Will Trump Turn His Trade Guns on the WTO?: QuickTake Q&A

President Donald Trump has vowed to reshape the global trading system, saying the U.S. would prioritize its trade laws over the World Trade Organization’s rules. America plans to defend its “national sovereignty over trade policy,” the Office of the U.S. Trade Representative wrote in an annual document in March. Trump’s newly confirmed trade chief, Robert Lighthizer, has said that a “slavish dedication” to WTO rules“makes very little sense.” All this could move the WTO to center stage as Trump disavows one trade agreement after another and the threat of a global trade war looms.

1. What has Trump said about the WTO?

As a candidate, he said the WTO was a “disaster” and threatened to withdraw from the organization. While the more recent comments from Trump’s trade office represent a ratcheting up of the rhetoric, it’s not clear how they’ll translate into action. White House spokesman Sean Spicer said the comments aren’t official policy and don’t indicate “where we’re going.” Still, Trump in April ordered a review of all U.S. trade deals, including its participation in the the WTO, to see if any harm national interests and should be revised or terminated. His formal notification to Congress on May 18 that he intends to renegotiate the North American Free Trade Agreement, along with his earlier decision to pull the U.S. from a 12-nation trade pact known as the Trans-Pacific Partnership, could bring greater focus to the WTO. It’s one of the last major, multilateral trade agreements or negotiations that Trump hasn’t disavowed.

2. How has the WTO responded?

Cautiously. WTO Director-General Roberto Azevedo, who was appointed to a second four-year term in February, says the organization has the tools to deal with Trump’s concerns. At a May 20 meeting of Asia-Pacific Economic Cooperation trade ministers in Hanoi, Azevedo said the biggest risk to the global trade order is one country taking unilateral action that causes a retaliatory, domino effect throughout the system. Azevedo had earlier warned, in an interview with Germany’s Bild newspaper, that a global trade war would be “catastrophic.”

3. What does the WTO actually do?

The WTO is an international body that negotiates, monitors and mediates trade rules among 164 members including the U.S., China, Russia and the European Union. Established in 1994 and based in Geneva, the WTO’s goal is to reduce obstacles to international trade.

4. How does the WTO prevent trade wars?

The WTO’s dispute-settlement system helps ensure that countries don’t take unilateral trade actions -- like raising tariffs or imposing other trade sanctions -- against one another. The goal is to prevent escalation that can lead to trade wars. WTO members that believe another country’s laws violate the rules can ask the organization’s panel of legal experts to investigate. The WTO first encourages members to resolve their disputes by seeking a settlement through informal discussions. If that’s not possible, the WTO’s dispute-settlement body will study the matter, issue a ruling and, if required, urge guilty parties to bring their laws into compliance.

5. Are WTO rules legally binding?

For the most part. Each member agrees to abide by the WTO’s various agreements and the individual terms accepted when it joins. That said, the U.S. agreed to join the organization on the condition that the WTO and its dispute system wouldn’t override its obligations and rights. The WTO’s primary legal authority is rooted in the General Agreement on Tariffs and Trade, also known as GATT, which aims to promote international trade in goods. The WTO also oversees certain rules related to trade in agriculture, services and intellectual property, among other issues.

6. What happens if a member ignores WTO dispute rulings?

The country that brought the complaint can ask the WTO to authorize retaliatory trade measures.

7. Could the U.S. withdraw from the WTO?

Yes, but it would be problematic for the U.S. and could leave its companies at a disadvantage. Other countries would be able to unilaterally raise tariffs on U.S. imports and impose burdensome requirements that prevent U.S. companies from competing abroad. The U.S. would also forfeit any ability to overturn unfair trade practices via the WTO dispute-settlement system.

8. How long do WTO disputes take?

It depends. Some cases can be resolved quickly through informal mediation. An efficiently litigated case could take up to three years. Other cases — like the ongoing aircraft subsidies dispute between the U.S. and the EU, which the WTO has had since 2004 — can take much longer.

9. Do WTO rules apply to individuals and companies?

Not directly. WTO agreements apply to member countries, which create laws that affect citizens and companies. However, WTO rules and dispute rulings can cause countries to alter their laws, which can change the operating environment for companies and any advantages they may enjoy over international competitors.

10. What issues fall outside the WTO’s remit?

The WTO has no authority over its members’ labor rules, antitrust laws, monetary policies or tax rules as long as such policies do not distort trade or act as a barrier to trade. The WTO has also avoided oversight of economic sanctions against other countries.

11. Do trade wars start at the WTO?

Not if the WTO is working properly. Countries like the U.S. and China are already engaged in tit-for-tat trade skirmishes within the WTO’s dispute system. The threat of a true trade war escalates when countries intentionally bypass WTO rules and ignore its rulings to pursue unilateral trade tariffs or other restrictions.

Reference Shelf

  • A Bloomberg article outlines the Trump’s administration’s complaints on the global trading system.
  • Trump’s new trade chief leaves his mark at a May 20-21 Asia-Pacific Economic Cooperation meeting.
  • Why Trump shouldn’t be afraid of the U.S. trade deficit.
  • Two left-leaning economists take a less-benign view.
  • A QuickTake on the fight over free trade.
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