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An US exit from the WTO… July 12, 2018

Posted by WorldbyStorm in Uncategorized.
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This on foot of reports that:

President Donald Trump reportedly wants to yank the US out of the World Trade Organization, a move that would upend the decades-old international trading order.
Jonathan Swan at the news website Axios cited an anonymous source Friday as saying Trump had repeatedly asked his advisers about pulling the US out of the WTO and had said the rest of the world used the organization to “screw the United States.”

What would it look like? Not great it seems.

How likely is it to happen? This from Business Insider is pretty good.

Trump would need congressional approval to pull the US out of the WTO, something he is unlikely to receive.

And one other source notes:

What’s more, lawmakers familiar with the bill do not seem keen on it, and ultimately any bill would need to be approved by Congress. Legislative Affairs Director Marc Short earlier this year said that the bill was “dead on arrival” and would not receive support from Capitol Hill. A source echoed this sentiment, telling Axios that “Congress would never give this authority to the president,” and called the bill “insane.”

But a soft retreat from the WTO is not impossible. Indeed it may already be happening:

At the same time, Edward Alden, a senior fellow at the Council on Foreign Relations, told Business Insider that Trump’s disregard for WTO rules in the implementation of the steel and aluminum tariffs could make pulling out of the group unnecessary.
“While you never know with this president, I consider it unlikely that Trump will try to pull the US out of the WTO,” Alden said. “He has already shown that he can pursue the policies he wants without regard to WTO rules. The WTO has not been a constraint on this administration.”

What are the negative impacts for the US? I’m not one to quote people from the Cato Institute, but… this isn’t wrong in its outline.

Simon Lester, the associate director of the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, told Business Insider that the US leaving the WTO would most likely lead to “an economic disaster” and pointed to three “big losses” from an exit.
1 “It would mean is that the US could be faced with higher trade barriers in all of its major export markets, as these countries would no longer be bound by their promises to lower tariffs on US goods or not to discriminate against US goods,” Lester said.
2 “It would also mean that countries who are not parties to separate [free-trade agreements] with the US would no longer be subject to enforceable obligations to protect US intellectual property.”
3 “It would mean that the US would not have a good enforcement mechanism to address foreign trade barriers.”

Worth keeping in mind that trade deals, as we are learning from the UK/EU situation in regard to Brexit, take a long time to negotiate. A very long time.

BTW, is Trump right re the WTO – seemingly not:

The WTO certainly has problems, but failure to enforce its rules is among the least of them. Its Dispute Settlement Body has received about 500 complaints during the last 20 years and has issued rulings in 350 of them. Most of the rest were resolved through consultations between the parties.
The Obama administration filed 26 disputes in the DSB, most of them against China, and won every one that has been decided to date.

Or as noted:

But economic value to the U.S. comes from its dispute-resolution process. As the world’s largest exporter, with well over $2 trillion per year (nearly $800 billion in services alone) and its biggest importer, the U.S. is the greatest beneficiary of the WTO’s disciplines.

That may not matter. Worth keeping in mind that the stupid is strong in this administration. They simply may not understand the outcomes that departing the WTO would imply. As Forbes notes:

Trump has called the WTO a “disaster.” Withdrawing from it would be a disaster. Other countries could raise tariffs against us, dump products in our markets, steal our intellectual property and cheat us every which way from Tuesday and our ability to retaliate would be severely weakened.
Trump keeps complaining that other countries are taking advantage of us. If that’s true, why would he decouple the United States from the one organization that can do something about it?

Or this:

What would happen if the U.S. quit the WTO?  For one thing, countries would be able, with impunity, to deny to the U.S. the benefit of WTO-agreed, non-discriminatory tariffs and rights available to members as “most favored nations” (MFN). 
Tariffs could be raised to any level against U.S. products. The U.S. would be disadvantaged in competing with WTO member states for access to up to 96 percent of the world’s consumers and would cede leadership on trade to China.  

