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Issue #1778      May 24, 2017

Trump and the WTO

In view of the pervasive influence and control the US has exercised over the WTO and the fact that it has been guilty of largely ignoring or frustrating rulings against it under that body’s trade dispute settlement system, Trump’s latest rant against that body is bizarre, says D Ravi Kanth.

The ugly dance of the global hegemony remains a source of concern as well as confusion. It wants to regenerate industrialisation by bringing back all those manufacturing industries that left its shores. More importantly, it seems determined to re-jig its trade policy by opting for bilateral free trade agreements and by asserting its sovereign trade policy decisions in contingency measures such as anti-dumping, countervailing (anti-subsidy) measures and safeguard actions – regardless of the multilateral rules it had framed since 1948.

On the face of it, the global hegemony is determined to pursue an aggressive version of the “open door” policy that was first implemented in 1898. That policy began under the slogan of saving Cuba from the clutches of Spanish rule. Several years after the Cuban war, the head of the Bureau of Foreign Commerce of the US Department of Commerce wrote: “The Spanish-American war was but an incident of a general movement of expansion which had its roots in the changed environment of an industrial capacity far beyond our domestic powers of consumption. It was seen to be necessary for us not only to find foreign purchasers for our goods, but to provide the means of making access to foreign markets easy, economical and safe” [cited in Howard Zinn (2013), A People’s History of the United States, 3rd edition, Routledge, p. 306].

The “open door” policy continued to manifest itself under different masks but beneath the surface there remained continuity, regardless of the destruction and violence it wrought in various countries. It wore, for example, a reformist mask since the setting up of the United Nations, the Bretton Woods institutions of the International Monetary Fund (IMF) and World Bank, and followed by the General Agreement on Tariffs and Trade (GATT) in January 1948.

During the last seven decades, the United States, the most powerful nation in history, went on to refine the “open door” policy in ways that suited its overall trade/economic interests and strategic considerations, including its immediate military and trade priorities, according to several studies by historians and economists.

The creation of the World Trade Organisation (WTO) in 1995 following the Uruguay Round of trade negotiations was an apogee of that onward march which had begun almost a century ago. Although the Uruguay Round started in 1986 when the US was under a Republican administration, it was concluded by a Democratic president at the official level in December 1993.

Unsurprisingly, there is an underlying chain of continuity in the economic and trade policies followed by the global hegemon since the late 19th century. The US control over the so-called multilateral trade and financial institutions is pervasive in almost all aspects. Barring some minor hiccups here and there, Washington has ensured a brutal grip on decisions taken at the IMF, the World Bank and the WTO.

Little wonder then that before entering the Director-General’s office at the WTO headquarters in Geneva, one has to cross the room of a Deputy Director-General which remained occupied by successive US nominees. Indeed, every decision big or small at the WTO has to be vetted by that Deputy Director-General, who is the link between the US embassy in Geneva and the Director-General’s office, according to several past and present trade envoys.

Against this backdrop of continued influence and control over the WTO by the world’s sole superpower, it appears somewhat bizarre to assume that the US under the leadership of Donald Trump will turn the multilateral trade body upside down, notwithstanding the White House’s latest trade policy agenda report which was submitted to the US Congress on March 1.

“The Trump Administration will aggressively defend American sovereignty over matters of trade policy,” the report says, insisting that the “overarching purpose of our trade policy – the guiding principle behind all our actions in this key area – will be to expand trade in a way that is freer and fairer for all Americans”.

The four major priorities of the Trump administration, according to the document, are (1) defend US national sovereignty over trade policy; (2) strictly enforce US trade laws; (3) use all possible sources of leverage to encourage other countries to open their markets to US exports of goods and services, and provide adequate and effective protection and enforcement of US intellectual property rights; and (4) negotiate new and better trade deals with countries in key markets around the world.

The US has also said it was cheated by its trading partners through unfair trade practices like currency manipulation and non-implementation of decisions. Peter Navarro, the top trade adviser to President Trump, has accused Germany of using a “grossly undervalued” euro to “exploit” the US and its EU partners, the Financial Times has reported. Navarro wants Germany to enter into bilateral negotiations to reduce the US trade deficit.

As the Trump administration sees it, the continued ballooning of the US trade deficit (which touched US$648 billion in manufactured goods last year) and the loss of five million jobs during the last 16 years demonstrate that multilateral, regional and even bilateral trade agreements have only brought deindustrialisation and destruction.

In short, the US is suggesting that its ever-increasing trade deficits are an offshoot of the manner in which it was duped by its trading partners which refused to play by the rules governing so-called “fair and free trade”.

“Plainly, the time has come for a major review of how we approach trade agreements,” says the president’s trade policy agenda report, which emphasises that “going forward, we will tend to focus on bilateral negotiations”.

The report speaks incessantly about “sovereignty” but doesn’t quite say that Washington would not abide by WTO rules or rulings it doesn’t like. (The US has charged that several WTO rulings have crossed their remit.)

However, even a cursory look at the litany of so-called trade crimes perpetrated by the US at the WTO indicates that Washington has consistently followed a practice of not implementing adverse WTO rulings since 1995. Barring a couple of decisions involving the EU, the US has largely frustrated the developing and the poorest countries in a variety of trade remedy disputes by not fully implementing the WTO Dispute Settlement Body’s recommendations. Indeed, the US has virtually created a mega-industry for imposing illegal anti-dumping and countervailing measures, including the infamous Byrd Amendment, over the past 20 years.

Significantly, the billionaire new US Commerce Secretary Wilbur Ross has made it clear that despite the criticism levelled against the multilateral trade body, the WTO “in some ways” is necessary as an arbiter of global trade.

Effectively, the Trump administration would use the WTO’s Dispute Settlement Body because of the rules it had framed during the previous Uruguay Round, while turning its back on any future change in the multilateral trade rules.

In conclusion, the trade policy missiles being fired by President Trump will continue to form part of the arsenal built by successive American administrations since President William McKinley (1897-1901).

The only difference is that Trump appears somewhat like the notorious Robespierre of the French Revolution who had followed a policy of “we must smother the internal and external enemies of the Republic or perish with them.”

Third World Resurgence

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