Advertisement

SKIP ADVERTISEMENT

Once the W.T.O.’s Biggest Supporter, U.S. Is Its Biggest Skeptic

The World Trade Organization’s first major meeting in two years will take place this week in Buenos Aires. Even the organization’s biggest supporters, particularly the United States, have been critical of it.Credit...Eitan Abramovich/Agence France-Presse — Getty Images

WASHINGTON — As officials from the 164 countries in the World Trade Organization gather in Buenos Aires this week for their first major meeting in two years, they will be watching to see whether the United States, once the group’s biggest advocate, is seeking to subvert it.

The World Trade Organization knits together countries around the world by working to reduce trade barriers and resolve disputes among its members but it has come under criticism not just from globalization’s critics. Its supporters have said it has fallen short of its ambitious goals to create trade agreements among scores of countries with different economies, cultures and income levels.

But it has never faced such uncertainty as it does now, when its longtime leader and champion, the United States, has turned into a skeptic — putting the future of the group and the kind of broad trade agreements it is aimed at forging in doubt.

In recent months, the Trump administration has led the United States in stepping back from its traditional role at the head of global institutions like the World Trade Organization, creating a vacuum in leadership and throwing their future into question.

The change reflects a philosophy, shared by the president and his top trade advisers, that the current global structure of rules and organizations compromises the United States’ sovereignty and cheats American workers. In his first year in office, Mr. Trump has criticized international agreements like the North Atlantic Treaty Organization, pulled out of the Paris climate change accord and the Trans-Pacific Partnership, and began renegotiating trade deals with Canada, Mexico and South Korea.

Like many of the administration’s positions, its view of the World Trade Organization represents a historic shift, said Douglas Irwin, a professor of economics at Dartmouth College.

“The Reagan and Bush administrations wanted to create it,” he said. “The Clinton, Bush and Obama administrations tried to strengthen it. Now we have an administration that is very skeptical of it, and some would say has tried to undermine it.”

Mr. Trump and his trade advisers criticize the World Trade Organization for failing to police what they describe as China’s infractions of global trade rules. China’s entry into the organization in 2001 accelerated the hollowing out of American manufacturing jobs, as imports of cheap Chinese products boomed. But the Trump administration has argued that China never held up its end of the bargain by curtailing the role of its Communist government in the economy.

Late last month, the United States said it would join the European Union in an action involving China about that very matter. In discussing that dispute, a senior White House official said that it was unclear whether the World Trade Organization could work when China, the world’s second-largest economy, clearly did not share the goal of moving toward a market-based system.

But what the Trump administration intends to do about the organization’s perceived shortcomings is less clear. Some of the measures proposed under Mr. Trump’s “America First” economic policy appear to make use of the World Trade Organization, while others could violate its rules and undermine its very existence.

Most notably, the United States could run afoul of international convention with actions it might take as a result of investigations into imports of cheap solar products and washing machines. In the past, the World Trade Organization has decided that tariffs imposed as a result of these kind of “safeguard” investigations, which aim to protect domestic industries from a surge of imports, violate its rules.

In a separate investigation into China’s infringement of American intellectual property, administration officials are currently debating whether to use existing global rules (by filing trade cases through the World Trade Organization) or break them (by erecting the kind of across-the-board tariff on Chinese imports that President Trump often pledged during the campaign).

Some of the tax policies the United States is considering might also run afoul of the organization’s guidelines. In a report published Thursday, a group of lawyers and academics argued that a proposal intended to exempt the foreign income of domestic corporations from American taxes might not comply with the World Trade Organization or bilateral tax treaties.

The question, trade analysts say, is what the Trump administration would do if the World Trade Organization rules against these policies. Several administration officials have suggested that they might respond by ignoring the trade organization or withdrawing from it altogether — two options that might weaken the organization enough to serve as a death blow.

“On China, there’s lots that can be done using our current trade laws,” said Dan DiMicco, a trade adviser to the Trump administration. “We can go to the W.T.O. and file more trade cases. And if they don’t work with us, we can leave the W.T.O.”

Proponents of the trade group are also concerned by what they describe as the Trump administration’s effort to undermine the organization’s system for settling trade disputes among its members.

Since President Trump came into office, the White House has blocked the appointments of new judges to a body that considers appeals, slowing the pace at which the World Trade Organization can process trade cases. As more judges see their terms expire in the coming months, experts fear the dispute settlement system could be paralyzed.

Image
Robert Lighthizer, right, the United States trade representative, has criticized an appellate body of the World Trade Organization for making decisions that he believed to be outside its purview.Credit...Jonathan Ernst/Reuters

In a letter this week, farm groups said “the current actions by this administration to block appointments indefinitely” could prevent the resolution of cases that might benefit American agriculture.

Chad Bown, a senior fellow at the Peterson Institute for International Economics, said that the trend may be intentional. Mr. Trump’s top trade negotiator, United States trade representative Robert Lighthizer, has been critical of the appellate body for passing judgments outside the scope of the original World Trade Organization agreement — akin to what some in the United States term “judicial activism.”

In a speech in Washington in September, Mr. Lighthizer said that Americans tended to view the trade group as a contract with clearly defined rights. “Others — Europeans, but others also — tend to think they’re sort of evolving kinds of governance,” he said. “And there’s a very different idea between these two things.”

The Trump administration has also been slower than its predecessors to bring trade cases against other countries at the World Trade Organization — cases that the United States frequently wins, Mr. Bown said. That could soon result in a situation where the United States is losing cases, but not winning many — a set of circumstances that could fuel opposition to the World Trade Organization in the White House, he said.

In other matters, however, the Trump administration is making use of the organization’s rules. That includes the decision to join the European Union in arguing its case before the World Trade Organization for not labeling China a “market economy” — a distinction that would entitle China to preferential economic treatment that the United States feels it does not deserve.

So far, the Trump administration’s “America First” policy does not appear to be greatly dampening international trade.

The World Trade Organization is projecting that global trade in goods will grow 3.6 percent this year, more than double the rate last year, as economies around the world continue to strengthen. On Monday, the organization announced that its members introduced fewer measures to restrict trade between October 2016 and October 2017 than they had the previous year.

New trade pacts are also moving forward. On Friday, the European Union and Japan announced that they had finalized a deal to create a sweeping new free trade agreement. During President Trump’s trip to Asia, in which he proclaimed that the United States was no longer entering into multinational trade agreements, the 11 remaining countries of the Trans-Pacific Partnership pushed ahead with forming the pact.

Few trade experts expect much progress out of the meeting in Buenos Aires, which runs through December 13. It’s unclear whether the members will reach a consensus on new rules on global fishing. Other recent efforts toward reforming digital trade and services that were formerly pushed by the Obama administration now appear to be bogged down.

“Every country in the world hates the W.T.O., they just hate all the other alternatives worse,” said Rufus Yerxa, the president of the National Foreign Trade Council and the World Trade Organization’s former deputy director general. “That’s really the lesson that the U.S. has to draw. It’s easy to hate some system of rules. The question is, what’s the alternative?”

Follow Ana Swanson on Twitter: @AnaSwanson. Get politics and Washington news updates via Facebook, Twitter and the Morning Briefing newsletter.

A version of this article appears in print on  , Section B, Page 1 of the New York edition with the headline: W.T.O. Champion Turns Top Skeptic. Order Reprints | Today’s Paper | Subscribe

Advertisement

SKIP ADVERTISEMENT