The weakening of the WTO, a factor of tension

Lhe contrast is striking between the modest ambitions of the World Trade Organization (WTO) summit which has just opened in Abu Dhabi (United Arab Emirates) and the upheavals taking place in international trade. The 13e ministerial conference, which will end on Thursday February 29, will attempt to achieve the signing of a limited agreement on the ban on fishing subsidies and another on electronic commerce. Meanwhile, trade tensions are increasing between the world’s three main trading zones: the United States, the European Union (EU) and China.

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This paradoxical situation is not surprising, however. By blocking the functioning of the WTO appeal body, an essential body for settling trade disputes, the United States, under the leadership of Donald Trump, achieved their goals: disconnecting an essential tool of multilateralism to replace it with the law of the strongest. This choice was adopted by his successor, Joe Biden, thus opening a period of uncertainty which is taking on worrying proportions.

The protectionism now assumed by the United States to stem the rise of China, accused of not respecting WTO rules, has only imperfectly achieved its objectives. While customs barriers and retaliatory measures against the Middle Kingdom multiply, the American trade deficit continues to widen. To initiate real reindustrialization, the United States did not hesitate to contravene WTO rules by launching a gigantic subsidy plan in the field of decarbonization, the Inflation Reduction Act (IRA).

Europeans hesitate

The US sanctions policy, far from persuading China to fall into line, has only encouraged Beijing to look for loopholes. Faced with a severe real estate crisis, the country has accelerated industrial production. Massive investments and a policy of targeted public subsidies have created excess capacity which today seeks to be sold for export, threatening to destabilize the world economy. The market for renewable energies and electric vehicles therefore risks experiencing a flood of low-cost Chinese products, which could be fatal to European industry.

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Caught off guard, the Europeans are hesitant about the strategy to follow. Certainly, Brussels is showing more responsiveness than in the past. Anti-dumping investigations are underway in China, while a carbon border tax entered the testing phase in October 2023. The challenge for the EU is to stand together, as China already seeks to aggravate divisions between the Twenty-Seven. Finding alignment between European interests and the aspirations of large German companies, which remain very dependent on their activity in China, promises to be difficult.

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