PREVIEW
Pressured by western economies the WTO is to review of ‘most favoured nation’ trade provisions
Trade ministers are set to reopen the World Trade Organization’s fundamental principles on most favoured nation status at a March summit in Cameroon after WTO director general Ngozi Okonjo-Iweala gave her support for the idea.
‘The status quo is not enough,’ Ngozi Okonjo-Iweala told reporters in Geneva on 12 February, adding that ‘one should never be afraid to engage on the issues of the day, including foundational principles, especially at a time when you're trying to in a world of uncertainty and geopolitics, you should have a conversation.’
Okonjo-Iweala has little choice but to accept the inevitable. Both the United States and the European Union have questioned the viability of the current MFN but for different reasons. The MFN sets a principle of equal treatment in trade terms between countries. But the EU is in a multi-sector trade dispute with China over what it says are Beijing’s subsidies and excess production in the electric vehicle, steel and discrimination in exports of rare earths and the procurement sector.
The WTO’s relevance – and that of the so-called ‘rules based order’ – has been shaken by the US Trump administration’s aggressive use of trade tariffs to advance its trade and foreign policy agenda and by China’s use of subsidies and market dominance in areas such as critical minerals and rare earths as leverage.
The past 12 months have been deeply uncertain for African countries who have also been caught up in the Sino-American trade war. Trump slapped tariffs of 10%-30% on African states last year as part of his plan to renegotiate trade relations and reduce the US trade deficit (AC Vol 66 No 16, Trump lessens the tariff pain, but they will still bite).
In January, the US Congress approved a one-year extension of the African Growth and Opportunity Act, which offers tariff- and quota-free trade and had appeared to have been killed off by the Trump tariffs (AC Vol 67 No 3, Problematic resurrection for AGOA trade scheme after Congress votes). But African industry groups have cautioned that this only offers temporary respite.
China launched its offer of tariff- and quota-free trade for almost all African states just weeks after the Trump ‘Liberation Day’ tariffs last April.
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