Global trading system under ‘unsustainable’ pressure warns UK

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The global trading system is under “unsustainable” pressure, the British government has warned, ahead of a crunch meeting of trade ministers later this month.

The UK told the Geneva-based World Trade Organization that significant reforms were required to halt the breakdown of the rules-based trading order.

“It is clear the status quo is unsustainable,” the UK said in a policy paper seen by the FT, setting out the government’s position ahead of the WTO’s ministerial council meeting in Cameroon at the end of this month. “The multilateral trading system is too important to fail, but it will fail if we do not act,” it added.

The bleak assessment of the international trade landscape included thinly veiled criticism of both the US and China for their go-it-alone policies that have seen a sharp rise in trade tensions since Donald Trump returned to the White House last year. 

The gathering of over 160 world trade ministers will take place just days before Trump’s scheduled visit to Beijing to meet the Chinese President Xi Jinping.

Over the past year as US tariffs have hit their highest levels since the second world war, while China’s annual trade surplus exceeded $1tn, fuelling western criticism of its unfair trade practices.

Recalling how the 19th century’s global trading model encouraged rivalry between major powers which ultimately led to armed conflict, the UK added: “We risk moving backwards as we again are faced with a choice between the rules-based order or a power-based order.”

UK trade secretary Peter Kyle told the FT that the WTO risked becoming “out of touch with reality” if it did not grasp the nettle of reform.

“Britain is prepared to have the difficult conversations and call out behaviours that undermine the global rules-based trading system. We stand ready to drive forward a reformed and refreshed WTO with partners in Cameroon,” he added.

The UK is part of a bloc of so-called ‘middle power’ countries, including the EU, Canada, Singapore and Australasia, that are seeking to agree an ambitious reform programme to update the WTO trading system.

The reforms include proposed changes to WTO decision-making that would stop individual countries from blocking agreements that improve trade, stricter measures to tackle unfair subsidies and modernisation of carve-outs for developing countries.

Despite Sir Keir Starmer’s efforts to improve trade ties with China, including a visit to Beijing in January, the UK policy paper attacks the use of “state-owned enterprises and the use of subsidies leading to overcapacity”, in a clear swipe at China’s distortionary economic policies.

It also implicitly attacks the US for continuing to block the appointment of judges to the WTO’s main enforcement mechanism, which has been moribund since 2019, a situation the UK paper said “fundamentally undermined” the value of the WTO.

The push for reform comes as Trump’s global tariff war has severely undermined the so-called ‘most favoured nation’ policy, a foundational principle of the WTO that requires members to treat each other equally.

The EU, which has long been a staunch defender of the MFN principle, caused consternation last month with its own policy paper which appeared to call into question the bloc’s commitment to the idea.

The prospect of making progress at the Cameroon meeting suffered an early setback last week after the US and several other countries refused to agree a draft statement setting out a roadmap for reform.

Diplomats had hoped to get agreement for the draft text ahead of the meeting in Cameroon, but three diplomats with knowledge of the discussion said the US had supported a rival text.

The alternative version, submitted by Paraguay and seen by the FT, sets out a more vague plan of action. Washington’s move came despite US representatives telling a closed-door meeting of diplomats last week that it did not want to “waste time on empty statements”.

WTO diplomats will meet in Geneva on Tuesday to finalise documents to be submitted to trade ministers in Cameroon, but several said they were not optimistic that a consensus could be reached over the rival drafts. “The US has made its position pretty clear,” one added.

A senior US trade official said: “The United States is interested only in concrete and realistic outcomes. Many WTO members are promoting drafts that are disconnected the reality of the challenges facing the WTO.”