W.T.O. Chief Quits Suddenly, Adding to Global Turmoil

Roberto Azevêdo, director-general of the World Trade Organization, has been a proponent of international cooperation, putting him at odds with the Trump administration.

The head of the organization charged with bringing a semblance of order to international trade relations resigned unexpectedly Thursday, adding another element of uncertainty to commerce in the midst of the coronavirus pandemic and escalating trade conflicts.

Roberto Azevêdo, a career Brazilian diplomat, resigned as the director-general of the World Trade Organization effective Aug. 31, the Geneva-based organization said. His second four-year term was not scheduled to end until September 2021.

The W.T.O.’s operations have been crippled since late last year as a result of actions by the Trump administration, which has refused to approve nominees to fill vacancies on a crucial appeals panel that rules on trade disputes.

With Mr. Azevêdo’s departure, which caught officials in Geneva and Brussels by surprise, the organization will lose an advocate of open trade and international cooperation whose views clashed with President Trump’s preference for bilateral power politics.

His resignation also leaves a leadership vacuum at a perilous moment for the world economy.

The pandemic “is the worst shock to global trade that has happened in our lifetimes,” said Josh Lipsky, director of the global business and economics program at the Atlantic Council, a research organization in Washington. “To lose the leader of the W.T.O. is a serious blow. There is a broken global trading system, and it needs leadership to fix it.”

Mr. Azevêdo, 62, did not link his departure to tensions with the Trump administration. Rather, he said he wanted to give W.T.O. members a head start on choosing a successor, which is often a difficult process.

The coronavirus pandemic has brought complex negotiations on issues such as fishing subsidies to a standstill and made it unlikely that agreements would be reached until next year. A debate at the same time about the next W.T.O. director would interfere with attempts to overcome trade disputes, Mr. Azevêdo said.

“The selection process would be a distraction from — or worse, a disruption to — our desired outcomes,” he said during an online meeting with W.T.O. members. “We would be spending valuable time on a politically charged process that has proved divisive in the past.”

World trade was already declining because of Mr. Trump’s trade wars with Europe and China, and has plunged further since the pandemic brought economic activity in many countries to a standstill. The W.T.O. has predicted that global trade could fall by one-third, a decline not seen since the Great Depression in the 1930s.

Recently Mr. Azevêdo has expressed frustration that the United States, Europe, China and other large countries were not coordinating their response to the coronavirus emergency. Mr. Trump has recently stepped up his criticism of China.

“Either we shape up and begin to talk to each other and find common solutions or we are going to pay a heavy price,” Mr. Azevêdo told CNN in April.

Robert Lighthizer, the United States’ top trade official, was conciliatory Thursday. “Despite the many shortcomings of the W.T.O., Roberto has led the institution with grace and a steady hand,” Mr. Lighthizer said in a statement. “He will be difficult to replace.”

Mr. Azevêdo, who was previously a top trade negotiator for Brazil and has worked in Geneva since 1997, also cited personal reasons for his departure. The W.T.O. makes decisions by consensus, which means even one of the organization’s 164 members can stymie progress. The director-general must find a way to thread conflicting national interests and reach accord, a laborious and exhausting task.

Mr. Azevêdo said Thursday that, while he had no serious health problem, he recently had knee surgery. Between that and the lockdown, he said, “I have had more time than usual for reflection.”

Trump Hasn’t Killed the Global Trade System. Instead, He Split it in Two.

Allies find relations modestly tweaked, despite the president’s rhetoric, while relations with China are entering a deep freeze

When Donald Trump entered the White House on a platform of defiant nationalism nearly two years ago, many feared he would dismantle the global trading system the U.S. and its allies had built over the past 70 years.

He hasn’t. Instead, he is presiding over its realignment into two distinct systems.

  1. One, between the U.S. and its traditional, democratic trading partners, looks a lot like the system that has prevailed since the 1980s: free trade with a smattering of quotas and tariffs like those Ronald Reagan once deployed.
  2. The second reflects an emerging rivalry between the U.S. and China carrying echoes of the Cold War. On trade, investment and technology, the U.S. is moving to undo some of the integration that followed China’s accession to the World Trade Organization in 2001.

There are two big questions hanging over this realignment. The first is deciding how far the U.S. is prepared to decouple from China. The U.S. has given China until March 1 to avoid higher tariffs by addressing complaints it discriminates against foreign companies and steals their technology. Mr. Trump is counting on a deal that avoids a trade war. But many in his administration and Congress don’t trust China to make the necessary concessions and would likely advocate a sharper break.

The second question is whether the U.S. can persuade allies to join a united front to contain China. Other countries don’t relish the choice. Their economic ties to China are far greater than they ever were to the Soviet Union during the Cold War.

Two years ago, it was easy to predict a grimmer fate for the global trading system. Mr. Trump campaigned as a protectionist willing to tear up trade agreements and raise tariffs to shrink the trade deficit and bring back factory jobs.

In his first week he withdrew from the unratified 12-nation Trans-Pacific Partnership. He prepared to pull out of the U.S.-Korea Free Trade Agreement (Korus) and the North American Free Trade Agreement. Earlier this year he imposed steep tariffs on imports of steel and aluminum, using a little-used national security law, and threatened the same for autos.

