it's not in the tariff sense a market access negotiation. >> same with services? >> domestic regulation of services i think we're making some progress. not as far as e-commerce, as far as i know. microand medium and small enterprises is really about how do you make everything work better. my guess is that's what it is. you look at all the codes, like i said to the international
standards organizations, make sure that a small business can gain access to the standards that are out there so that they can actually trade. standards are a 100% block on trade as opposed to any tariff. 40% tariff, you decide whether you can afford to get through it. standard, you may be dead on arrival. meeting the standard is very tough. in our family, my daughter-in-law gave up a business that she had because it was shadow puppets sold online on platform of some sort, and was not designed for children, it was designed to be shown to children. how do you know that the alligator clips that hold the puppet to a stick is made out of minerals that are conflict-free,
you know? how do you know whether the sticks will be subject to testing and not break in certain circumstances. how do you know what went into the materials for the plastic puppet. just give it up, forget about it. the standards kill you. >> okay. we will open up the floor, identify yourself, go to the microphone in the back or there's a traveling mic we will bring to you, and fire away. >> thank you. mr. director general, you said, you called what's happening as assisted suicide. infer is a cr the appellate body. where did they go wrong? what they did, they declared a rule under their authority in article 17 to provide for what happens when one of the members
of the appellate body's term is over and the members have not done their duty to fill that term or to reappoint that so the appellate body provided for a rule that the judge in office would continue to serve until reappointed. similar in a way that we have the international trade commission. should they have done the opposite? as a legal expert, do you think what they should have done is said if we're in the middle of a case and one of the appellate body members terms in, that's it, we just get a new division of three appellate body members appointed and start the case again? and would that even be permitted under the rules? >> i'm not going to instruct the appellate body on how it conducts itself.
i take pictures -- the appellate body members get their coffee under a window from just outside my office in the atrium and i take pictures and they're able to gather around a smaller and smaller table constantly and i take pictures, and i send them off to appellate body members as sort of a memento. a court requires legitimacy. whether there was any political -- we would never think there was anything political involved in the roberts court upholding obamacare in this country, but it did work to the political advantage of maintaining legitimacy of the court, so where did they stray? the u.s. has its list of indictments which other
countries don't agree with by and large, or didn't agree with, but are willing either because they agree with the u.s. or because they think that it's worth saving the appellate body, they are willing to make some chang changes. the appellate body is a very, i find, odd construct. it's the final word except by design, the final word was supposed to be in the body which cannot act or the general counsel which cannot act as a practical matter. >> because of the anonymity rule? >> because of the negative consensus. in other words, it's just going to adopt the panel. it has no role, it just adopts the panel decision, appellate
body or panel decision's just adopted and then the general counsel, it would be no -- there's positive consensus but there wouldn't be a positive consens consensus, so the jewel in the crown happened to be in a crown that was deteriorating or never quite fully formed, and to their credit, i guess, understanding them a bit, the appellate body members said we originally lived up to the 90-day rule, this was a staffer who had been an appellate body staff person, and he said countries would come to us and say you didn't address several of the issues we raised, and the appellate body would say
well, they weren't necessary to decide the case. they said but we are a member and we put something in front of you, and we want an answer. we want to know whether that argument was any good or not. so from an appellate body point of view, they evolved into, a, taking every case, every appeal, even if -- and they never found one they liked entirely, as far as i know. no panel decision was oh, that's perfect. so take every case and relitigate it. and then they say well, we need more staff. but why were they commuters, why was there a 90-day rule, i have no idea, and i don't think it's the drafting history and why do they report to a dispute settlement body that cannot possibly do anything? the system did not have three branches of government, nor even two. it had one.
