“We strongly believe that both the unilateral increase in tariffs on steel and aluminum and the offer of exemptions to countries on the basis of what they can offer by way of additional market access or voluntary export restraints (VERs), are incompatible with WTO principles and provisions," Prabhu said at an informal summit of trade ministers from 29 countries hosted by Australia on the margins of the annual meeting of the Organisation for Economic Co-operation and Development (OECD) in Paris.
The OECD, which is called the economic club of industrialised countries for promoting market-driven economic policies, was created by the United States with other industrialised countries in 1961 after the Marshall Plan.
Gloom and doom befell the OECD on Thursday when US President Donald Trump launched a trade war with three of its biggest trade allies—the European Union (EU), Canada, and Mexico—by imposing 25% additional duties on steel and 10% on aluminum.
The EU and Canada promptly announced that they will impose trade retaliatory measures running into billions of dollars against the US for its unilateral and allegedly illegal trade action against them.
Last month, India also signalled that it would impose trade retaliatory measures to the tune of more than $165 million on a range of sensitive American farm products from 21 June if the Trump administration makes the controversial duties on steel and aluminium products from India permanent on 1 June. It remains to be seen what the government will do in the face of President Trump’s action on 31 May against its traditional allies.
In a sharp rebuke of the US’ measures, several trade ministers present at the Paris meeting severely criticised the US for its unilateral actions. But the US Trade Representative Ambassador, Robert Lighthizer, who was present at the meeting simply ignored the criticisms levied by his counterparts, said a participant who asked not to be quoted.
Without naming the US, Prabhu said at the meeting “actions and counter actions such as these can stop the fragile global economic recovery in its tracks, with consequences for jobs, GDP growth and development that would harm us all".
More disturbingly, such actions “can also irrevocably damage the rules-based multilateral system," Prabhu said. “Instead of using such actions to deal with any inadequacy or unfairness in the WTO provisions, the best course of action would be deal with such issues within the WTO," he said.
The US repeatedly justified the duties imposed on steel and aluminum under Section 232 security provisions because of the disappearance of the domestic steel and aluminum industry.
The Trump administration is resorting to unilateral trade measures to please its supporters ahead of the crucial mid-term elections to the US Congress later this year, according to several participants at the OECD meeting who preferred not to be identified.
Norway’s foreign minister Marie Eriksen Søreide cautioned that “might is right is not right" in the face of unilateral trade measures being imposed by some powerful countries. She said “arm twisting" will cause irreparable damage to the global trading system.
India also spoke its mind against the plurilateral trade initiatives involving two or more countries saying they posed a serious threat to the multilateral trading system. The plurilateral initiatives “weaken the multilateral trading system and undermine the inclusive institutional structure of the WTO."
South Africa said “many of us are also concerned at the day-to-day erosion of the consensus decision-making in the WTO brought on by the [proponents of] Joint Initiatives [ plurilateral initiatives on electronic commerce, and disciplines for micro, small and medium enterprises] ."
“The claim that these initiatives are transparent, open-ended and that outcomes will be extended to all (members) does not bridge the substantive policy divergences amongst members that was evident throughout 2017, and underscored politically at MC 11 (eleventh ministerial conference)," Ambassador Xavier Carim South Africa said at the Paris meeting on behalf of his trade minister Rob Davies.
But trade ministers from several industrialised and developing countries present at the meeting said they will intensify their consultations on plurilateral initiatives.
Prabhu also emphasised that trade “must contribute to development". Given the chequered background to India’s economic development, impressive achievement in some sectors but compelling changes in many others, India has not been able to integrate into the global trading system like many other countries, he said.
Without mentioning Trump’s demand for fair and reciprocal trade rules, Prabhu said “any endeavor at the WTO for reciprocal trade rules, which ignores reality, will further deepen the divide and aggravate the disenchantment with globalisation."
“Special and differential treatment provisions for all developing counties without exception, LDCs (least-developed countries) are an integral part of the WTO Agreement and this principle must be protected in all future agreements as well," Prabhu emphasised.