12 July 2018
Trump Sends Mixed Messages About US WTO Membership as EU and Mainland China Agree to Spearhead Reform Effort
The Trump administration continues to send mixed messages about the continued membership of the United States in the World Trade Organisation, a multi-lateral body Washington was instrumental in conceiving and strengthening. U.S. Treasury Secretary Steven Mnuchin on 29 June downplayed a report that President Trump had told advisers he wanted to withdraw the United States from the WTO. Axios, citing a source who had discussed the issue with the president, said Trump had threatened to withdraw “100 times” because the WTO “is designed by the rest of the world to screw the United States.” Mnuchin, appearing on Fox Business Network, said there was “no breaking news here.” Trump, he added, “has concerns about the WTO. He thinks there are aspects of it that are unfair.” Moreover, U.S. Commerce Secretary Wilbur Ross told CNBC on 2 July that it is “a little premature” to discuss withdrawal from the WTO.
However, Trump on 2 July again issued a nebulous threat against the multi-lateral body if it does not begin to treat the United States “properly,” but said that there are no current plans to withdraw from the organisation. Specifically, Trump complained before a meeting with Dutch Prime Minister Mark Rutte that the WTO has treated the United States “very badly” for many years although he expressed hope that the current situation could be corrected. According to Trump, however, if the WTO does not treat the United States properly “we will be doing something.”
According to press reports, the president believes the WTO has been detrimental to U.S. interests and in fact was “designed by the rest of the world” to be that way, despite the fact that the United States has won the vast majority of the cases it has initiated at the WTO since its inception in 1995. He is also known to be focused on lowering the U.S. trade deficit through what he calls “reciprocal” trade; i.e., imposing the same tariffs on U.S. imports from specific countries as they impose on U.S.-made goods. His ability to put this into practice, however, is limited by WTO rules that prevent the United States from arbitrarily increasing tariffs on goods from individual countries or raising tariffs above agreed (bound) rates.
Asked to clarify Trump's views, White House Press Secretary Sarah Sanders said the United States is not withdrawing from the WTO, but that Trump has “concerns that there are a number of aspects that he doesn’t believe are fair and China and other countries have used the WTO to their own advantage, and we’re focused on fixing the system and that would include that.” Pressed on what specifically Trump would do if the WTO fails to reform, Sanders said she did not have a “specific announcement on what he’d do.” She added that right now the president would like to “see the system get fixed and that’s what he’s focused on doing.” In response to a question on what Trump would like to see change at the WTO, Sanders said, “the president would just like to see an overall more fair trading system and we’re going to continue negotiations with individual countries as well as organisations.”
Trump’s remarks came after a draft legislative proposal from his administration leaked that would allow the president to ignore bound tariff rates and the WTO’s most-favoured nation principle. The draft bill that Trump was reportedly briefed on in May would essentially ignore those rules by providing that if the president determines that a foreign country imposes a tariff or non-tariff barrier on a particular good that is “significantly higher” than such measures imposed by the United States on that good, the president may (i) negotiate an agreement to lower that tariff or eliminate the non-tariff barrier or (ii) increase the U.S. import duty equal to the foreign tariff or the effective duty rate imposed by the non-tariff barrier. If the foreign country retaliates with its own tariff increase, the president could follow suit. Before taking any such action, the president would have to consult with the Senate Finance and House Ways and Means committees, publish a notice in the Federal Register, and seek advice from trade advisory committees. However, it does not appear that approval from any of these sources would be necessary for tariff increases to become effective.
According to press reports, any such bill stands little chance of being enacted into law. In that case the president could consider withdrawing the United States from the WTO altogether, but that appears to be unlikely as well, at least at this point. An Axios article noted that the president could not uni-laterally declare a withdrawal, which U.S. law “states quite plainly...requires an act of Congress.” In addition, the president reportedly stated that “I’m not talking about pulling out” of the WTO, a claim reiterated by several administration officials. On the other hand, a Business Insider article cited Council on Foreign Relations senior fellow Edward Alden as saying that a withdrawal could be moot because the president “has already shown that he can pursue the policies he wants without regard to WTO rules.”
Meanwhile, the European Union and mainland China have agreed to co-operate on reforming WTO rules in an effort to counter what they see as protectionist measures implemented by the Trump administration. According to press reports, the two sides emphasised the importance of conducting international trade under WTO rules, a standard both feel that the White House’s additional import tariffs and restrictions on steel, aluminium and other products have not met. However, they also agreed that those rules need to be updated to meet new challenges in areas such as technology transfer, industrial subsidies and state-owned enterprises.
EU Vice President for Jobs and Economic Growth Jyrki Katainen explained that the goal is to “make multi-lateralism better functioning in the future” so that WTO members will not be as inclined to pursue uni-lateral measures. The EU and mainland China are planning to create a group within the WTO to pursue this initiative and will reportedly invite other member countries to join.