Tough road ahead for WTO's new trade facilitator

Delivered every Monday by 10 a.m., Weekly Trade examines the latest news in global trade politics and policy.

Apr 29, 2024 View in browser   By Ari Hawkins With help from Doug Palmer QUICK FIX — WTO members hope the new official leading negotiations on the coalition’s dispute settlement system will put talks back on track and overhaul its non-functioning Appellate Body by the end of 2024. — The first-ever panel under the U.S.-Mexico-Canada Agreement's rapid-response labor mechanism sided with Mexico in a dispute involving a San Martín mine, citing a lack of jurisdiction to rule. — China passed a new measure signaling its willingness to retaliate against western trade partners... the same day that U.S. Secretary of State Antony Blinken met with Chinese leader Xi Jinping. It’s Monday, April 29. Welcome to Morning Trade! I’m wishing you as happy a morning as my favorite new TikTok star, Maggie the dog from Huntsville. Anyone headed to Alabama free for a carpool one of these days? Strictly asking for trade-related reasons of course… Send us your trade news. Reach us at: ahawkins@politico.com, gbade@politico.com and dpalmer@politico.com. You can also follow us on X: @_AriHawkins, @GavinBade and @tradereporter.   THE GOLD STANDARD OF POLICY REPORTING & INTELLIGENCE: POLITICO has more than 500 journalists delivering unrivaled reporting and illuminating the policy and regulatory landscape for those who need to know what’s next. Throughout the election and the legislative and regulatory pushes that will follow, POLITICO Pro is indispensable to those who need to make informed decisions fast. The Pro platform dives deeper into critical and quickly evolving sectors and industries—finance, defense, technology, healthcare, energy—equipping policymakers and those who shape legislation and regulation with essential news and intelligence from the world’s best politics and policy journalists. Our newsroom is deeper, more experienced, and better sourced than any other—with teams embedded in the world’s most active legislative and regulatory power centers. From Brussels to Washington, New York to London, Sacramento to Paris, we bring subscribers inside the conversations that determine policy outcomes and the future of industries, providing insight that cannot be found anywhere else. Get the premier news and policy intelligence service, SUBSCRIBE TO POLITICO PRO TODAY.     Want to receive this newsletter every weekday? Subscribe to POLITICO Pro. You’ll also receive daily policy news and other intelligence you need to act on the day’s biggest stories. Driving the day World Trade Organization Director-General Ngozi Okonjo-Iweala greets officials on stage at a WTO summit in Abu Dhabi, United Arab Emirates, on Feb. 26, 2024. | Jon Gambrell/AP DIFFICULT TALKS AHEAD: The WTO appointed a new trade facilitator to lead talks on reforming the international coalition's ruptured dispute settlement system. The goal? Try to reach a deal by the end of the year. Of course, there’s no guarantee of success. Mauritius’ Ambassador to the WTO, Usha Dwarka-Canabady, steps into the new role after years of experience with the WTO and other international organizations. She is taking over for Marco Molina, Guatemala’s former deputy permanent representative, who was abruptly fired by his government in February, on the eve of the WTO’s 13th Ministerial Conference. Next steps: Dwarka-Canabady must confront two key issues. First, whether to continue an “interest-based” approach where WTO members make suggestions but do not take formal negotiating positions, which advocates say makes it easier to reach compromises. Second, how to treat the consolidated draft text that Molina unveiled in February. That package resolved many issues except for the biggest one: What to do about the WTO Appellate Body that the United States effectively killed in 2019 by blocking the appointment of new judges. The Trump administration at the time had claimed the body had gone beyond its mandate in imposing new obligations on the U.S., especially in the area of anti-dumping. WTO members cooperated to produce the February draft text based on the outcomes, or “interests,” they’d like to see reflected in the final deal. Dwarka-Canabady is expected to spend the next several weeks consulting with members with the expectation of presenting a work plan at the next WTO General Council meeting, tentatively set for May 22-23. U.S. view: The United States and many other members — including China, Canada and Brazil — called Friday for a continuation of the interest-based approach, a Geneva-based trade official said. In a speech earlier this month, USTR Katherine Tai described why the United States prefers this approach to the more traditional form of negotiation. “If you were to force me to come to the negotiations with a position paper, with a written text-based proposal, I'm going to have to first think about what I think is desirable, what I can live with, and then dial every single aspect of that proposal up to 150 in order to … try to get close to something that I can live with,” Tai said. Another big change: Outgoing WTO Dispute Settlement Body Chair Petter Ølberg also told members Friday that a decision has been made to “formalize” the