BIDEN – TRUMP DOWNGRADE OF THE WTO DISPUTE RESOLUTION SYSTEM — NOT GOOD FOR THE U.S.

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This is a good piece in the Wall Street Journal today discussing the U.S. and the WTO’s dispute resolution system. Too bad it describes the Trump-Biden scorn of it. Here are a few statements from this article.

The globalization boom that began in the 1990s didn’t happen by itself: It was lubricated by the biggest economies’ willingness to write, enforce and obey shared rules of engagement.

… That consensus is now crumbling. The World Trade Organization, the embodiment of this rules-based order, has increasingly been sidelined as countries turn to export controls, subsidies and tariffs to promote domestic industries or kneecap adversaries.

Many blame this on the U.S., as first President Trump and now President Biden rejected WTO authority and enacted tariffs and subsidies that riled trading partners.

Biden has governed as a champion of the international order, yet on trade, he has stuck with many of the policies enacted by the avowedly nationalistic Mr. Trump. He has maintained Mr. Trump’s tariffs on China and blocked appointments to the WTO appellate body, which has the final say on enforcement decisions, leaving it unable to function.

Last month, in two separate decisions, WTO panels ruled that the Trump administration had violated its WTO obligations by imposing tariffs on imported steel and aluminum, and requiring that products made in Hong Kong be labeled as made in China.

A spokesman for U.S. Trade Representative Katherine Tai criticized the decision. The WTO, he said, had no right to even rule on the U.S. actions. The U.S., he noted, has for more than 70 years insisted that it, not the WTO, gets to decide what qualifies as national security.

The U.S. had originally pushed for the WTO’s binding dispute mechanism out of frustration that under its predecessor, GATT, enforcement decisions could be easily blocked by any one country.

The unintended consequence is that countries unhappy with U.S. trade laws, rather than negotiate, sue the U.S. at the WTO, and often win because WTO judges take an expansive view of their own authority to interpret and, critics say, make trade law.

This doesn’t portend a return to the 1930s, when countries dramatically raised tariffs and retreated into autarky. The WTO still exists, and most members still abide by their commitments. Some have used alternative channels to adjudicate disputes while the appellate body remains defunct.

U.S. officials say their imposition of trade barriers on national-security grounds won’t precipitate a flood of frivolous copycat actions. Any country making such a claim accepts the right of affected trading partners to retaliate—and would thus think twice. “There’s a self-regulating nature to invoking national security,” one official says, noting that the U.S. faced retaliation for its steel and aluminum tariffs long before the WTO ruled.

Rather than a single set of rules imposed on fundamentally incompatible systems, such as China’s and the U.S.’s, the world will migrate toward a series of regional pacts.

“The WTO and Policing the Trading System.” Wall Street Journal (January 14, 2023).

About Stuart Malawer

Distinguished Service Professor of Law & International Trade at George Mason University (Schar School of Public Policy).
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