The negative impacts of the dispute - which began to manifest in late 2018 and grew more acute in the first half of this year - will likely worsen following the announcement of new tariffs in May 2019.
"The WTO would ideally help reduce friction between the US and China, but it is not up to the task given its outdated rules and governance challenges.”
The conflict has left many countries in the Asia-Pacific region feeling caught in the US-China crossfire, given the importance of their trade and investment ties with the world’s two largest economies. As a result, they have sought to manage these critical relationships without alienating either country.
The World Trade Organization (WTO) would ideally help reduce friction between the US and China but it is not up to the task given its outdated rules and governance challenges. The crisis in the WTO’s Appellate Body points to this deeper problem of failing to keep up with developments in the trading and investment landscape.
An equally pressing issue is the WTO’s slowness to respond to technological advancements, particularly the digital economy. Simply put, the trade regime is in trouble and in urgent need of reform.
The US has put forward some constructive proposals for WTO reform but it has largely retreated from its leadership role in driving agreements on new trade rules and initiatives since the organisation’s creation nearly 25 years ago.
No part of the world has benefited more from the rules-based trading system than the Asia-Pacific region where trade has exploded since the creation of the WTO.