The World Trade Organization chief, in an interview with AFP, urged the United States to avert “paralysis” in the global trade dispute settlement system, as economic tensions between Washington and China ratchet up.

The Dispute Settlement Body (DSB) is seen as a crucial arm of the Geneva-based WTO, offering nations a forum to work through grievances while avoiding an exchange of tariffs that can ignite a trade war. 

While President Donald Trump's protectionist administration has levelled hostile rhetoric towards the WTO in general, the DSB has been crippled by direct action.

Trump's trade officials, who claim DSB rulings unfairly favour developing nations like China, have blocked the appointment of any new judges, intensifying the backlog in a court already criticised for working too slowly.

“If nothing is done and if we continue down this road, clearly there will be a paralysis of the system”, the WTO's director-general Roberto Azevedo told AFP.

He added that he talked to the US “constantly” about the judges’ issue, but that there were “no developments that would indicate that we are closer to a solution”.

The DSB is supposed to have seven judges to function properly, but currently only has four, one of whom is set to leave when their term expires in September. Each case must be heard by three judges.

Azevedo said he was “relatively hopeful” the WTO's 164 member-states are working on solutions that “will allow us to continue our work”.

Trade war?

The US Commerce Department earlier this month recommended imposing heavy tariffs on China and other countries to counter a global glut in steel and aluminum which it says threatens national security.

China immediately vowed to protect its interests.

Trump is due to make a decision on possible tariffs next month, but analysts warn he may endorse the measures, taking advantage of an opportunity to strike a highly public blow for his “America first” trade policy.

Should that happen, China could do what many nations have done in the past: assemble its lawyers and head to the DSB, arguing that the US actions violate rules that aim to create a level-playing field in global trade.

But with Washington continuing to degrade the WTO's mandate — both rhetorically and in practical terms — some fear the world's top two economies are on a collision course.

“The risk of a trade war is always present”, Azevedo said. “There are periods when it is higher, there are periods when it is less likely.”

But he warned that tit-for-tat unilateral action, outside the multilateral system that the WTO safeguards, is cause for serious concern.

“Once that begins to happen you have the domino effect and then it may spiral out of control very easily,” he said.

“Every now and again there is the tendency to take measures into ones' hand and to fix it unilaterally and that is always a dangerous road to go”.

No pullout

During his presidential campaign, Trump called the WTO a “disaster” and threatened to pull the US out if elected.

While his administration has called for sweeping reforms within the organisations, the pullout threat appears to have been more bark than bite.

“There is nothing in my conversations with the United States that remotely indicates the possibility that the US is leaving the WTO”, Azevedo told AFP.

“They do have concerns with several things that are happening here, but they also said, number one, that the organisations is very important and does a lot of good.”