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Senate Committee Holds Hearing on Multi-lateral Economic Institutions

The Senate Foreign Relations Committee’s Subcommittee on Multilateral International Development, Multilateral Institutions and International Economic, Energy and Environmental Policy held a hearing on 27 November on multi-lateral economic institutions and how to work with them to achieve U.S. foreign policy and economic goals. The committee examined whether the World Trade Organisation is ensuring that all countries follow the same rules, a topic of particular interest given that some observers in the Trump administration and elsewhere have argued that mainland China is not in compliance with many WTO principles.

Subcommittee Chairman Todd Young (Republican-Indiana) emphasised in his remarks that the United States needs to continue to participate in multi-lateral fora because “in a vacuum created by the absence of U.S. leadership, Beijing would twist these organisations to their purposes.” Jennifer Hillman, a former WTO Appellate Body judge from the United States, said that “given the impossibility in today’s climate of creating new multi-lateral institutions, it is imperative that the WTO be renovated to make it a more efficient and effective organisation.” She argued that it is in the best interest of the United States to renovate the WTO to make it more effective and relevant, “if for no other reason than to provide the best forum in which to address concerns over China.” According to Hillman, the best and most effective way to get deep and broad economic reform in mainland China is through “a big, bold case at the WTO, brought by a coalition of countries that share the United States’ concerns with China’s practices, even if they do not share the United States’ uni-lateral tactics.”

Thea Lee, president of the Economic Policy Institute and former AFL-CIO union international trade expert, said the U.S. government has failed to take advantage of its considerable clout at the WTO to press for deep reforms. And even if it were to do so, Lee added, it would only succeed if it were able to build a coalition with other industrialised countries and key developing and emerging nations. She concluded that the current stalemate and growing tensions could present an opportunity to build such a coalition.

Subcommittee Ranking Democrat Jeff Merkley of Oregon asked whether it was time for the United States to “re-think” mainland China’s WTO membership, which he called a “sweet deal” for Beijing. Hillman replied that “it very well may be time” because “many countries around the world share many of the United States’ substantive concerns about China.” However, Hillman argued against a uni-lateral approach by the United States vis-à-vis mainland China.

Last April, Young, Merkley and two other committee members introduced the National Economic Security Strategy Act of 2018 (S. 2757), which would require the president to produce a national economic security strategy to complement the administration’s standard national security strategy. The national economic security strategy would address the global competitive position of key U.S. economic sectors as well as U.S. economic security interests. Hillman endorsed the legislation, noting that “it would be serving a great need by helping to draw a line between what is economic security and what is national security.” At the same time, she expressed concern that other countries would now try to use “security” arguments to justify protectionist measures.

S. 2757 would need to be re-introduced in order to be seriously considered in Congress, however, as any legislation introduced in the current Congress will expire at the end of this year in preparation for a new Congress in 2019. Even though S. 2757 was introduced by two Republican and two Democratic members of the Senate Foreign Relations Committee, it was referred upon introduction to the Committee on Banking, Housing and Urban Affairs. It is also worth mentioning that the Senate Finance Committee is the committee of jurisdiction over the specifics of U.S. trade policy, while the Senate Foreign Relations Committee has broader foreign policy jurisdiction.

President Trump has repeatedly threatened to withdraw the United States from the WTO but his administration has thus far not taken any concrete steps to do so. The United States has, however, delayed the appointment of new Appellate Body judges. The European Union and other WTO members have been developing various proposals for WTO reform, including proposals aimed at addressing U.S. concerns.  Mainland China has also been working with other WTO members on reform proposals while insisting that developing countries (including mainland China) be given special treatment in the WTO.

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