that. but i want to say in degrees of importance, that has to be changed. >> well leave it on that optimistic note. >> appreciate it. >> larry kudlow, thank you very much. [ applause ] >> thanks a lot. thanks for coming. so we'll take a break now, coffee and refreshments right outside. we'll be back here in 30 >> thank you so much for joining us today. you came here straight from buenos aries, argentina, at group of 20 summit and you presented the wto annual trade monitoring report to world leaders. this year the conclusions were rather grim. can you summarize for us what you saw in the report. >> the report shows that there was a very large increase, a dramatic increase on the amount of trade that has been covered by restrictive measures around the world. i would say a lot of that is attributed to the increased

tariffs between the united states and china, so it does show that a much larger portion of trade is now subject to restrictive measures than we had before and the -- the liberalized measures are not keeping pace. they are way behind those numbers. >> so i would like to try and put that broad conclusion into context and as we're talking about before, you're the guy who's job is to scrutinize the world trade system and assess the risks and dangers and you know the bullet in the economic scientists is the doom day clock, how close we are for destroying our world and this year it set it two minutes to midnight which is the closest they've been to peril in the seven decades of estimates. if you had a doomsday clock for the global trading system, where would the minute hand be right now? >> well if the blue skies, trade is everything and everything is great, it would be a quarter to

midnight. i would say we are 1:37 away. >> and directionally how is it -- >> it is moving closer. >> and where would you put it before this weekend's g-20 summit? did that move the -- >> it would have been close to that point. it wouldn't be very far away. >> so the next big question is, if the world careening toward a trade war, is the wto, you are equipped to stop it and i want to get the audience's -- we have a poll question. and if we could put up the poll question but, first, how would you answer that question? >> i think that the world trade in general and the environment in buenos aries shows that -- at least people are aware of the dangers. i don't think anybody at this point in time would discount trade as a secondary concern.

everybody is very much concerned. i think the conversations trying to get the declaration show there are very, very significant differences between them. the conversation about the reform of the wto scenario, of the wto rules, i think, is part of the that conversation. i think it helps to complement what we're seeing by laterally between those countries. i'm not sure that we -- that we have a complete handle on everything that is going on. but i think we are beginning to find some traction in the key tracks that we have before us. i think that the wto is part of that conversation. it is not going to be the silver bullet. i don't think that you'll find a silver bullet anywhere but it is a very significant part of that

conversation. >> so i was tracking the audience response as you were talking. i'm still waiting to see if you persuaded anybody to vote yes in that box. but we'll see if that goes up as the conversation continues. as you know, the assessment from this administration here in washington has been fairly severe. well first let's go to the g-20 communique and they said it was falling short and what do they mean by that and what do you do about an assessment from your bosses, the leaders of the organization that say the organization is falling short. >> i this there are two elements there. the first one is the rules were negotiated basically in the late '80s. that is when the conversations were happening. they came into force in 1995 when the wto was created but clearly a lot has happened since the late '80s to today. world was completely different and the internet didn't exist back then and the rules haven't changed significantly since then. so part of the conversation is

we need to update the rules. what we have today is not enough. i think there is some frustration with the timing of negotiations in the wto. it takes a long time to get things done. there are exemptions here and there. we managed to conclude the trade facilitation agreement about five years ago -- >> stream lines -- >> stream lines and customs and procedures and minimizes the cost of transactions and the economic impact is actually very, very large. it can be larger than if we eliminated all tariffs that exist in the world today. but that is the exception, that is not the rule. i think what we're trying to do now with the reform is see whether there are ways we can re-engineer the way that the wto negotiates so that we can deliver more updated agreements and faster. >> i want to get to what the

prospects of reform but i want you to respond to the assessment of this administration, which is harsher than the g-20. we had larry kudlow on stage that described the wto as broken and the president called the wto a catastrophe and disaster for this nation and said if they don't shape up, i will withdraw. what would the implications of a withdraw from the wto would be. >> i think the wto should have and should cover almost all of global trade. we are now at more than 98% of global trade is covered by the wto. the u.s. is of course a big chunk of that. so the u.s. is a very important player and very important participant for us but at the same time the system is very important to the united states as well. so i think if the u.s. ever left, both sides would lose. they would lose significantly. now i don't think that we should be focusing on this. i think we should be focusing on what is actually happening and

