WTO faces first attack from US under Trump

GENEVA: The World Trade Organization on Thursday became the target of a first concrete attack launched by US President Donald Trump’s administration when Washington declared it was not bound by the body’s rulings. 

The US decision is a clear break from precedent and could threaten the viability of the WTO’s Dispute Settlement Body (DSB), where major trade conflicts have been adjudicated.

A letter sent from the United States Trade Representative (USTR) to Congress on Wednesday outlining Trump policy reviewed the terms under which the US joined the WTO when it was founded in 1995.

According to the Trump government’s interpretation, “Congress had made clear that Americans are not directly subject to WTO rulings”, said the document.

The text — entitled “The President’s 2017 Trade Policy Agenda” — also says Trump’s government “will aggressively defend American sovereignty over matters of trade policy”.

READ MORE: WTO ratifies first multilateral trade deal

Overall, the document reads like the trade version of Trump’s “America First” foreign policy doctrine and follows the president’s call for companies to “Buy American and hire American”.

In another rebuke to the 164-member WTO, which aims to forge deals applicable to its whole membership, the US said it believed American trade goals “can be best accomplished by focusing on bilateral negotiations rather than multilateral negotiations”.

WTO director general Roberto Azevedo responded with an olive branch on Thursday, noting it was “clear that the United States has a variety of trade concerns, including about the WTO dispute settlement system.

“I am ready to sit down and discuss these concerns and any others with the trade team in the US whenever they are ready to do so.”

China defence

China, seeking to position itself as a defender of the international trade system in response to a rising tide of American protectionist sentiment, said Thursday it will continue to support the “open and unbiased” WTO.

“China would like to work with all WTO members to ensure that the WTO can play an important role in global trade”, foreign ministry spokesman Geng Shuang told reporters in a response to a question about the Trump letter.

Azevedo has sought to downplay the threat posed by the US president, who called the WTO “a disaster” during his campaign.

The organisation’s dispute settlement mechanism has been criticised by several camps over delays and backlogs.

But, since 1995, it has heard more than 500 disputes on issues such as subsidies, customs and tariffs and made more than 350 rulings.  The WTO cannot punish countries that do not abide by its rulings, but can authorise retaliatory measures.

Violations coming?

For Sebastian Dullien, a fellow at the European Council on Foreign Relations, the DSB has been a important venue for non-super powers to have grievances addressed.

“Contrary to what Donald Trump is saying, it is not just other countries screwing the US, but sometimes it’s the United States screwing other countries”, he told AFP, noting that if the WTO is marginalised, smaller but still significant economies could suffer.

Dullien said the USTR text may be a warning sign that Trump’s administration “is preparing to pass policies which are in clear violation of WTO rules”.

A border tax currently being discussed in Washington would constitute such a violation and likely trigger responses from the European Union, among others, Dullien said.

Richard Edward Baldwin, an economics professor at the Graduate Institute of Geneva, urged caution, saying he was “hopeful that once Trump’s real trade advisors are in office cooler heads will prevail”.

Trump’s nominee for USTR Robert Lighthizer is awaiting approval from Congress, but he too has indicated that the US should ignore WTO rulings.