President Donald Trump’s decision to impose tariffs on steel and aluminum will destroy an already weakened World Trade Organization
March 8,2018: The day the World Trade Organization died. Twenty-three years and 67 days after its launch on January 1 of 1995. RIP.
U. S. President Donald Trump did not single-handedly kill the WTO yesterday by announcing he would impose tariffs on imported steel and aluminum. It had been dying a slow death for a long time. China in particular never accepted the norms of the WTO, and its spectacular economic success pursuing policies that too often defied the organization’s market-based principles did more than any other country to weaken the legitimacy of the system. The failed Doha Round negotiations, launched in 2001 and never successfully completed, showed that member nations had no capacity to find the compromises needed to update the WTO’s rules. Trump only gave it the final nudge over the cliff yesterday.
But that should not reduce the shock and surprise that it was the United States—which championed the WTO’s creation—that is left holding the murder weapon. For the past quarter century, the United States has been both a leader and a model citizen of the WTO, almost always hewing closely to the rules even when that meant making politically difficult decisions at home to comply with adverse rulings.
The White House announcement yesterday threw the rulebook out the window. The Trump administration is set to impose tariffs under a flimsy national security pretext that flouts if not the rules then at least the widely-shared norms of the WTO. It has further launched a free-for-all negotiating process in which its trading partners are now expected to come to the White House hat in hand begging for exemptions, a clear violation of the understanding that trade will be conducted under internationally agreed rules, not ad hoc negotiations.
To be clear, none of this necessarily means the end of global trading rules and a reversion to 1930s-style trade conflicts, though the world is closer to this than it has been in decades. The United States and its trading partners managed for many decades under the General Agreement on Tariffs and Trade (GATT)—the organizational precursor to the WTO—to expand trade enormously under a much looser system. The GATT had many agreed rules, but no binding dispute mechanisms to force countries to abide by them. The decisions by GATT panels were accepted or ignored by countries acting in their narrow sovereign interests. Messy compromises—such as the multiple instances of Japan “voluntarily” restraining its exports of steel or cars or television sets to the United States and Europe – were the norm.
It can be argued that the old system was better suited to political facts. In creating the WTO, the United States and other countries tried to fashion a law-based predictability that would provide the certainty to allow global commerce to expand even faster.