what is actually happening is that the united states is engaging very much in the wto. they have been making proposals, they are negotiating, they are making proposals to negotiate. they are bringing cases to the dispute settlement system even though they are been blomi-- blg the appointment of the appellate body members but so clearly they see merit in the system and want to use the system but they also have concerns and they have been saying we need to change this. this is not working properly according to our view. some members may even agree to that. but not all. i think others would say, no, this is a misguided view. we disagree fundamentally with that but that is the nature -- >> as you were saying before, part of the problem and one of the criticisms of the wto is that it seems to be very slow moving and one of the reasons for that is the need for consensus and all members to agree. how do you create the necessary

reforms on the urgent timetable that seems to exist with a system that seems completely rigged against any kind of swift decision? >> i think the -- there are many flexibilities that already exist in the system. so, yes, we decide by consensus. many of the agreements that we have reached recently were decided by consensus. they are tough and they are difficult but we can do it but it takes a while. there are other types of agreements that don't really require consensus. we closed about three years ago the information technology agreement which brings tariffs down to zero on the latest generation of information technology products. and that covers trade of around $1.3 trillion. that is bigger than all of the automotive sector trade in the world. all tariffs are going down to zero. that is not a consensus

decision. it is a a group of like-minded countries that want to see more liberalization in the sector. so that is one thing we can do. we can also -- but that is a bit different because that is about tariffs. so bringing tariffs down, you can do that pluri lateral, meaning not multi-lateral but they could do that for rules as well. >> so one of the issues with the rules as the trump administration knows and one of the core criticisms which is widely and increasingly shared has to resolve around china and whether the wto rules which were written before china emerged as a major power could adequately deal with china or whether they're based on this naive assumption as the critics say that china would stall into american capitalize but lighthizer said it was not designed to manage commercialization on this scale. does he have a point. >> like what i said, the rules

were negotiated in 1980s so many things changed since then. china is a new player in the market with an economy that has a number of innovations to say the least and clearly the rules all of the things that china does, but not only china, others do as well. trade practices change over time. government intervention and government distortions change over time. and i think this is a conversation that we have to have. this is not the only conversation we have to have, but that's clearly part of the conversation of the reform. >> one big controversy is that china, under wto rules, can declare itself a developing country, a developing country that doesn't have to move as quickly as others to liberalize its trade. does that make any sense? >> i think the realities are very different. we're not seeing a situation

where there is uniform thinking about all of this stuff. i think we have different perspectives. that's the nature of what we do. i'm pretty sure that people will be bringing different proposals to the table. there will be different claims and different complaints about what each other is doing, and i think this is just the beginning, just vthe very, very beginning of the conversation. i think there is a long way to go. >> another issue, and this is something larry kudlow mentioned this morning, is one of the complaints the u.s. has with china is sort of the joint venture law that allows companies to enter joint ventures and technology transfer. that's ain't tranot a trade rul an investment rule, yet it has big preliminary indicatioimplic going to retaliate. does the wto have any plans

about that now? >> the wto is about trade. we're not a silver bullet for other kinds of concerns that people have. but clearly, when you talk about investments, there is a very strong trade component when you're talking about investments, particularly in the area of intellectual property rights, which i think is part of the conversation you just mentioned. i think we should be exploring. we should not be afraid of doing things simply because they haven't been done before. there are ways of improving the system, creating new eras for the system. services were not covered until 1995. so there are a number of areas that you can improve and explore. i don't think we should be with our hands tied because we haven't done something before. >> while the trump administration complains about the wto, they're also creating some new headaches for your

organization. one has to do with their unprecedented use of national security as a justification for new import limits. the president has already done so with steel and aluminum and he's studying doing so with cars. u.s. trading partners responded by flooding the wto with complaints, asking you to issue rulings against the u.s. and pressure the u.s. to roll these tariffs back. can the wto tell the u.s. or any member country what is or isn't a matter of national security for them? >> normally in the past, whenever somebody claimed or adopted a measure that would be justified under national security concerns, there was never a challenge. nobody ever challenged that. there might not have even bayne response or counter-sanctions. somebody imposes a sanction and someone says, okay, i impose one as well. what is happening is people are

