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Trump is changing trade rules but he's only one member of the WTO, global trade body leader says

  • "Donald Trump is the WTO. The WTO is 164 countries, the WTO is not anything else than the sum of a group of countries sitting around a table," ITC Executive Director Arancha Gonzalez told CNBC's "Squawk Box Europe."
  • Gonzalez's comments to CNBC come after several weeks dominated by international concerns over a potential trade war between the world's biggest economies U.S. and China.
  • Since tensions reached their zenith in early April, there has been a state of stalemate, however, with neither country appearing to proceed or withdraw from the plans.

President Donald Trump might be disrupting the status quo surrounding international trade but he's only one member of the World Trade Organization (WTO), according to the executive director of its joint agency, the International Trade Centre (ITC).

"Donald Trump is the WTO. The WTO is 164 countries, the WTO is not anything else than the sum of a group of countries sitting around a table making a decision to exchange reciprocal concessions. The word 'reciprocal' is very important to these leaders — 'I give you, and you give me,' 'You may give me in cars and I give you in textiles.' It's reciprocal and you decide," ITC Executive Director Arancha Gonzalez told CNBC's "Squawk Box Europe."

"But if the WTO doesn't work, it's because the leaders don't want it to work," she said. "But I think it's in their interest to make the WTO work because it's the most efficient way to fix today's interdependence."

Gonzalez's comments to CNBC come after several weeks dominated by international concerns over a potential trade war between the world's biggest economies U.S. and China.

Calling out what he sees as unfair trade practices and accusing China of "dumping" (the practice of flooding global markets with cheap products, such as steel, which lowers the product's prices), Trump unveiled in March a list of Chinese imports that he said he would target.

President Donald Trump answers a reporter's question as he departs to view Hurricane Irma response efforts in Florida, September 14, 2017.
Jonathan Ernst | Reuters
President Donald Trump answers a reporter's question as he departs to view Hurricane Irma response efforts in Florida, September 14, 2017.

The proposals included a 25 percent tariff on imported steel and 10 percent on aluminum, as well as tariffs on Chinese products used for robotics, information technology, communication technology and aerospace. Trump said there would be exemptions for the European Union and Canada, as well as some other countries.

China promised to retaliate in kind, saying it would target 160 products from the U.S., including soybeans, cars and whiskey, if Trump went ahead with the plans.

Since tensions reached their zenith in early April, there has been a state of stalemate, however, with neither country appearing to proceed or withdraw from the plans.

China has shown, however, some movement over the foreign ownership rules over Chinese firms, saying it will ease some of these restrictions by 2022. Although on Tuesday, China slapped U.S. imports of cereal crop sorghum with a temporary deposit as part of an antidumping probe.

Trade rules need to be fixed

The International Trade Center has a joint mandate from the WTO and the UN through the United Nations Conference on Trade and Development (UNCTAD) and supports its parent organizations' regulatory, research and policy strategies.

The ITC's Gonzalez has been vocal in her criticism of Trump's trade and tariff proposals, saying in March that exemptions for some countries and not others would not effectively deal with market overcapacity. A trade system based on deals and not rules undermined the whole global trading system, she said.

Gonzalez told CNBC that "nobody wins a trade war" but she stressed that the rules of the multi-lateral trading system currently needed to be changed at a systemic level.

"There is one big player called the United States, there is a second big player, that wasn't that big in the past, called China, and then you've got other big players that are somehow involved in these tensions," she said.

"At the heart of this … There is the need to fix the rules of the game for international trading areas where these rules are weaker and the need is greater — and these are around subsidies, state-owned enterprises and the transfer of technology linked to investment. These are three structural areas and we need a dialogue to fix these issues if we are to avoid what I see as a conflict."

Arancha refuted the idea that trade imbalances and deficits around the world — where the value of a country's imports outweighs its exports, creating a trade deficit, or vice versa, creating a trade surplus — were the result of the global trading system.

"I think it's wrong to put the trade deficit or the structural deficit of economies on the back of the world trading system," she said, giving the European Union as an example.

"You have the same trade policy applicable to all 28 members of the union, the countries applying the same trade rules. But deficits and surpluses are different depending on the country so it must mean that there is something else other than trade rules that make for a good or bad deficit or surplus in your economy. A lot of this has to do with your ability to save or desire to overspend and the WTO is not going to fix this."