Or this from the Washington Post is good too on the negative effects:

U.S. exporters would lose preferential access to many global markets if the U.S. pulled its WTO membership — and American consumers would likely see higher prices of many imported goods. The United States has free trade agreements with 20 countries, but these agreements cover only 40 percent of American trade.

And what about workers?

Absent a strong, U.S.-led WTO, an estimated 41 million American workers might lose their export-supported jobs. So too the U.S. Chamber of Commerce estimates that an average American household could lose $10,000 in extra purchasing power they gain from WTO-enabled access to low-cost imports, including from China and the intermediate inputs from around the world upon which U.S. industry depends.

And:

Goods prices for U.S. consumers have fallen fairly steadily for years, while the real cost for things like clothing has not changed for nearly 20 years. It would be impossible for the United States to negotiate bilaterally the comprehensive WTO disciplines with even a fraction of its members. 

But all is not lost. Oh wait, it may be…

There is reason for hope, though – if you’re an optimist, that is. Trump has nominated a man who actually knows something about trade to be his U.S. trade representative. Robert Lighthizer was a deputy U.S. trade representative during the Reagan administration and has been practicing trade law at a prestigious Washington law firm since then. It’s hard to know how much clout he’ll have against Ross and Peter Navarro, the head of Trump’s new National Trade Council. The Economist called him a “China-bashing eccentric.”
Navarro said in a January 29 interview with Fox News that the Trump administration would approach Australia about negotiating a free trade agreement. The U.S. and Australia already have a free trade agreement.

But here’s the thing. The Republicans are an uneasy party to lead out of the WTO. For a start it would split them – and not down the middle but with the greater part of their representatives in the opposite camp to Trump. And this isn’t quite the same as the way in which the Republican foreign policy cohort have decamped from the Republicans into splendid isolation at his ‘approach’ to that area. They have proven to be a more marginal group than would have been predicted but then they always were. Whereas, and it doesn’t take a Marxist to tell people this, but if the cap fits, economics being the base, adherence to free trade, or mostly free trade is written much more deeply into Republican DNA.

Trump is the equivalent of a bomb-thrower, though one suspects much of the time that he doesn’t understand a) what a bomb is and b) what the implications are of throwing it.

Comments»

1. An Sionnach Fionn - July 12, 2018

If Trump does a WTOexit – even a soft one – it would give fuel to the Brexiteer argument in the UK viz relations with the EU and border arrangements here. I could certainly see Boris running with that idea. A great Anglo-American/Anglophone/Empire 2.0 trading bloc. Even if a largely imaginary one.

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2. polly - July 12, 2018

Is it an opportunity I wonder?

For the EU to improve its position vis a vis the smaller and poorer countries that have felt disadvantaged in WTO negotiations? By saying to them ‘Stick with us, in an organisation that at least has a ratchet that can only ever go in the direction of lower tariffs, and a dispute resolution mechanism that is binding and that is capable of being made more effectively binding again, and, anyway, where the rules are in a book and you know what they are. Better the devil you know than the wild uncharted seas of ‘free trade’, as defined on the spot from time to time by President Crazypants.’

?

Liked by 1 person

3. WorldbyStorm - July 12, 2018

It’s difficult to predict, but I’d think that both those dynamics you describe above will come into play. On the one hand it gives heart to the Brexiters, but on the other hand it consolidates the EU to a degree. And possibly those beyond the EU. Small wonder the PRC is making efforts to extend its influence.

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4. EWI - July 12, 2018

and not down the middle but with the greater part of their representatives in the opposite camp to Trump.

This is – much like FG – down to a matter of looking after their own financial interests, though. If Trump acts in concert with someone – say Britain and/or other quasi-fascist European states – to weaken the EU and start dictating terms, they may see the potential spoils as outweighing the losses.

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5. Barnes - July 12, 2018

I saw it remarked that the weakness of the international system was exposed by the fact it just took one election, a few ten thousand of
voters to apparently over turn it. At the least the dependency of the order on America looks all too apparent.

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WorldbyStorm - July 12, 2018

Agreed. It’s been a big problem. It may however be a self-resolving problem the way things are going.

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