challenging others under the dispute settling system. that's risky. that's very risky, because in my view in particular, it's difficult in some situations to ask for three trade experts to decide on what is or what is not the national security interests of any country. i have explained this to members, i have talked to members and i told them be careful with this because we don't have an option. if i case is brought, i can't say, this is a risk, we're not going to look into that. no, if a case is brought, it automatically and mandatorily will go through. the experts will look at the job and the issues. i don't know how it will come out because i don't do that. in fact, i'm not supposed to touch issues once they get to the dispute settlement stage, and i observe that very

cautiously, and i think that this is something that will require some more conversation. i'm talking to members, i'm talking to the parties to see whether we can find a way of solving this without bringing it to the last consequences. >> we have time for a couple of questions for the director general about the wto. here we go. >> thank you for allowing me -- >> can you identify yourself? >> the nation pension plan. there is a common narrative that i think we heard this morning again that china has cheated and reneged on its commitments to the wto. is that true and can you comment on that? thanks. >> i suppose china would disagree. but i have to say this. i can imagine the conversation.

somebody says, well, to china, you are not complying by the rules. and i would see china answering, saying, yes, i am. and if you don't agree with what i am doing, challenge me. bring the cases to the settlement system. i have been complying. someone would say, well, not everything. yeah, but mostly i have been complying. then the other side will say, but the rules are not good enough. they could be improved. and then china would say, well, i didn't draw up these rules, i was invited. and i negotiated, i accepted the rules, and then the other side will say, well, the rules aren't good enough, we need to do better. that's where we are now, i would say. >> another question? >> right here. >> please identify yourself. >> rich lester, bgc. let me just come back and see if i'm understanding this. rules were negotiated decades

ago. they were based on assumptions of the world at the time. the world has evolved technologically, politically and economically over that time period, and presumably with no bad intent if you assume that. there's still going to be imbalances. the assumptions made years ago are no longer in place, but some countries benefit from that and some do not, but it requires consensus to change the rules, the state of that balance. absent extraordinary pressure, how does that ever occur in a negotiation when some people are benefiting under rules that were fairly negotiated at the time but the world has changed since then? >> that's exactly where we are now. i think the pressure is there. the pressure is there. there is a legitimacy in the argument that things have changed. i myself have said that several times. i've been telling members, we need to respond more to the realities we see out there today. so we need to do something about it. people are talking about in the press sometimes the g20

headlines for the wto. i think it was great for the wto. it headlines what we have said for a long time. we need to do something to make the wto respond better to what we have out there today. that's exactly where we are now at this point in time. so let's stop and see, first, what were the rules -- what are the rules that we need now? what are we missing here? are we deciding and negotiating in the best way possible, or can we be more flexible, faster, respond in a more agile way? that is what we hope we can respond with these conferences in geneva. >> what are the hard brexit for the people? >> the hard brexit for me is no agreement between the two sides, and therefore the wto rules will apply. that's what i understand. if you look at that, for the eu,

nothing changes. it's exactly the same. for the u.k., i would say slightly less than half. the u.k.'s trade with the world is already on the wto rules, so trade with china, with the united states, with brazil, with japan, it's already under the wto rules, so that doesn't change. however, more than half is on pref preferential terms with the u.s. not only on goods but services. and it will vary from sector to sector. for example, with the eu, where the eu tariff is very low, maybe the impact isn't that great. but in areas where you have a higher tariff or services where some special arrangements are

there. banking, tourism, whatever, all those you could have a more significant impact, and it would depend on the rules that would apply after the exit. >> thank you very much. >> thank you. >> announcer: has tas the 115th congress winds down, here's what to watch for. current government funding runs out tomorrow. seven spending bills await congressional action to avoid a partial government shutdown. agriculture and transportation are among the departments that would be affected. one of the biggest issues to be resolved is fund foing for president trump's u.s.-mexico border wall. the president has pressed congress to provide $5 billion for the wall which democrats don't support. watch live coverage of the senate on c-span2. looking ahead,