Trade Cases

WTO Looks to a Future Without U.S. Leadership

Written by Sandy Williams

“What if President Trump’s ultimate goal is to kill the World Trade Organization?” That was the question submitted by journalist Eduardo Porter in the New York Times last month. Porter’s question seemed even more to the point last week when President Trump accused the WTO of ignoring its own rules while the United States has followed them.

“Simply put,” the president said to CEOs at the Asia-Pacific Economic Cooperation summit, “we have not been treated fairly” by the WTO. “Organizations like the WTO can only function properly when all members follow the rules and respect the sovereign rights of every member. We cannot achieve open markets if we do not ensure fair market access. In the end, unfair trade undermines us all.”

“What we will no longer do,” said Trump, “is enter into large agreements that tie our hands, surrender our sovereignty, and make meaningful enforcement practically impossible.”

What the U.S. is also “not doing,” is appointing judges to the WTO Appellate Body, which members say is undermining the ability of the WTO to settle trade disputes.

The United States has said it will block appointments to the WTO until the organization addresses systemic problems with the dispute settlement mechanism.

“Of [the WTO’s] 164 countries, you can’t have one or two countries minded to sabotage the system,” said Bernd Lange, chairman of Parliament’s International Trade Committee, during a plenary session of Parliament in Strasbourg, France, on Tuesday. “I think it’s absolutely disgraceful that the U.S.A, by failing to appoint judges to the Appellate Body, is jeopardizing the whole system. It’s disgraceful that the U.S.A. is refusing to consider practical steps forward and is refusing to put a text on the table.”

“There have been calls by some members, notably the United States, to reform the WTO,” noted EU Trade Commissioner Cecilia Malmström. “We are ready to engage in discussions on this, but we need to see concrete proposals on what precisely such reforms would entail.”

With two appellate seats vacant and another to be vacant soon due to a retirement, the EU parliament prepared a resolution addressing the issue for the WTO 11th ministerial conference in Argentina in December.

“This deadlock, which has already left two of the seven seats on the Appellate Body vacant, could lead to the collapse of a system that is essential to managing disputes among the world’s most powerful trading nations,” a draft of the resolution says.

Porter, in his New York Times op-ed, said that in the 1980s the U.S. negotiated “voluntary export restraints” with 15 countries in an attempt to “coerce one country after another into bringing its surplus with the United States down to zero.” Since the establishment of the World Trade Organization in 1995, the U.S. has been required to take its trade complaints to the WTO for settlement, sometimes winning and sometimes losing.

“While emasculating the trade organization may seem foolhardy,” wrote Porter, “trade experts warn that blowing up international trade law may be the only way the Trump administration could pursue its quixotic goal of eliminating the bilateral trade deficits that it has with most countries.”

The U.S., during the APEC and G20 meetings last summer, refused to agree with language calling the WTO a multilateral trading system, revealing the administration’s preference for bilateral agreements.

Malmström, as reported by Inside U.S. Trade, said WTO members at the ministerial must reaffirm the importance of the organization as the center of the multilateral trading system, setting up a potential showdown with the U.S.

“We need to make sure that we can defend a strong, functioning WTO with concrete outcomes because it has to be at the center of the multilateral trading system,” she said.

The Trump administration has made it clear in the last year that the United States can no longer be counted on as the leader of free trade, preferring instead to withdraw to a protectionist stance.

World Trade Organization deputy director-general and former U.S. trade official Alan Wolff said the “new reality is that America is sitting this one out.” A U.S. withdrawal from the WTO would not be a cliff-edge scenario, but more of erosion to the multilateral trading system, he told Inside U.S. Trade. He advised the WTO to plan for a lack of U.S. leadership and develop a long-term strategy. Members should explore plurilateral agreements, which are participated in on a voluntary rather than mandatory basis, and continue to move forward with regional free trade agreements.

“What’s most mystifying to foreign diplomats and trade policy experts is how the Trump administration conceives the endgame of bringing down a legal system the United States spent so much time and effort to build,” wrote Porter. “Even if Mr. Trump prevails, the United States stands to lose.”

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