The United States’ Shaky Relationship with the World Trade Organization

By Daisy Ni (PO ’21)

The mantra of “America First” has come to symbolize President Trump’s commitment to America’s businesses and manufacturing industries. In January, Trump took the first step in fulfilling his promise of protectionism by implementing tariffs on washing machines and solar products after complaints from multiple companies that cheap, artificial prices from abroad were hurting domestic production. The administration’s decision was recommended by the United States International Trade Commission, an independent body of trade officials, which concluded that imports were hurting domestic manufacturers. The U.S.’s move, though satisfying American industries, may force contention with the international community and international trade agreements.

The administration’s decision is being justified by a “safeguard” clause from the Trade Act of 1974, which states that “domestic industries seriously injured or threatened with serious injury by increased imports may petition… for relief.” It is based on the criteria for import relief as elaborated upon in Article XIX of the General Agreement on Tariffs and Trade (GATT) and the Agreement on Safeguards, and permits a country to temporarily forgo its obligations under the GATT. This piece of legislation was last used in 2002, when George Bush elevated steel tariffs. However, it has been invoked already twice within a year of the Trump presidency, signaling firms’ quickness to recognize and utilize an administration sympathetic to their own causes.

However, the U.S. faces risks in its invocation of the safeguard measure. China and South Korea, two countries which the tariffs would primarily affect, have already communicated their intentions to take their complaints to the World Trade Organization, an intergovernmental organization that regulates international trade and settles disputes. The Appellate Body had in 2003 declared Bush’s tariffs as illegitimate and illegal. The W.T.O. concluded that the U.S.’s safeguard measures were inconsistent with the prerequisites for the imposition of such a measure as detailed under Article XIX of GATT and the Agreement on Safeguards. Specifically, the U.S. had not provided evidence that imports had increased, or that the increased imports actually caused serious injury to domestic industries,

Should the W.T.O. side with the U.S., the organization would be tacitly approving and permitting other countries to erect similar trade restrictions. In that case, the U.S. would be left open to retaliatory measures and could potentially start a trade war, triggering a global era of protectionism. Should the W.T.O. side with the opposition, adhering to the established precedent, the U.S. would face significant international pressure to lift the tariffs, as Bush had, or face sanctions from the other nations. Regardless of the W.T.O.’s decision, however, the U.S. will be forced to decide its position on the authority of the W.T.O. itself.

Trump has actively called the U.S.’s participation in the W.T.O. detrimental to our national interest and has been slowly dwindling the U.S.’s presence in the international trade community. He is leading the U.S. to block the appointment of new judges to sit on the Appellate Body, an opposition that could potentially render the W.T.O.’s dispute process inoperable. The U.S.’s main justification for this action echoes Trump’s claims of unfair treatment. However, there is no concrete evidence behind accusations of bias—according to a study by the European University Institute, the U.S. has won approximately 78 percent of all its claims as a plaintiff, a larger percentage than any other user of the system. Despite the data, Trump remains firm in his stance, sending a document titled “The President’s Trade Policy Agenda” to Congress in March 2017 foreshadowing violation of W.T.O. rules: it stated a key objective of “resisting efforts by other countries—or Members of international bodies like the World Trade Organization—to advance interpretations that would weakened the rights of benefits of, or increase the obligations of, the various trade agreements to which the United States is a party.” The recognition, as well as the recommendation, of the possibility of  ignoring W.T.O. laws and rulings signals a sharp break from previous U.S. trade policy.

Trump’s policy regarding the W.T.O. seems contradictory at times. He is still making use of the regulations and system which the W.T.O. represents, continuing to pursue and bring forward cases. Additionally, the U.S. has joined the European Union in an action to argue against China’s right to the label of a market-economy in the W.T.O. Trump intends on using the W.T.O.’s prowess and authority to discipline China, whose trade policies he has been criticizing since the beginning of his campaign. This implies that membership in the W.T.O. could be beneficial to advance portions of Trump’s “America First” initiatives. As such, Trump still clearly envisions a possible future with the W.T.O., and is in fact retaining and adding U.S. attachments to the. But one thing may be certain: the U.S.’s disrespect of the W.T.O.’s rules and jurisdiction sets a dangerous precedent for others, with a potential to lead to the unravel of the stability that a rules-based trade system brings. The U.S. seems to indicate that it will acknowledge only with rulings it finds agreeable, disregarding accountability and paving the way to a lawless global community.

 

 

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