Dec 10, 2019

Trump vs. the WTO

Illustration: Sarah Grillo/Axios

Internationalists have always dreamed of a court with jurisdiction over all the countries of the world. In 1995, the World Trade Organization was created — allowing the world's countries to press claims against one another for the first time.

The state of play: That era lasted just 25 years. As of Tuesday, the Trump administration has, to all intents and purposes, brought it to an end.

Why it matters: When Trump defangs the WTO, almost every country will be hurt, including the U.S., which won a record $7.5 billion WTO award in October after it sued Europe for granting illegal subsidies to Airbus.

How it works:

  • By blocking all new appointments to the World Trade Organization's dispute-resolution court, President Trump has allowed it to decline from seven members to three; after two more terms expire today, the court will be left with just one remaining judge.
  • That's not enough for the court to issue a binding ruling.
  • From now on, countries will be able to appeal any ruling they don't like to the WTO's highest court. Since that court will have no power to rule against them, they'll be left free to continue infringing any WTO rule they want.

Flashback: For some 350 years — from the Treaty of Westphalia in 1648, which marked the beginning of the modern system of nation-states — no such court existed.

  • Then, in 1995, the World Trade Organization was created.
  • For the first time ever, the world's countries could take one another to court.

Be smart: "America First," if Trump's slogan means anything, implies an expansion of unilateralism at the expense of the kind of multilateralism exemplified by the WTO, which marked a post-Cold War high point of international cooperation.

What they're saying: Carla A. Hills was U.S. Trade Representative when the WTO was created (under President George H.W. Bush). She tells Axios that "we've delivered a debilitating hit" to the WTO.

  • The WTO is already being replaced, she says, by plurilateral arrangements like the Trans Pacific Partnership (which continues without U.S. involvement) and RCEP, the China-dominated Regional Comprehensive Economic Partnership.
  • The U.S. Trade Representative's office referred Axios to a statement made Monday by Dennis Shea, the U.S. ambassador to the WTO. Shea's main complaint is that the WTO court hasn't been abiding by its own rules, as laid down in 1995.

Winners: Donald "Tariff Man" Trump (his words) can now impose whatever tariffs he likes, without fear that the WTO might find them to be illegal.

Losers: Britain in particular stands to be a big loser post-Brexit, since WTO rules are the backstop default option in the event of a "hard Brexit." If those rules are worthless, Britain will have even less negotiating leverage against trading partners like the U.S. and the EU.

Reality check: As Eurasia Group president Ian Bremmer tells Axios, "multilateral institutions really resist dismantling." When Americans see that other countries — like Germany and Canada — have preferential access to Japan's markets while they don't, they are going to demand a leveling of the playing field.

My thought bubble: The WTO was negotiated before China dominated international trade, and before the internet disrupted all global commerce. A new agreement is desperately needed, and while there's no way that Donald Trump and Robert Lighthizer, the current U.S. Trade Representative, will negotiate such a deal, Trump's successor might yet be able to.

Go deeper

U.K. election: WTO paralysis raises more questions for future terms of trade

Photo: Christopher Furlong/Getty Images.

Millions of Britons are casting their votes today in what could be the most consequential election in living memory. One question now has less of a clear answer than ever: What will happen to Britain's terms of trade if it leaves the EU single market?

Driving the news: Polling suggests that Boris Johnson's Conservative Party will win about 43% of the votes. Under Britain's winner-takes-all voting system, that'll be enough to give him a modest overall majority in Parliament.

Go deeperArrowDec 12, 2019

Global economic uncertainty eased by U.K. elections, China trade deal

U.K. Prime Minister Boris Johnson. Photo: Lindsey Parnaby WPA Pool/Getty Images

Two of the biggest constraints to the world economy — uncertainty about Brexit and the China trade war — were alleviated last week, Bloomberg reports.

Why it matters: With a "phase one" deal between U.S. and China staving off more tariffs and the United Kingdom now on pace to leave the European Union on Jan. 31, the outlook for global growth should be more positive in 2020 after being hampered by widespread uncertainty in 2019.

Go deeperArrowDec 15, 2019

Trump's fine with ditching USMCA prescription drug provision

House Minority Leader Kevin McCarthy (R-Ca.) was among the lawmakers who watched Game 5 of the World Series with President Trump in October. (Photo: Toni L. Sandys/The Washington Post via Getty Images)

As they took in Game 5 of the World Series together, President Trump told House Minority Leader Kevin McCarthy he doesn't want to fight for the most prominent prescription drug component of the administration's trade pact with Mexico and Canada — despite it being a key priority for Republicans.

Why it matters: The biologics provision has been one of the final sticking points keeping the USMCA from finalization, with Democrats fighting for it to be removed or watered down. But McCarthy has known for more than a month that Trump probably won't go to bat to keep it.

Go deeperArrowDec 10, 2019