Thursday, March 09, 2017

Trump wants to defy the WTO. But that’s not entirely crazy.

Zeeshan Aleem · Wednesday, March 08, 2017, 8:46 am

Trump’s skepticism of global trade rules isn’t totally new or unwarranted.

Donald Trump won the White House after railing against free trade and has already pulled the US out of one massive trade deal. With less public notice, the new president just took what could be an even more far-reaching step — formally declaring that Washington would no longer be bound by rulings made by the World Trade Organization.

Citing concerns that many Americans do not “see clear benefits from international trade agreements,” the report lays out Trump’s intention to “aggressively defend American sovereignty over matters of trade policy.”

That's a characteristically blunt way for Trump to outline a major policy shift. What it means is that even if the WTO — which effectively serves as an international Supreme Court for trade — decides against the US in a dispute, “such a ruling does not automatically lead to a change in US law or practice.”

So let’s say the WTO rules that a tariff, or a border tax, that the US has imposed on a certain kind of Chinese car part that’s being imported to the US is in violation of WTO rules. Trump is using this document to say the US will feel no qualms about ignoring the WTO ruling if it doesn’t serve US interests. That would deal a serious blow to the organization’s legitimacy — and shows that Trump is serious about throwing out the playbook that has in one form or another governed global free trade since World War II.

“The consensus approach to trade in the US has been economic internationalism — this is a much more zero-sum approach to the world,” says Edward Alden, a senior fellow at the Council on Foreign Relations. “[The Trump administration is saying,] ‘If that hurts other countries, that’s okay — our focus is on the United States.’”

So if the US is going to ignore WTO rulings when they conflict with US interests, then how is it going to settle conflicts? Simple: head-to-head sparring with other countries using direct negotiations and real threats of punitive tariffs.

The Financial Times has reported that incoming Trump officials asked the US Trade Representative’s office to “draft a list of the legal mechanisms that Washington could use to level trade sanctions unilaterally against China and other countries.”

Trump’s willingness to buck the WTO appears to be yet another example of how his administration has an aversion to working in concert with the major international institutions that uphold the global political, security, and economic order, including military alliances such as NATO. His instinct is always that multilateral institutions and deals end up exploiting the US, and that going it alone is the best way for the US to protect its own national interests.

But the Trump administration’s skepticism of the WTO isn’t new, nor is it born entirely out of a reflexively nationalist or anarchic impulse. The WTO’s relevance has been a real question for years, and there’s even a case to be made that should Hillary Clinton have taken the White House, she might have considered doing things like carving out paths to take trade disputes with China outside the WTO.

In order to understand why, you have to consider how the US and China — the two major powers clashing at the WTO — are confronting a situation the WTO has never handled before.

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