- Trump’s Asia Trip — Just More Complaints?
- Trump’s War on the WTO — Part II — The Constitutionality of Withdrawal.
- Trump’s War on the WTO — Not Enough Wins? — Yes and More.
- Trump’s Dual Narrative — Promoting Foreign Policy and National Security Chaos?
- U.S. Victory in the WTO in Boeing and State Subsidies — But What is its Impact on Litigation against China?
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My earlier post is at “Trump’s War on the WTO ….” Here are some additional thoughts:
- Sidelining the dispute resolution system in the WTO is a sneaky means of killing the WTO’s effectiveness as an international institution.
- By vitiating the WTO / DSU might well encourage more unilateral actions against the U.S. since there would be no international mechanism to address trade complaints.
- If the president withdraws from either NAFTA or the WTO this would most likely generate domestic law suits in the U.S.
- These agreements (Nafta and the WTO) were authorized by Congress and then effectuated by implementing legislation.
- Diplomatic agreements have been abrogated by former presidents but not trade agreements.
- Terminating the WTO agreement, even though it has a withdrawal provision, raises questions if the president is even permitted to do it internationally.
- This is because powers to conclude these agreements were delegated to the president in the first place and there is implementing legislation that serves as law of the land. That he can’t do anything about. Indeed, he seems to be required Constitutionally to enforce these provisions.
My sense it that the above raise questions that are not clearly answered by prior case law and makes for really good litigation by the interested parties. Almost guaranteed. We’ll see ………………
…. “Weakened NAFTA, WTO Pave Way for Conflict..” Wall Street Journal (Oct. 19, 2017).
…. “Strategy to Thwart NAFTA Pullout Emerge.” Wall Street Journal (Oct. 21-22, 2017).
…. “Republicans Gear up to Fight Trump Over NAFTA.” Financial Times (Oct. 20, 2017).
What is the Trump war on the WTO and its dispute resolution system all about?
Sour grapes for not getting 100% wins? Personal animosity by the new USTR because of his failures in private practice? Trump’s abuse of domestic courts as a real estate developer – he’s been involved in over 3,500 private law suits?
It’s hard to say. Probably a bit of each of the above.
But what can be said with certainty is this — the current U.S. anti-WTO policy is a critical part of Trump’s disdain for international institutions that try to negotiate and apply rules of law to international relations and international transactions.
Trump shows no appreciation or understanding the crucial role the United States played in formulating the post-war global institutions nor the great strides made in channeling highly politicized trade disputes into a regularized system of settling disputes outside of the gaze of harsh domestic interests and rabble rousers.
More than anything else the WTO’s dispute resolution system was an American creation and we were the principal architect of bringing law to global trade and to have commercial issues adjudicated as being in our national interest.
That system has prospered over the last twenty years. The U.S. is the largest user of the WTO’s dispute resolution system. We win most cases brought as a complaining party. We also win a large number of the cases brought against us. The system is used widely by countries across the world.
What’s my conclusion? The Trump – Lighthizer foreign trade policy opposing the WTO and its dispute resolution system is against our national interest and the interest of the global trading system. They must rise above their personal and business biases for the good of the United States.
- “USTR before the Center for Strategic and International Studies — Different Trade Philosophy, Problems with the WTO.DSU and on China Mercantilism.” CSIS (Sept. 18, 2017).
“Trump’s Speech to UN General Assembly (Sovereignty and Trade).” White House (Sept. 19, 2017) and NYT (Sept. 20, 2017).
“WTO Held Hostage by the U.S.” The Economist (Sept. 23, 2017).
“WTO Chief Warns of Risks to Trade Peace.” Financial Times (October 2, 2017).
General Kelly during President Trump’s Speech at the U.N.
Trump’s combative speech to the United Nations continued his outrageous dual narrative. One, American sovereignty has been gravely eroded by its participation in multilateral institutions such as the U.N. and the WTO. Two, only protectionism and “America First” can revive the American economy. Policies based upon this dual notion can only lead to economic and national security chaos.
Trump blindly overlooked the economic and political history of the United States since the 19th century. One that demonstrates a reliance upon lowering tariffs, promoting free markets and welcoming immigration to expand our national and international commerce. Trump’s diatribe to the U.N. used the word “sovereignty” 21 times. He decried “unaccountable international tribunals.”
The USTR Robert Lighthizer few days later, standing before the Center for Strategic Studies, whistled his old tune about the WTO, one from his days as representing his steel clients who lost most of its cases before the WTO. He declared that “[T]he World Trade Organization is not equipped to deal with this problem.” He went on to decry that its dispute resolution system “has really diminished what we bargained for or imposed obligations that we do not believe we agreed to.” He went on to state that its decisions concerning dumping, subsidies and trade remedies “are really indefensible.”