negotiations. That means they will be brought into the formal WTO structures and records will be kept of the talks, unlike the informal process Molina led for over a year. That step was welcomed by countries like India, Nigeria and South Africa, who complained the informal process lacked transparency and made it hard for many developing countries to stay up-to-date on the talks. A Geneva trade official, speaking on condition of anonymity, said he thought it was still possible to pursue an interest-based negotiation within the formal structures of the WTO. But that is one of the issues that Dwarka-Canabady will have to navigate in coming weeks, the official said. REGULATORY REVIEW USMCA PANEL HANDS MEXICO A WIN: A panel under the USMCA sided in favor of Mexico in a dispute involving workers at the San Martín Mine in Sombrerete, Zacatecas, citing a lack of jurisdiction to rule, the Mexican government said Friday. In June of last year, USTR asked Mexico to investigate whether workers at the mine were being denied the opportunity to freely unionize. Mexico’s Economy and Labor ministries said the panel “determined that they did not have jurisdiction to rule on the denial of union rights” according to an informal translation. Those denials can only be attributed to "events after the entry into force of the T-MEC and subject to the 2019 Labor Reform,” they said, referring to the USMCA. A final translated version of the decision is expected “in the coming days” it said. Why it matters: “This ruling is of the utmost relevance, since it sets a precedent on the non-retroactivity of trade treaties. For Mexico, it is essential to avoid opening this possibility in both labor and commercial disputes,” the statement from Mexico added. USTR spokesperson Angela Perez said in an email to Morning Trade that the United States is “disappointed that Mexico has chosen to comment on the panel report contrary to [USMCA] rules in advance of the report’s translation and publication.” “The United States will comment on the report of the panel when it is made public,” she said. Reminder: Mexico argued in a two-day hearing in February that the disputes outlined by USTR under a 2019 labor reform, which was implemented under the USMCA, should be judged under the country’s earlier labor laws. Around the World CHINA TOUTS TARIFF THREAT: China passed a measure Friday formalizing its ability to retaliate against countries that renege on trade agreements amid scrutiny from U.S. and EU trading partners. The tariff law takes effect Dec. 1 and was approved after three rounds of deliberations, which date back to 2022. The move came the same day as U.S. Secretary of State Antony Blinken met with Chinese President Xi Jinping, who warned against “vicious competition” between the world’s largest economies. Keep in mind: Beijing has repeatedly accused the U.S. of violating international agreements, with former President Donald Trump implementing Section 301 tariffs on more than $300 billion worth of Chinese goods. What’s next?: Tai recently told lawmakers she had a high degree of confidence the results of the Section 301 review would soon be announced, but did not provide a clear timeline. President Joe Biden also called to triple tariffs on Chinese steel and aluminum exports. TRADE TALK WITH TAIWAN RESUMES: The U.S. and Taiwan today are kicking off another round of negotiations toward their 21st-Century Trade pact in Taipei, USTR said Friday. The talks are expected to dive into disputed areas of trade, the environment and agriculture. Terry McCartin, assistant USTR for China, Mongolia and Taiwan Affairs, leads the U.S. delegation. While the pact is not expected to tackle tariffs, U.S. officials have framed the deal as a path toward opening up the island to more U.S. exports. FWIW: China has denounced the talks — as it usually does for such forms of engagement between the United States and Taiwan, which it considers part of its own territory.   DON’T MISS POLITICO’S ENERGY SUMMIT: The future of energy faces a crossroads in 2024 as policymakers and industry leaders shape new rules, investments and technologies. Join POLITICO’s Energy Summit on June 5 as we convene top voices to examine the shifting global policy environment in a year of major elections in the U.S. and around the world. POLITICO will examine how governments are writing and rewriting new rules for the energy future and America’s own role as a major exporter. REGISTER HERE.     TRADE OVERNIGHT — Commerce cracks down on firearm exports to ‘high-risk’ countries, per POLITICO. — UN launches panel to improve critical minerals cooperation, per POLITICO. — Canada-South Korea trade confronts green paradox, POLITICO reports. — Elon Musk visits China as Tesla seeks self-driving technology rollout, per Reuters. — U.S. obsession for China's Temu, Shein sends air cargo prices soaring, per Nikkei Asia. THAT’S ALL FOR MORNING TRADE! See you again soon! In the meantime, drop the team a line: dpalmer@politico.com, gbade@politico.com and ahawkins@politico.com. Follow us @POLITICOPro and @Morning_Trade.   Follow us on Twitter Ari Hawkins @_AriHawkins Doug Palmer @tradereporter Gavin Bade @GavinBade Adam Behsudi @ABehsudi Emily Cadei @emilycadei   Follow us

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