Great summary of the current U.S. administration’s assault on the WTO by Bloomberg’s Terms of Trade appearing today (February 14, 2020). Interestingly this appears on Valentine’s Day. There is cleanly no loss of love between the Trump people and the WTO and the global trading system as we know it.
President Donald Trump has never been a fan of the World Trade Organization.
For years Trump has called the Geneva-based body the “worst trade deal ever” — largely because he believes the WTO helped China gain a competitive advantage over the U.S. and precipitated the loss of thousands of American jobs.
Trump’s trade chief, Robert Lighthizer, supports this view and has expertly poked at the organization’s weaknesses.
Under Lightener’s stewardship the U.S. has:
- Imposed hundreds of billions of dollars worth of unilateral tariffs against China
- Exploited the WTO’s national security loophole to levy duties on steel and aluminum
- Paralyzed the WTO appellate body, which can no longer resolve trade disputes
Collectively, these actions have thrust the WTO into the most acute existential crisis of its 25-year history.
But Trump may not be finished yet.
As Bloomberg reported this month, U.S. officials are now mulling America’s withdrawal from the WTO Government Procurement Agreement — a global trade alliance covering government contract opportunities worth $1.7 trillion.
U.S. withdrawal from the pact would effectively block most foreign, non-defense contractors from bidding on American public tenders. In turn, a wide range of U.S. businesses would lose access to a nearly $900 billion procurement marketplace offered by the GPA’s other 47 members.
Perhaps an even bigger blow would be a plan Trump insiders are said to be mulling to reset American tariff commitments at the WTO by increasing the tariff ceilings — or bound rates — agreed to by previous administrations.
The move stems from the Trump administration’s long-held frustration with the WTO’s principle of most-favored-nation (MFN) nondiscrimination, which requires members to offer the same tariff rates equally to all of the organization’s 164 members. In essence, MFN is the cornerstone of the WTO — and undermining it risks tipping over the entire ant farm.
“President Trump sees it only as a constraint on his ability to strike quick-and-dirty deals,” said Chad Bown, a senior fellow at the Peterson Institute for International Economics. “But take away MFN, and suddenly the entirety of benefits that the WTO provides begins to unravel, including those that Americans have enjoyed for decades.”
On one hand, these kinds of salvos against faceless bureaucrats in Geneva will be an easy sell at home for Trump’s core voters during an election year.
But defenders of the rules-based global trading system say dismantling it would cause a severe shock to the American economy. They argue that despite its flaws, the WTO provides businesses with the certainty to trade and expand their operations internationally. Ultimately, the results are robust export industries that create good jobs, and for consumers, diverse and low-cost products moving around the world.
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