The world’s two largest economies, the United States and China, are currently locked in a trade war. Yet they are also ripping up the global rules on trade.
President Trump threatens to pull the US out of the World Trade Organization if it does not “shape up.” He has already gummed up the agency’s judicial process. Meanwhile, China is violating so many norms of international commerce that it is a defendant in half of all complaints before the 164-member WTO.
No wonder then that neither country was invited to a major international meeting that started Wednesday aimed at changing the rulebook on global trade.
As the host of the two-day confab, Canada decided that 13 “middle powers” from Chile to Japan can help the two giants agree to a reform of the WTO. Canada plans to build up a critical consensus from below, perhaps one that will allow China and the US to better understand each other.
Such mediation – and humble listening – is urgent. The world economy is slowing in part because of the trade disputes. And the WTO, founded nearly 24 years ago to grease global trade and lift people out of poverty, may grind to a halt next year without a compromise on the appointment of new judges to its appellate body.
“Without action to ease tensions and recommit to cooperation in trade,... the long-term economic consequences of this could be severe,” says WTO Director General Roberto Azevedo. And Christine Lagarde, managing director of the International Monetary Fund, has called for a “rapprochement” between China and the US on trade.
The first role of a broker in such negotiations is not to find compromise. Rather, it is to help each side understand the other’s core interests and then look for solutions that neither has yet considered. For starters, China and the US can agree that the world continues to need a rules-based trading system.
The “middle powers” at the Oct. 24-25 meeting in Ottawa have started the process – only without the two superpowers in attendance for now. Once that group of influential nations reaches its own consensus on WTO reform, it may be hard for China and the US not to follow. Reshaping the rules of commerce is not always a matter of hard bargaining. It can also entail soft listening.