The G7 on Trade: Some Hope for US Return to Binding Multilateral Dispute Settlement?
Judged by the recent past, the G7 meeting in the UK (with key US allies) was a resounding success. But then again, the Trump administration created a low bar. In 2019, there was no G7 communiqué for the first time — because of divisions on trade. And in 2020 there was no meeting — the US host “postponed” it until the year ran out.
Yet this year, there was a long communiqué, and it had a full section even entitled “Free and Fair Trade.” Once more, the G7 committed to championing “the rules-based multilateral system” that the previous US President so disparaged.
The G7 statement now calls “for the world’s leading democratic nations to unite behind a shared vision.” That vision is “to ensure the multilateral trading system is reformed, with a modernized rulebook and a reformed World Trade Organization (WTO) at its centre.”
This general commitment is followed by specific ones. The first stresses the need to make “progress” for the WTO’s next Ministerial Conference in November, with the hope of “a meaningful conclusion” of negotiations on fisheries subsidies. Meanwhile, subsidized fleets deplete the oceans of fish. The baseline for progress may be low, but engagement is critical.
The second expresses concern about “forced labour in global supply chains.” The statement does not call out China by name, possibly because of pushback from other G7 members, but it specifically mentions “the agricultural, solar, and garment sectors,” all of which involve production in Xinjiang.
The final paragraph commits to working together and “with the wider WTO membership” to address major issues that implicate China. Once more, China is not mentioned expressly, but the US clearly has China in its scope on “forced technology transfer, intellectual property theft, lowering of labour and environmental standards to gain competitive advantage, market-distorting actions of state owned enterprises, and harmful industrial subsidies,” and “transparency.” As I have argued elsewhere, singling out China by a so-called “alliance of democracies” is not just risky, but a mistake. The issues, however, are real.
Perhaps most interesting is the G7’s commitment to advance the “proper functioning of the WTO’s negotiating function and dispute settlement system” (emphasis added). This could have been worded more elegantly (“functioning” of a “function”?), but it is an advance.
Unstated is that there is tension — if not outright contradiction — between the G7 commitment to a “rules-based multilateral system” and the US neutering of WTO dispute settlement. Here the US remains alone among the G7 and the “broader membership.” The communiqué nonetheless offers hope here, signaling that the G7 aims to see WTO dispute settlement “function properly.”
On this front, the Biden administration’s strategy, it seems, is first to resolve disputes over the Trump tariffs imposed on G7 and other US allies, against which the allies retaliated. Resolving this dispute is politically tricky. The tariffs provide protection to the US steel industry, and that industry is in swing states that are critical for the 2022 election. The control of the US Senate and House are at stake. The Biden administration will thus proceed carefully, biding its time, consulting with labor union constituencies. Still, the two sides are making progress, agreeing to suspend new tariffs while they negotiate.
If the Biden administration can settle tariff disputes with its G7 allies, then maybe, just maybe, the US will be in a cleaner position to make concrete proposals to return to binding multilateral trade dispute settlement. Then the system might be “rule-based” once more.
Gregory Shaffer is Chancellor’s Professor at the University of California, Irvine and author of Emerging Powers in the World Trading System: The Past and Future of International Economic Law, published by Cambridge University Press July, 2021.