and they decided that they knew the answers. and to some, that's exactly why they're there. there are a number of members -- there was a european chief legal officer of foreign ministry who came by and said but i like their decisions. i said good, put them in a scrapbook and you can take them out and look at them every now and then, but you're not going to have an appellate body. so you know, is there room for pragmatism, yeah. the system stopped working and the fundamental answer is if one big member complains, one very large member that's important to the system, over the course of three or four administrations, complains that the system is not appropriate, that they are coloring outside the lines, eventually the populist
administration comes in and they say it's over, game done. but can it be, you know, can there be a solution, i really believe there can be. but it has to be thought through. and the beginning of thinking is really taking place. proposals are on the table which is, i think, you know, really superb. >> next question. >> hi. i'm the business editor of feature story news. i want you to speak, if you can, to these populist pressures that you were talking about just then. how do you make the case to somebody who is suspicious of multi lateralism and feels removed from the organization in geneva and doesn't think that it's perhaps appropriate to resolve issues, structural issues in the u.s./china relationship? can you make the case that the
world trade organization is an appropriate forum to address their concerns and to really structurally change the trading relationships around the world to help to resolve those tensions? >> i think it's up to member governments to tell their people and certainly not all governments do this, that they're in this for a reason. and i listed several at the outset. that we don't want any other country to discriminate against our goods. we want a fair shot. what churchill and roosevelt said in the atlantic charter in early part of the war was equal market access for all. of course, churchill had a little codicil saying consistent
with current obligations which meant imperial preferences, but putting that aside, which the u.s. administration did, you know, it can be explained that we want -- we don't want to be discriminated against and you lose the wto and everyone is free to discriminate against u you. it is -- what occurred to me this morning is not maybe the best analogy, but anybody who's watched "game of thrones" you do not want to be on the other side of the wall at night. in other words, you want to be in the wto, because everyone can discriminate against your trade with no limits whatsoever unless you happen to have a bilateral agreement. so you are in deep trouble. it's different really than any other organization. you can grab another country and
the u.n. may or may not act, and that happens. but you withdraw from the wto and everybody is totally free to discriminate against your trade or exclude it entirely, and that's a loss of a lot of jobs and a lot of farm jobs as well as a lot of manufacturing jobs and a lot of service jobs, too. so it's total disaster to decide that you don't have to be part of this system. it's a system of rules. and yes, they confine your scope for doing some of the things you might like to do but on the other hand, if you're on the outside, you are in the deepest possible trouble. >> next question? >> thank you, mr. wolff. my question is, president trump
threatened to withdraw from the wto a couple of times. is there any -- does the u.s. propose any constructive plan so far and also, is there a timeline for reform? thank you. >> well, the g20 put in a timeline to have a progress report by their next meeting in i think osaka in late june, so reform is now something that's signed up to by most of the world economy. real leaders of most of the world economy. and it's not the way the wto really worked. each round took eight to 12 years of percolating through to get to a conclusion and we're talking about lightning speed,
but there are real problems to be solved. one action-forcing event is the real action-forcing event is -- well, there are two. one, the appellate body disappeari disappearing. i don't think -- i don't think there is a plan b that isn't almost as good as plan a, which is make this one work. i don't know that anyone would disagree with that, actually. and there are also some complications in any plan b. and the u.s./china situation, how do they reach a new equilibrium and i think rules have a role to play in that. they may not think that they do. maybe they just say you buy soybeans, you drop your car tariff, and we'll just move on
and you know, the truce is maintained. but for stability in a truce, you need i think a broader understanding and that's the case i will make to both parties. >> let me pick up on that last point and maybe this will be the final question. most of us here at the institute and i think in the trade policy community in washington have felt that as the administration raises legitimate questions about china's policies, its biggest failure has been to rally around it the traditional coalition of allies that could join it in raising those issues with china, particularly in the wto. now it's got truces it looks like with europe, japan, korea, it's resolved for the moment at
least to nafta. where you sit in the cockpit looking out at people coming to a coffee machine and doing these things, what's the prospect for putting together a widespread, i won't say universal, but a widespread multilateral consensus that changes are needed in china's policies, that, as you were describing before, could then be a central part of the needed reforms of the system, converts the truce into a peace settlement? is there a prospect now for getting a widespread multilateral consensus to move that process forward toward some more or less lasting solution?
>> i think there's a multilateral consensus that is possible and is in the insipient stages to deal with problems that haven't been dealt with. it won't be let's all do this because of china or any other country. it would be in domestic subsidies, for example, in fish, the chinese are certainly not the only problem. in terms of a transparency, china is not the only issue out there. so there are broad things that i think can help the u.s./china contest that can be subscribed to not because it's a one country problem or one country solution, but that it's broader.
agricultural subsidies have become, as the developed countries for budgetary pressures, perhaps, have cut back on their cultural subsi subsidies, the subsidies have moved to key development countries so there isn't a china problem, that isn't also a problem with other countries and the chinese and the indians would say you folks, the developed ones, namely eu and u.s., you have too much freedom under the existing rules so is there a deal out there where one could strike some balance? i mean, this is, a, we are dealing with trade negotiators, none of whom with philanthropists but they do have to understand that you have to
make a net positive contribution to the system for it to be maintained. so i don't see a coalition of everybody forms together and say we can do the following with respect to china. i think it will be a broader approach. >> thank you very much. we are a little past our witching hour. i think the time has come to close. i want to thank you very, very much for bringing us both your wisdom and your optimism and your continuing efforts as you have for 40 years to drive the trading system forward in a constructive direction. thank you, and congratulations, and good luck. >> thank you very much. [ applause ] [ indistinct conversation ]
[ indistinct conversation ] >> the u.s. house is not in session today, but the senate is back live at 3:00 p.m. eastern to start work on a criminal justice bill. that measure aims to lower the number of federal inmates by making changes to current sentencing laws, while better supporting prisoners who return to society so they don't commit new crimes and go back to prison. a vote to advance the bill takes place at 5:30 eastern today. later this week, work is expected on government spending with funding set to expire on friday. follow the senate live here on c-span 2 when members gavel in at 3:00 p.m. eastern.
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