WTO can't be forum to solve trading problems: US

New Delhi: Virtually denouncing the World Trade Organisation (WTO), the US has blamed the Geneva-based body for creating global imbalances and said that it cannot be the forum to solve existing and future problems of the trading system.

"The US has serious concerns with the trading system embodied by the WTO, given that the system has overseen and contributed to a world of severe and sustained imbalances. These imbalances, which are driven in part by overcapacity and concentration of production, have created dangerous dependencies and vulnerabilities for many countries and have undermined many countries' legitimate aspirations to develop or maintain industrial capacity," it said in a paper on reforming the agency submitted late Monday.

Listing out the problems - which seemed primarily focused on China - it argued that trade imbalances were created as countries offered subsidies, suppressed wages, indulged in labour and environmental abuse and used their currency policies, resulting in massive trade deficit in the US, which it is seeking to address. Besides, it said that non-market policies have resulted in over-capacity and over-concentration of production in some countries. It added that WTO has "no competence on security matters, including economic security" or addressing supply chain resilience.

The US attacked the basic principle of most-favoured nation (MFN) treatment, providing for countries to levy the same level of tariff for a product. "The MFN principle is not just unsuitable for this era; it prevents countries from optimising their trade relationships in ways that would benefit each party in that relationship. Put differently, MFN impedes welfare-enhancing liberalisation. It pushes members to engage in one venue - WTO - and attempt to develop a one-size-fits-all approach."

Arguing that the current global system is completely at variance with what was perceived, the paper said: "It has been replaced by an era of deepening divergence, rooted in some countries' unwillingness to pursue and uphold fair, market-oriented competition, some countries' insistence on maintaining economic systems that that are fundamentally incompatible with WTO principles, and many countries' pursuit of chronic trade surpluses that have adverse economic and political consequences in deficit countries. To face these challenges, trading nations must be able to treat different trading partners differently."

In what was seen as another comment primarily aimed at China, it said that the current architecture has reduced the manufacturing capabilities of not just the US but other developed and developing countries and called for a deep-rooted reform of WTO. Without naming it India it has hit out at countries that are blocking plurilateral agreements - where a group of WTO member nations come together to do sectoral deals - such as those related to investment facilitation.

Further, it said that the special and differential treatment, which allows poor and developing countries such as India a longer implementation period and take lower levels of commitments has once again faced American attack, which has called for its elimination.