How self-serving are those private views that have now become U.S. trade policy?
The US is the biggest user of the dispute resolution system and has won most cases it filed and a large number of cases filed against it. A really good record. Our closest allies condemn us for not living up to rulings against the US concerning trade remedy cases and our incessant dumping and subsidy actions. They despise out Section 301 law and its threat of unilateral retaliation. The U.S. was the architect of the WTO’s dispute resolution system as in fact it was of the post-war economic system.
To me the split between the “economic nationalists” and “globalists” in the White House need to be quickly resolved. President Trump needs to “pivot” away from his campaign rhetoric to professional foreign policy positions. Reliance on this dual narrative as we go forward would be a fatal distraction from promoting economic development and confronting real national security challenges. U.S. national security deserves better than this insane rhetoric.
- “Trump’s Speech to UN General Assembly (Sovereignty and Trade).” White House (Sept. 19, 2017) and NYT (Sept. 20, 2017).
- “USTR before the Center for Strategic and International Studies — Different Trade Philosophy, Problems with the WTO/DSU and on China Mercantilism.” CSIS (Sept. 18, 2017).
U.S. Victory in the WTO in Boeing and State Subsidies — But What is its Impact on Litigation against China?
Earlier this week the Appellate Body of the WTO reversed a panel report and found that seven Washington state tax measures did not amount to a prohibited subsidy to Boeing.
The EU had alleged that the state tax measures were conditioned or contingent upon Boeing’s use of domestic fuselages and wings — instead of imported ones. This is considered by the USTR as a complete victory in the segment of the long-running WTO litigation concerning Airbus and Boeing. It probably is.
This case is particularly interesting because it considers the validity of state or sub-national units as being subject to the subsidy disciplines of the WTO. Applying global trade rules to US states is often overlooked.
But more importantly my concern is that this ruling may actually be used against the U.S. in its recent action against China concerning some of its practices calling for domestic content. We’ll see.
The USTR fired a direct shot at Beijing last week as it formally started a §301 investigation into China’s intellectual property practices and entry of US firms into China, particularly in joint ventures.
The formal decision to open an investigation followed Trump’s executive memorandum earlier last week. The USTR will hold a public hearing on the subject in October at the International Trade Commission, when members of the public may testify.
The USTR will examine whether Beijing’s practices – specifically requirements that U.S. companies transfer technology in order to do business in the country. It will need to determine if this violates the statutory standards of unreasonable, discriminatory or restriction of U.S. commerce.
If the USTR determines if any one of these standards has been violated the U.S. could eventually take unilateral action. But the rules indicate that a case shall be filed first in the World Trade Organization.
The problem is much of the global trading community consider that §301 in and of itself violates the WTO rules. That states joined the WTO as a means of restraining such unilateral actions, particularly by the U.S., the principal supporter of the WTO and the primary architect of the dispute resolution system.
As far as U.S. – China trade relations this may be viewed as only a very mild trade action — the filing of an administrative action within the U.S. Yet, even though Bannon is gone from the White House staff the USTR Lighthizer still represents his nationalistic – protectionist- China hawk sentiments. U.S.-China trade relations are still precarious.
The best practice for the U.S. is it should just go ahead and file an action with the WTO directly. That’s the proper forum. We have litigated many cases with China as both a complaining party and a responding party. That’s the normal and customary way of doing things in global commerce.
Why choose this unilateral and domestic action. A somewhat discredited and nationalistic approach. This is not clear. But the answer in part is probably because the Obama administration did not. We’ll see …………….
- ….. “USTR Initiates Section 301 Investigation of China.” USTR News Release (August 18, 2017).
- ….. “Lighthizer’s Economic Deficit.” Wall Street Journal (August 22, 2017).
- …..”Bannon Exit Highlights China’s Success in ‘Containing Trump’.” Financial Times (August 22, 2017).
President Trump is going to sign a memo tomorrow Monday delaying actually filing a §301 USTR case against China for violation of U.S. intellectual property rights. By the way he has also failed to follow through on his bullying threats to declare China a ‘currency manipulator’ and to file a §232 case concerning steel from China. Needless to say we all remember his bluster on the campaign trail.
What’s going on? Hard to say. But this practice of over threatening and underperforming is basic to his business dealings forever going back to his early real estate days in New York City.
My take …………… In terms of trade policy President Trump has actually done a lot less damage so far than could have been expected. Actually almost no damage concerning China. Of course this may change. But so far that’s good for the U.S., China and the trading system.
- “Trump to Delay Section 301 IPR Investigation by USTR.” New York Times (8.13.17).
- “Trump to Investigate China Trade Violations.” Washington Post (8.13.17).
- “Trump’s Trade Policy — Crunch Time on Trade.” Financial Times (August 14, 2017).