Asia-Pacific 'middle powers' urged to reform WTO

The experts said it was time to update the WTO and that countries in the region as well as the US and China should take the lead on this.
The experts said it was time to update the WTO and that countries in the region as well as the US and China should take the lead on this.PHOTO: AFP

In what is being seen as growing concern over the future of the World Trade Organisation (WTO), a group of high-profile experts has warned of a breakdown in trade rules in which every country would become its own "judge, jury and executioner".

The experts, including former trade officials and academics from the Asia-Pacific, said it was time to update the WTO and that countries in the region as well as the US and China should take the lead on this.

In an issue paper for the Asia Society Policy Institute (ASPI), they said a more effective WTO would ideally help reduce friction between China and the US, but, in its current form, the organisation was not up to the task, given its outdated rules and governance challenges, and failure to keep up with developments in the trading, investment and digital economy landscape,

The ASPI paper was co-authored by Kim Jong-hoon, former Korean trade minister; Peter Grey, former Australian trade negotiator; Mari Pangestu, former Indonesian trade minister; Yoichi Suzuki, former Japanese ambassador and trade negotiator; Tu Xinquan, dean of the University of International Business and Economics in Beijing; and ASPI vice-president Wendy Cutler.

The Trump administration has not only been bypassing the WTO in the name of national security, but has also been blocking appointments to its appellate body which, by December, may not have enough members to hear cases, meaning its dispute settlement system would cease to function.

While the United States has put forward constructive proposals for WTO reform, it has retreated from its leadership role in driving agreements on new trade rules and initiatives. As the major beneficiaries of the WTO, it is time for the Asia-Pacific countries, particularly the "middle powers" and trade-dependent economies, to step up and lead reforms, the experts said.

"WTO members should not wait another two decades to set the rule for the next generation of technologies," they said.

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    A full year's worth of trade data following the outbreak of the US-China trade war - with the US firing the first tariff shots in April last year - showed Vietnam was by far the largest beneficiary of import substitution by the US, according to a Nomura Global Markets Research report. Vietnam gained 7.9 per cent of its gross domestic product from trade diversion over both US and China tariffs.

    In general, Asia - except China - has gained the most as the US looks for substitutes for imports from China. Top gainer Vietnam was followed by Taiwan, Chile, Malaysia and Argentina, said the report.

    "The escalating trade war between the world's two largest economies is no doubt negative for the world economy, but one aspect can be positive: the US and China diverting imports away from each other to other countries can benefit some industries in those economies," it noted.

    In terms of products, the US' import substitution has benefited Vietnam, Taiwan and South Korea in electric apparatus for phones, and parts for office and automatic data processing machines; Malaysia in semiconductors; and South Korea and Mexico in motor vehicle parts, it said.

    China has also been substituting for its US imports, and the biggest beneficiaries have been Chile for copper; Argentina, Brazil, Chile and Canada for soya beans; Singapore, Hong Kong and South Africa for gold; Malaysia and Australia for natural gas; and France and Germany for aircraft.

WTO members, particularly those in the Asia-Pacific, should use the upcoming regional and multilateral meetings, including the Group of 20, Apec and Asean meetings to build momentum for WTO reforms, the experts added.

The paper noted that Asia-Pacific countries, which are exceptionally vulnerable to the crossfire of the US-China trade dispute, had sought to manage critical relationships without alienating either country.

It noted that Singapore's Trade and Industry Minister Chan Chun Sing has said Asian countries did not want to be in the position of "only dealing with one and not the other".

In calling for new international rules for trade and investment, the paper's authors singled out two trade agreements for special mention. It said countries that have signed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) should quickly ratify it and expand its membership, so that it sets the standard.

They also recommended that countries conclude negotiations on the Regional Comprehensive Economic Partnership (RCEP) by the end of this year.

The CPTPP comprises Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam. Of these 11, Brunei, Malaysia, Chile and Peru have yet to ratify the pact, but the other seven are already implementing it, with two rounds of tariff cuts in place.


The RCEP includes the 10 Asean members and Australia, China, India, Japan, New Zealand and South Korea. They make up nearly one-third of global gross domestic product and half the world's population.

A version of this article appeared in the print edition of The Straits Times on June 05, 2019, with the headline 'Asia-Pacific 'middle powers' urged to reform WTO'. Print Edition | Subscribe