Today, Korus and Nafta have been replaced by updated agreements(one not yet ratified) that look much like the originals. South Korea accepted quotas on steel. Mexico and Canada agreed to higher wages, North American content requirements and quotas for autos.

These represent a step back from free trade toward managed trade, but they will have little practical effect: The limits on how many cars Mexico and Canada can ship duty-free to the U.S., for example, exceed current shipments. Mr. Trump hasn’t stopped threatening auto tariffs, but for now his officials have elected instead to seek broader tariff reductions with Japan and the European Union.

.. Meanwhile, the U.S. trade deficit that incenses Mr. Trump has grown during his presidency, especially with China and Mexico, as a strong American economy sucks in imports. His exhortations to manufacturers to bring jobs back to the U.S. have largely fallen on deaf ears.

Douglas Irwin, an economist and trade historian at Dartmouth College, calls these results the “status quo with Trumpian tweaks: a little more managed trade sprinkled about for favored industries. It’s not good, but it’s not the destruction of the system.”

.. Yet the status quo with China is crumbling. Businesses have grown disillusioned with China’s restrictions on their activities, forced technology transfer and intellectual-property theft, all aimed at building up domestic competitors at foreign expense. Meanwhile, legislators in both parties are alarmed at increased military assertiveness and domestic repression under President Xi Jinping.

.. When Mr. Xi visited the U.S. in 2015, Mr. Sullivan urged his colleagues to pay more attention to China’s rise. On the senate floor, he quoted the political scientist Graham Allison: “War between the U.S. and China is more likely than recognized at the moment.”

Last spring, Mr. Sullivan went to China and met officials including Vice President Wang Qishan. They seemed to think tensions with the U.S. will fade after Mr. Trump leaves the scene, Mr. Sullivan recalled.

“I just said, ‘You are completely misreading this.’” The mistrust, he told them, is bipartisan, and will outlast Mr. Trump.

While delivering one message to China, Mr. Sullivan gave a different one to the administration and its trade negotiators: Don’t alienate allies needed to take on China.

“Modernize the agreements but stay within the agreements,” he says he counseled them. “Then we have to turn to the really big geostrategic challenge facing our country and that’s China.”

His was one voice among many urging Mr. Trump to single out China for pressure. Presidents Obama and George W. Bush sought to change China’s behavior through dialogue and engagement. Obama officials had begun to question engagement by the end of the administration. Last year, in its National Security Strategy, the Trump administration declared engagement a failure.

The Trump administration regards economic policy and national security as inseparable when it comes to Beijing, because China’s acquisition of Western technology both strengthens China militarily and weakens the U.S. economically.

The administration has yet to publicly explain its goals. In 1946, at the start of the Cold War, diplomat George Kennan made the case for containing the Soviet Union in his famous “long telegram.” The Trump administration hasn’t done anything comparable for China. One reason might be that administration officials are divided. Mr. Trump appears torn between wanting to halt China’s rise at any cost and hoping for “a big and very comprehensive deal” that lifts the cloud of a trade war.

.. U.S. and domestic concerns have prompted Australia, New Zealand, Japan, Britain and Canada to restrict or consider restricting Huawei equipment in their telecom infrastructure, in particular for the next 5G mobile phone standard.

The U.S. is also seeking to wall China off from future trade deals. It insisted the pact replacing Nafta include a clause letting the U.S. quit if either Canada or Mexico signs a free-trade agreement with a “non-market economy,” i.e., China.

.. The first goes to the heart of Mr. Trump’s goal. If his aim is to hold back China’s advance, economists predict he will fail. China’s innovative capacity has expanded dramatically. China now accounts for 18.6% of articles in international scientific journals, according to one study, and nearly a quarter of global venture-capital investment, according to another.

Indeed, some China experts fear that the U.S., by adopting a more adversarial approach, weakens China’s reformers and strengthens its nationalist factions, making conflict more likely. They predict China will intensify its pursuit of technological self-sufficiency.

.. Persuading other countries to hold China at arm’s length will be harder than containing the Soviet Union. China accounts for 11% of world exports, whereas the Soviet Union in the 1980s accounted for less than 3%,

.. China is 22% of Japanese imports and exports; the Soviet Union was less than 1%.

.. Many of China’s close neighbors depend far more, economically, on China than on the U.S.

.. U.S. officials note that China’s aid, such its Belt and Road infrastructure program, often saddles recipients with debt. Yet the U.S. offers no alternative, said Mr. Rudd.
.. Some of Mr. Trump’s trade policies undermine the united front he wants against China. He hasn’t sworn off protectionism against U.S. allies, promising to withdraw from Nafta even if its replacement isn’t ratified by Congress. His steel and aluminum tariffs, most of which remain in place, outraged such allies as Canada.

U.S. officials play down such frictions as easily worked out. Abroad, they are seen as more serious. Canadian ambassador to the U.S. David MacNaugton said he told U.S. trade negotiators that if Mr. Trump carried through on his threatened 25% tariff on Canadian autos, it would fundamentally change bilateral relations for the worse for years to come. In a letter accompanying Nafta’s replacement, the U.S. agreed not to levy the tariffs.