WTO is most worrying target of Trump's trade talk: Lamy

By Tom Miles

GENEVA (Reuters) - U.S. President Donald Trump's protectionist rhetoric is turning into a systemic threat to the World Trade Organization, former WTO chief Pascal Lamy said in an interview.

Under Trump, the United States has blocked new appointments of judges at what is effectively the world's supreme court for trade. That might not matter in normal times, but the WTO is already short of judges, litigation is piling up, and the system is nearing breaking point.

Trade diplomats are shocked by the U.S. tactics and in little doubt that it's part of Trump's attempt to tilt the global trading system to America's unilateral advantage.

"Simply put, we have not been treated fairly by the World Trade Organization," Trump said last Friday.

Lamy, who spent five years as European commissioner for trade going toe-to-toe with U.S. negotiators, said Trump's views on trade were summed up by his "Buy America" slogan.

"It is simply a trade policy, the purpose of which is to make business invest in the U.S.," he said.

Of all Trump's initiatives - which include renegotiating NAFTA terms with Canada and Mexico and withdrawing from the Trans-Pacific Partnership - the real risk was destabilisation of the WTO's dispute settlement system, he said.

"That is the only manifestation so far of a clear danger for the (global trading) system," said Lamy, who ran the WTO between 2005 and 2013.

Many trade diplomats are similarly alarmed. China's ambassador to the WTO has said the U.S. stance could push the WTO into a "crisis of survival".

But one U.S. law professor has suggested a way to defuse the crisis, and Lamy endorsed his approach.

Steve Charnovitz, a trade expert at George Washington University, wrote earlier this month that the remaining judges could - together with the head of the WTO's dispute settlement body and WTO chief Roberto Azevedo - rewrite their own rules.

"I propose that the Appellate Body amend Rule 20 of the Working Procedures to state that in the event of three or more expired terms in the Appellate Body membership, the Appellate Body will be unable to accept any new appeals," Charnovitz wrote on the International Economic Law and Policy Blog.

"It's perfectly realistic," Lamy said. "It's a perfectly logical way in order to ring the alarm bell if people have not understood what is going on."

Lamy, who previously asked if Trump's bark was worse than his bite, now thinks the gap between rhetoric and reality is narrowing.

"The fact that there is less difference is a worry because if there is less and less difference, after two or three or four or five years there won't be much of a margin of manoeuvre left between rhetoric and reality."

(Reporting by Tom Miles)