The WTO was created to try to prevent that kind of outcome,although the trade war the US initiated with China demonstrates rather starkly that it hasn’t always succeeded.
Trump and his key advisers are distrustful of multilateral organisations in general and the WTO in particular. They believe the agreements impinge on US sovereignty;that the US unfairly shoulders too much of the burden of funding them and,in the case of the WTO’s,has tilted the playing field toward US competitors.
"We will leave[the WTO] if we have to. We know they have been screwing us for years and it’s not going to happen again,’’ Trump said earlier this year. Last year he said the WTO was the single worst trade deal ever made.
The US has a particular complaint about the ability under the WTO’s rules of countries to designate themselves as"developing"countries,a status held by China,India,South Korea,Singapore,Mexico and other economies where that status might be questioned.
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Developing countries get concessional treatment on contentious issues such as export subsidies and lower tariff rates and are allowed leeway on state interventions in their economies that developed economies wouldn’t be allowed.
Not surprisingly,the US doesn’t regard China as a developing country.
Ironically,given that other key blocs within the WTO hold similar views to the US on China – on its status within the WTO,its state subsidies,centrally-directed industrial policies,protection of domestic sectors and lack of protection for intellectual property – the US could have used the WTO as a forum for generating global pressure for reforms to its practices.
Instead,given that the administration sees trade through a protectionist,"America First"lens,the administration is going it alone,using the threat – in China’s case,the reality – of tariffs to coerce trading partners into deals it believes are more favourable for the US.
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Another irony is that only last month the Appellate Body ruled in America’s favour in the longest-running dispute the WTO has heard.
A dispute that lasted 15 years ended with a ruling that the US could impose tariff penalties of $US7.5 billion ($10.6 billion) on European Union exports – the largest in WTO history – in retaliation for EU subsidies of Airbus. Trump hailed the decision as"a nice victory".
There is a good argument for reforming the WTO and adapting its rules to a very different world to the one at its creation but the US is threatening to simply blow up the global rules-based order for trade at a delicate moment.
Global trade flows are drying up,partly as a consequence of Trump’s trade war with China. The WTO said on Monday that goods trade had stalled in the first half of this year and appeared likely to remain below trend in the second half.
Its"barometer’’ of trade had a reading of 96.6,below the baseline for the index of 100 and therefore recording declining growth in the volume of global merchandise trade. This will probably be the worst year for global trade since the financial crisis.
With the US trade conflict with China yet to be resolved,the prospect of an implosion of the WTO and the potential for anarchy to develop in the vacuum that would leave wouldn’t provide any confidence that 2020 and beyond would be any better.