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Will the WTO survive Trump?

  • Published at 06:46 am March 29th, 2018
Will the WTO survive Trump?
An international organization that Donald Trump demeans, undermines and then embraces when it suits his interests: probably sounds familiar within Nato, or the UN. Now it's time to add the World Trade Organization to the list. The early signs of the US president's intentions towards the Geneva-based trade body all pointed towards hostility. As a candidate he called it a "disaster" and threatened a US withdrawal. His administration's trade office then said the United States had the right to ignore any rulings from the WTO's crucial Dispute Settlement Body that violated national interests. But that was small potatoes compared to his proposed tariffs on steel and aluminium. For many experts, his administration's effort to portray the tariffs as legal under international trade law for national security reasons amounted to a nuclear strike against the rules-based trade system. But then, just a day after hitting China with unilateral tariffs on up to $60 billion of imports, Washington last week turned to the WTO, asking the DSB to punish China over intellectual property breaches. "The fact that they have brought this to a WTO dispute means it is not 'Trump versus the WTO,' it is Trump fully using the WTO, which is a completely different picture from the national security [steel and aluminium case]," said Peter Ungphakorn, who worked at the trade body for two decades. Ungphakorn, now a writer on trade, told AFP it may be impossible to identify a "coherent" Trump trade policy, but that outlines of the American WTO strategy may be emerging. "They are going to use any weapon that will allow them to win," he said, explaining that Washington may work within the system when it wants to and disregard the rules when it needs to. But that raises an important question for the WTO's future: can an organization designed to create a level-playing field in world trade survive when the world's top economy refuses to be bound by the rules?

Weak and withered

Edward Alden, a trade policy specialist at the Council on Foreign Relations, wrote that March 8 – the day the steel and aluminium tariffs were announced – was "The day the WTO died." While the details surrounding the tariffs, including exemptions for US allies, remain muddy, Alden's underlying argument about the threat still applies. Washington has argued that national security provisions in trade law are self-executing, meaning the moment security is invoked to justify a trade measure that measure automatically becomes legal. Alden and others have noted that the WTO's dispute settlement system may not survive a case that hinges on national security. If WTO judges agree with the US argument, it would allow any country to impose any tariff any time it wants. If they reject the argument, then Washington will dismiss the verdict and the integrity of the system will be in tatters, Alden said. He told AFP he does not believe Trump's trade team has a specific desire to damage the WTO. It just refuses "to be constrained by WTO rules," he said. "And if the WTO weakens and withers then so be it. I don't think that is their purpose, but they are prepared to live with it if that is what it comes to," he said.

Action, reaction

Experts have argued that the WTO's future will hinge both on Trump's moves and how other members react. China, which has been heavily criticised as a trade manipulator by multiple WTO members in addition to the United States, has ironically emerged as the one of the institution's most forceful defenders. In response to the steel and aluminium measures and the massive tariffs slapped on China, envoys from Beijing have repeatedly used WTO fora to call for restraint, urging Washington to safeguard the multilateral trade system. But Alden argued that members, especially China and the European Union, will have to make concrete moves to respond to the US frustrations with the current system. "If other countries can't adapt... [and] I think they probably can't, then I think the WTO just becomes less and less relevant," he said, while adding he does not believe the organization will disappear any time soon. Ungphakorn agreed that WTO would linger on as a forum for negotiations if its dispute settlements system collapsed, but cautioned against complacency regarding the organization's long-term viability. "The situation is dangerous," he said. "We should be clear about that."
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