Trump's WTO threats: A spectre of disorder in global trade system

On the last day of the last month, in an interview with the Bloomberg News, President Donald Trump threatened to withdraw the United States (US) from the World Trade Organisation (WTO). "If they don't shape up, I would withdraw from the WTO," Trump said in the interview and bemoaned that the agreement establishing the body "was the single worst trade deal ever made." He complained that the WTO treated the US 'very badly' and demanded that the Geneva-based body needs to 'change their ways.'

In fact, Mr Trump has been lashing out at the WTO and multilateral trade regime in general since he assumed presidency of the US in early 2017. Antagonism to rule-based multilateral trade regime originates from his nativist 'America First' policy. Trade policy of the Trump administration rests on five major pillars. These are: trade policy that supports US national security policy, strengthening the American economy; negotiating trade deals that work for all Americans; enforcing and defending US trade laws; and strengthening the multilateral trading system.

However, strengthening multilateral trade regime is subject to conditions as detailed in the trade policy agenda report posted on the website of the United States Trade Representative (USTR). It says that Trump administration will work with all WTO members who share the US goal of using the organisation to create rules that would lead to more efficient markets, more trade and greater wealth for the US citizens.  "However, the United States is also concerned that the WTO is not operating as the contracting parties envisioned and, as a result, is undermining America's ability to act in its national interest," it adds. "The Trump Administration will work with other like-minded countries to address these long-standing concerns," it further adds.

As a part of addressing the alleged concerns of the USA, Trump and his people have repeatedly vilified the role of the WTO. Due to the US non-cooperation, the last ministerial meeting of the WTO in Buenos Aires in December last ended without any declaration. Trump administration has also strong reservation on the dispute-settlement mechanism of the WTO.  In the Bloomberg  interview Trump said: "We rarely won a lawsuit except for the last year. You know, in the last year, we're starting to win a lot. You know why? Because they know if we don't, I'm out of there. I'll take them out. We're starting to win lawsuits that we never -- you know that. We never won lawsuits because the courts are stacked."

Trump administration has also alleged the WTO dispute-settlement system of interfering with US sovereignty, particularly on anti-dumping cases. On that plea it has been blocking all the judicial appointments to the WTO's appellate body for the last two years.

The seven-member body has currently four judges. In its latest move in the last week of August, the US informed the WTO that it wouldn't approve the reappointment of one of the four remaining judges this month. This is for the first time the USA blocked reappointing a trade judge whose term expires on September 30 this year. As a result, there will be only three judges and the number is a minimum for the system to operate. The terms of the two of the remaining will expire in December 2019. If there is no appointment or reappointment until that date, the whole system of resolving the trade disputes will collapse.  

CONTRADICTORY BEHAVIOUR: Interestingly, the US doesn't stop moving to the WTO dispute settlement mechanism. In the first eight months of the current year, the country has filed at least 10 complaints seeking remedy or requests for consultations with trade partners over their trade retaliatory measures against the US.

During the period under review, the US filed three complaints against China, two against Canada and one each against the European Union, Mexico, India, Turkey and Russia. At the same times, these countries along with Switzerland, Norway, South Korea and Vietnam filed a total of 13 complaints against the US.

In the third week of March this year, the US requested WTO consultations with India concerning alleged export subsidies provided by India through five programmes. In the same month, the US also filed a complaint against China. It alleged that certain Chinese measures were inconsistent with China's obligations under the WTO's Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs).

In the first week of April, China filed a complaint with WTO against the certain US tariff measure on some Chinese goods. In fact, Mr Trump has initiated the tariff war by declaring the imposition of additional tariff on Chinese goods in March. At the time, the US published a set of documents of the investigations against China and in the first week of April, the US published a list of products of Chinese origin. An additional ad valorem duty of 25 per cent was proposed on these products. China argued that the proposed duties would be in excess of the US's bound tariff and hence inconsistent with a number of WTO provisions.

By requesting for consultation, China indicated that it wants to avoid any tariff war by taking any retaliatory measure. But the US is indifferent and imposed the first round of additional tariff on $34 billion worth of Chinese imports in July.  The second round of additional tariff on $16 billion worth of Chinese goods came into effect on the last week of August.  China also retaliated by imposing additional tariff on some of the US products.

In July, the US filed a set of complaint with the WTO against five members of the organisation. These are: Canada, China, the European Union, Mexico and Turkey. The US alleged that these countries imposed duties on imports of certain US products. The countries take the retaliatory measures in response to the additional duties imposed by the US on steel and aluminium products. But the US, in the request for consultation, argued that actions by the five WTO members are inconsistent with provisions of the WTO's General Agreement on Tariffs and Trade (GATT) 1994.

These developments reinforce the view that the dispute settlement mechanism of the WTO is as much important for the US as for all its trading partners, nay for all the WTO member countries.

WTO's annual report for the last year showed that that US filed 115 complaints between 1995 and 2017-- the highest among the members. The country is also the respondent of the highest number of disputes, 134 during the last 22 years. Moreover, an analytical report of Forbes last year showed that when the US has been a complainant it has prevailed on 91 per cent of adjudicated issues. But when the country is a respondent it has lost on 89 per cent of adjudicated issues.

Mr Trump's allegation against the WTO is thus not well-founded. Though there are a number of shortcomings in the WTO system, the US itself is a beneficiary of the multilateral trading regime as well as the dispute settlement mechanism of the WTO.  Cheaper import from the rest of the world and competitive export from the US to many countries is possible due to rule-based mechanism under the framework of WTO.

Trump's threat to pull out the US from the WTO is virtually a threat to instigate a long-term disorder in the global trade system.

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