Canada, and many other smaller countries with export-dependent economies, rely on an internationally recognized, rules-based trading system, says Mike Gifford, former chief agricultural trade negotiator for Canada.
But that system is under threat from the United States, once the world’s leader in promoting liberalized trade under the auspices of the World Trade Organization (WTO).
“The Americans are getting increasingly less satisfied with the WTO… because of its inability to discipline… the Chinese economy,” Gifford said in an interview May 7. “When China joined the WTO back in 2001 everybody thought they were well on their way to becoming a market economy. But in the meantime, especially over the last decade or so, it has become more interventionist, and therefore the Americans have deliberately created a crisis in order to force change in China and to also force change in the WTO.”
But Gifford hopes the U.S. hard line will ultimately lead to improvements. A similar approach eventually worked for the U.S. after it launched a grain export subsidy against the European Union in 1985. The program allowed U.S. exporters to sell certain American crops at lower than market prices. The program cost Canadian grain farmers millions of dollars due to lower grain prices, some of which was offset by Canadian government subsidies. But Gifford credits the strategy for ultimately forcing the EU to reduce its domestic and export subsidies, which had distorted world grain trade.
And for the first time agricultural trade was regulated under the General Agreement on Tariffs and Trade (GATT), along with industrial products. The process also resulted in the GATT evolving into the WTO.
If the U.S. and China reach a trade agreement Gifford hopes it will eventually become part of the WTO.
“It’s in the Chinese interest to basically have rules in the WTO that are multilateral rather than to continue to be exposed to bilateral pressure games from U.S.,” he said. “The Europeans, the Japanese, the Canadians, the Aussies, New Zealanders, it’s certainly in our interest to have an effective and fair and equitable WTO.”
But if the U.S. and China reach an accord that commits them to preferential trade that won’t be good; it could lead to a collapse of the WTO, according to a paper entitled ‘The New Geo-Political Economy of Food,’ released recently by Al Mussell, Douglas Hedley, Ted Bilyea, and Gifford.
“This indeed could signal the beginning of the end for the WTO,” the paper predicts. “Such an outcome could be as bad as a breakdown of the bilateral negotiations and the development of an all-out trade war.”
Colin Carter agrees a multilateral, rules-based system should be the goal. But the University of California agricultural economist, who has studied China’s agriculture, doubts U.S. President Donald Trump’s approach is well planned.
“The president of the United States is not that strategic,” Carter said in an interview May 17 from Ireland. “I’m not sure he’s very good at playing chess.
“I’m not that optimistic.
“I think this whole China trade war is really unfortunate. Nobody is going to win from it.
“Canada is such a small player it’s bound to get hurt in between those two huge players.”