Trump’s tariffs set off crisis for WTO
WASHINGTON — President Donald Trump’s embrace of tariffs has frustrated allies, lawmakers and businesses across the globe. But its most lasting effect could be to hobble the World Trade Organization.
The global trade group has been thrust into an uncomfortable — and potentially damaging — role as chief judge in an intense fight among its most powerful members.
At the center of the battle is whether the United States’ claim that its sweeping steel and aluminum tariffs are necessary to protect national security or whether they are simply a ruse to protect U.S. metal manufacturers from global competition. Allies like Canada, Mexico and the European Union have challenged Trump’s tariffs at the World Trade Organization, saying their metals pose no threat to U.S. national security. They have fired back with their own retaliatory tariffs, prompting the Trump administration to bring its own World Trade Organization complaints
against those countries.
Now, the global trade group is in the difficult position of having to make a ruling that could cause problems whatever it does.
“It’s putting tremendous stress on the system,” said Jennifer Hillman, a professor at Georgetown Law Center. “There are those who would go so far to say that the U.S. has almost effectively withdrawn from the WTO by engaging in all the unilateral tariffs we’ve seen.”
Any decision could prove to be the undoing of the World Trade Organization, which the United States helped establish in 1995 as a forum to settle trade disputes and to set rules that keep commerce flowing freely around the globe. A ruling against the Trump administration could prompt the United States to leave the WTO entirely. But siding with the United States’ claim of national security could also significantly diminish the organization’s authority and prompt other countries to begin citing their own national security interests to ignore inconvenient rules on topics like intellectual property, environmental standards or farm subsidies.
“If the United States has
rewritten the rules of the WTO system to say you can do anything you want if it’s in your national security interests, be prepared for every country in the world to come up with a new definition of what is its critical national security interest,” said Rufus Yerxa, president of the National Foreign Trade Council and a former deputy director general of the World Trade Organization.
On Friday, the administration once again claimed national security when Trump decided to double the rate of tariffs on steel and aluminum imports from Turkey. In a statement, Wilbur Ross, the secretary of commerce, said metal exports to the United States had not declined “to levels sufficient to remove the threat to national security” and that raising tariffs on Turkey would reduce that threat.
Roberto Azevedo, the World Trade Organization’s director-general, said that while his group would rule impartially on challenges to the Trump administration’s metal tariffs, any decision on such a sensitive political issue could create damaging tensions in the group.
“Whatever the outcome — regardless of how objective, balanced and unbiased it is — somebody is going to be very unhappy,” he said last month.
Trump has already undercut the World Trade Organization’s authority in various ways, including publicly criticizing the body as a “disaster” that has been “very unfair” to the United States.
The United States has also objected to the appointment of new members for a WTO appeals body, a move that threatens to paralyze the group’s ability to settle disputes. The Trump administration claims that the body is guilty of overreaching its mandate, especially in its opposition to levies the United States uses to combat unfair trade competition from abroad.
By September, the appellate body, which typically has seven members, may dwindle to just three, the minimum needed to issue rulings. If the United States continues to withhold its approval of new appointments as members’ terms expire, by the end of next year there may be only one panel member left.
“The WTO is obviously an important institution,” Robert E. Lighthizer, the U.S. trade representative, said in December. “But, in our opinion, serious challenges exist.”
Meanwhile, the Trump administration continues to use the World Trade Organization to help fight its battles.
The administration has participated in dozens of
cases and filed complaints about the trade practices of China, the European Union, Mexico and others. U.S. officials have also said they would like to improve the organization, though they have given few specifics. And the United States, the European Union and Japan are working on draft texts that would toughen rules on subsidies and state-owned enterprises — measures aimed at China, which, economists contend, uses a variety of methods to prop up its industries.
Some trade experts have labeled this mixed stance pragmatic; others, hypocritical. But there’s no doubt that the United States’ ambivalent attitude toward the group has left a system in confusion, with the World Trade Organization on the brink of an existential crisis and the United States offering few clues about where its leadership — or lack thereof — might lead.
“When we ask what’s their plan, their answer is they don’t know,” said Pascal Lamy, president emeritus of the research organization the Jacques Delors Institute and director-general of the World Trade Organization from 2005 to 2013. Lamy said that Trump’s intention was to “shake the system, and then we’ll see.” That, he said, was “the only explanation they gave.”