'Look like you're doing something': Canada hosts trade reform talks without the U.S.

What happens when the central player who helped establishthe rules for the game reconsiders and flips over the table?

Welcome to the World Trade Organization in 2018:an organization approaching a crisis point, now that Donald Trump's Americano longer wants to play a leadership role in its negotiations or respect its court rulings.

The U.S. president isn't even sure he wants to be a member anymore. As theworld's largest economy withdraws, where does that leave thosewho still believe in the WTO'srules-based system?

The Canadian government has invited 12 representatives of"like-minded" trading partners to Ottawa for a private dinner Wednesday evening, followed by a day of meetings Thursday.

Trade officialsfrom Australia, Brazil, Canada, Chile, the European Union, Japan, Kenya, Mexico, New Zealand, Norway, Singapore, South Korea and Switzerland are comingto this first gathering the start of a process that may eventually include all 164 WTOmembers.

Historically, international trade breakthroughshave required the leadership of a smaller group. Canada's hoping to get onegoing.

"This is meant to be a discussion that is from the bottom up," Canada'sWTOAmbassador Stephen de Boer said earlier this month.

In a paper setting upthis week'sdiscussions, Canada diplomatically suggested that a "combination of disruption and paralysis hasbegunto erode respect for rules-based trade."

While not explicitly calling out the U.S., the paper suggestedthat "in the absence of a singleWTOmember with the capacity, willingness or credibility to lead, an alliance of members who share a commitment to the multilateral trading system" couldbuild toward a consensus onreforms.

No China, no U.S.

For now, the world's highest-profile trade combatants aren't invited.

TheU.S. is leading its own trilateral conversations with the EU and Japan. (When it says 'WTOreform', the Trump administration tends to mean'cracking down on unfair Chinese practices.')

A representative fromChina isn't coming, either. Itsstatus in theWTOremains controversial. (Is it really a market economy? Or do its state-owned and controlled corporations tilt the playing field? Those questions may amount to anelephant in the room this week.)

Why is Canada taking this on?

"We're very good at calling meetings," International Trade Diversification Minister Jim Carr quipped last month in New York.

But in all seriousness, someonehad to. James Bacchus, a former congressman from Florida who twice served as the chief judge of theWTO'sappellate body (the highest court for international trade), gives Canada credit for trying.

American officials have "shown no real interest in most of the reform agenda and it's not surprising that some of the other countries want to get together and discuss these issues before engaging with the United States," he said, adding that it would be counterproductive to involve Americawhile it's in an obstructionist mood.

"The United States has been stressing the rule of power while undermining the rule of law in international trade. This is inexcusable," he said.

While the Trump administration may prefer to use its economic might to negotiate its own bilateral deals,Bacchus fears afragmentation of world trade into competing regional blocs.

That wouldn't be a good situationfor Canada, which could be trapped inside fortress North America as a client state of the U.S., instead of making the most ofdeals it's negotiated withEuropean andPacific Rim partners.

Appellate body on verge of shutdown

The list of American grievances with theWTOis long. Some predate Trump's election.

Take, for example,how WTOrules allow "developing" countries to opt for less strenuous trade commitments than members with advanced economies.

Because there areno fixed criteria to determine which countries are still "developing" (it's self-defining, actually), G-20 economies the U.S. competes strenuously with South Korea, Brazil, India, Mexicoand, yes, China are treated differently when it comes to cutting tariffs, subsidies and other non-trade barriers.

And then there's dispute settlement. Despite what Trump might say, Americans have won about90 per cent of their cases at the WTO, Bacchus pointed out.

But the U.S. disagrees with the way theWTOhas treateditsanti-dumping calculations in arbitration.

Even before the Trump administration, American officials began blocking the appointment of judges to the WTO appellate body something normally done byconsensus in a direct challenge to its authority to interpret and enforce rules.

Now, only the bare minimum number of judges required to hear an appeal three remain on theWTObench. Two of them have terms that expire in 2019.

Could members appoint more using a majority vote instead of consensus? Maybe. But consensusdecision-making has been a way for smaller or less-developed countries to have stronger voices. They may not want to switch to decision-makingby majority vote.

In the meantime, no judges means no binding arbitration.

"WTOrules work because they're enforceable," Bacchus said. "If they cannot be enforced, then they won't work and countries will have no incentive to improve the rules or write new rules, because they won't work either."

National security cases coming

Bacchus is among those who thinkmembers who still wantWTOarbitration could setup a parallel system thatworks the same way, except without the U.S.'s participation.

"That's really the only way," said Nicolas Lamp, a former lawyer with the appellate body in Geneva, now an assistant professor at Queen's University'sfacultyof law. "The U.S. is not interested in a solution."

U.S. Trade Representative RobertLighthizerwould rather return to the system in placebefore theWTOwas founded in themid-1990s, in which members were free to ignorepanel decisions.

Now that the U.S. has emasculated the appellate body by blocking judge appointments, it has a de facto veto to keep panel decisionsfrom being enforced ifthey aren't to Washington's liking.

"It's pretty clear why they'd want that [veto] right, when you think of the 'national security' cases coming up," Lamp said, referring to the recent wave of challenges toboth Trump's steel and aluminum tariffs and the retaliatory tariffs levied by memberslike Canada in response."If [the cases] don't go the U.S.'s way, they're going to veto them."

WTODirector-General RobertoAzevedo, who is expected at the Ottawa meeting, isn't keen on theWTOadjudicatinghigh-stakes tariffs cases like this. Is it the WTO's jobto define what's essential to a country'ssecurity? That's not the kind of technical dispute this arbitration systemwas meant to resolve.

And for the WTO, it's a lose-lose proposition.If a panel allows theU.S. tariffsto stand, it could open the floodgates for protectionist tariffs worldwide, all citing "national security." If the U.S. loses, it's hard to imagine the Trump administration agreeing to be bossed around by asupranational panel out tointerferewith its economy.

Could these cases blow up the WTOonce and for all?

Canadian DebraSteger,the first director of theWTO'sappellate body, doesn't think so. Tough cases have been brought before, and it survived.

"Panels take forever," she points out. They take time to form and then, sometimes,two or three years to make up their minds.

"Let's wait and see what happens in the midterms," she said. "I'm not convinced this guy [Trump] is going to be in power forever."

Too Trump-centred?

In the meantime, shefears too many of the reform proposals are centred on trying to accommodate the criticisms and concerns of the current U.S.administration.

"Canada has adopted some of the U.S. lines that just aren't correct," she said. "Everybody's bashing the appellate body now, which is just stupid. It has not been overreaching. I don't accept that."

The appellate body is trapped in a Catch-22, she said. Because it's difficult to draft and clarifyrules by consensus the multi-year Doha Round negotiation meant to address many current issuescollapsed without meaningful progress more and more issues are ending up in arbitration. But when arbitratorsinterpret rules in the absence of clear direction, judges are accused of trying to make the law, not uphold it.

Another set of reformproposals recently circulated by the EU wasn't as focused on overhauling the appeals process.

But all the complex and sometimes competing proposals currently in circulation lack a clearfocus,Stegersaid.

Themost urgent issues maintaining anarbitrationprocessand, when consensus is not possible,enabling changethrough "plurilateral" deals between willing partners should take priority, she said.

So back to Thursday's meeting agenda. Subtract the times indicated for opening and closing statements, photo opportunities, alunch and a press conference, and these 13 members really have onlyabout three hours to talk.

"I don't think they're going to get very far beyond the big picture," she said."They've put way too many issues out there.

"Maybe the point is to look like you're doing something?"