Shackling the WTO
The new policy direction of the Trump administration seriously undermines the WTO.
The Office of the U.S. Trade Representative (USTR) on March 1 released its “National Trade Policy Agenda for 2017,” setting the first formal written outline of a trade policy direction for the Donald Trump administration. The report lacked specific details as it was drawn up before Trump’s USTR nominee Robert Lighthizer was confirmed by the U.S. Senate, but nevertheless provides guideline on what to expect from Trump, who had pledged to be tough on the trade front throughout his campaign.
The 300-page report devoted seven pages to explaining an overview of the trade agenda of the Trump administration, underscoring that it will “aggressively defend U.S. sovereignty over trade policy.” The report questioned the fairness of the World Trade Organization’s dispute settlement system and pledged stronger enforcement of domestic trade laws to defend U.S. industry interests.
That could suggest that Washington would bypass the 22-year-old World Trade Organization (WTO) and seek its own ways to solve trade disputes. Washington’s unilateral way of settling trade issues could pose more challenges to Korea on the trade front than any possible revisiting of the bilateral Free Trade Agreement between Korea and the U.S. as it could undermine the WTO and entire structure of rules for world trade.
Even with a shift towards free trade agreements between and among countries, the WTO remained the center of the global trading system, largely thanks to its dispute settlement role. The Dispute Settlement Body of the WTO has received 522 international trade litigations since 1995 and remained the undisputed arbitration authority.
Its most frequent visitor, the U.S., has so far been sued 129 times, while suing other countries 114 times. The fact that the U.S. has been sued more than it has sued and lost so many times underscores the objectivity of the WTO in settling trade disputes. Korea has been sued 16 times, including two recent cases by Japan, and has filed 17 suits. Of them, 11 were against the U.S.
China, which joined the WTO in December 2001, has been sued 39 times, first in March 2004, and filed 15 suits, the first of which was in March 2002.
Except for some cases, WTO member states respect the rulings although they are not legally binding and are up to voluntary compliance of each government. The preferential banana import quota the European Union had kept for former colonies, corporate tax benefits for overseas operations of U.S. companies, and a monopoly of UnionPay in the Chinese credit card market were all corrected through WTO rulings. In Korea, the tax levy difference between imported whisky and local soju and import restrictions on Canadian beef were also fixed by WTO rulings.
Upon losing cases over its calculation of antidumping margins, however, the Obama administration last year blocked the reappointment of a Korean Appellate Body member despite oppositions from all other members. Washington stuck to its position despite public protests from existing and former appellate judges.
The Trump administration wants to challenge the WTO dispute settlement system as well as the WTO itself. The new USTR Office calls for unilateral safeguard measures such as Section 301, which has never been used since the establishment of the WTO system as a powerful lever against unfair foreign trade practices. Congressmen from the Democratic Party and Republican Party have been expressing concerns about its agenda.
The Doha round of negotiations, which have faltered for more than a decade since its launch in Qatar in 2001, has been nearly comatose since USTR Michael Froman pronounced an end to talks on devising a perfect global trade framework in Nairobi in December 2015. Instead, U.S. President Barack Obama pursued regional multilateral free trade deals such as the Trans-Pacific Partnership (TPP) led jointly with Japan, the Transatlantic Trade and Investment Partnership (TTIP) with the EU, and the broader Trade in Services Agreement (TISA). Upon taking office, Trump killed the TPP, which was already signed with 11 members.
The USTR’s new policy direction prioritizing U.S. interests seriously undermines the WTO and its sustainability, which past U.S. administrations spent so much to uphold. With his “America-First” slogan, Trump is jeopardizing the 164-member WTO framework that was established and maintained in a spirit of mutual trust and decades of hard work from member states.
The crisis of the WTO can easily translate into a crisis for our trade with the world. Korean corporate interests were protected with the help of the WTO as bilateral protests on trade issues have been hard to do for Korea especially with the U.S., on which South Korea heavily relies for protection against North Korean threats.
Seoul must reinforce its trade strategy as the clout of the WTO shrinks. We are entering uncharted waters without an old friend and protector. The WTO was our best shield against trade retaliations and protectionism by China and other countries.
Translation by the Korea JoongAng Daily staff.
JoongAng Ilbo, April 19, Page 33
*The author is a professor of the Graduate School of International Studies of Seoul National University.