New proposal seeks to save World Trade Organization

New proposal seeks to save World Trade Organization

A new proposal attempts to save the World Trade Organization (WTO) and its dispute resolution mechanism at a time when the Trump administration is poised to cripple the WTO and, with it, a key part of the international trading system. Supporters of the proposal argue the WTO has benefited the United States and destroying a rules-based system for managing trade disputes will harm America.

“The World Trade Organization Appellate Body will cease to function on December 10 when terms of two of the remaining three members expire,” begins the letter from 26 business and policy organizations, including the National Retail Federation and the National Taxpayers Union. “The United States has focused attention on problems with the appeals process. But now greater leadership is required. America’s economic interests will be harmed if there is no internationally agreed upon mechanism for combatting unfair trade practices of other nations. Now is the time to put forward a specific, detailed U.S. proposal aimed at reforming the dispute settlement system so that global trade rules can be predictably enforced.”

Contrary to popular belief, the United States has won the vast majority of cases it has brought before the WTO. “The United States wins 87% of the cases it brings to the WTO against other countries,” reported Axios. “The U.S. files more cases with the WTO than any other nation, ahead of the EU and Canada. The U.S. loses 75% of the cases filed against them in the WTO. These winning and losing records are both better than average for members.” Note that a “loss” for the United States on behalf of an American trade practice could also be a “gain” for U.S. consumers in the form of lower prices.

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“The WTO dispute settlement system is worth saving,” according to the business and policy group letter. “It has adjudicated hundreds of cases between member countries, including more than 120 brought by the United States against trade-distorting measures of other nations. Although not perfect, the dispute settlement system has led to meaningful reductions in unfair practices and has helped to strengthen the rules-based international trading system. Global merchandise exports have risen from only $54 billion in 1948 to almost $20 trillion in 2018, an inflation-adjusted increase of 35 times.”

The group’s proposal to reform the WTO addresses issues raised by the Trump administration and others: “[E]nsuring that appeals are completed within 90 days; Appellate Body members do not continue to serve beyond their terms; precedent from past cases is not binding on future cases; facts and municipal law are not subject to appeal; the Appellate Body does not issue advisory opinions; and Appellate Body decisions do not add obligations or take away rights provided in the WTO rules.”

The business and policy group’s proposal builds on principles for reform put forth by New Zealand Ambassador David Walker. The proposal advocates an “oversight and audit committee” over the Appellate Body and term limits for members of the Appellate Body secretariat equal to a judge’s maximum term.

It is unclear what reforms would satisfy the Trump administration. “The Americans [the Trump administration] don’t want, or don’t just want, technocratic fixes,” writes David Beattie of the Financial Times. “They want a truth and reconciliation commission, guilt and repentance. They want a widespread admission that the AB [Appellate Body] started to go wrong right from its launch in 1995. They want a commitment to turn it back into an occasional technical advisory body rather than a routine court of appeal.”

Therein rests the problem. Key administration officials, including the president and U.S. trade representative Robert Lighthizer, may not agree that a rules-based system with enforcement mechanisms serves U.S. interests, with such “interests” narrowly defined as promoting exports and providing “protection” from imports for industries that government officials believe warrant such protection.

“The United States has spent two years chipping away at the World Trade Organization, criticizing it as unfair, starving it of personnel and disregarding its authority, as President Trump seeks to upend the global trade system,” writes Ana Swanson in the New York Times. “This week, the Trump administration is expected to go one step further and effectively cripple the organization’s system for enforcing its rules . . . With the administration blocking any new replacements, there will be no official resolution for many international trade disputes.”

Also Read: Chile cancels summit where Trump hoped to sign trade deal with China

Trade experts note America will not benefit from the absence of a dispute resolution mechanism at the WTO. “Without an appellate body it is possible that any new WTO decisions over trade disputes could be blocked indefinitely,” Bryan Riley, director of the National Taxpayers Union’s Free Trade Initiative, said in an interview. “The U.S. needs to be able to rely on the WTO to hold our trading partners accountable to the rules.”

Riley and other free trade advocates believe members of Congress need to “stick up” for the WTO. He points to a recent resolution from Rep. Ron Kind (D-WI) and Rep. David Schweikert (R-AZ) reaffirming U.S. commitment to the WTO as a starting point, along with oversight hearings.

“The loss of the world’s primary trade referee could turn the typically deliberate process of resolving international disputes into a free-for-all, paving the way for an outbreak of tit-for-tat tariff wars,” notes Ana Swanson. “It could also signal the demise of the 24-year-old World Trade Organization itself, since the system for settling disputes has long been its most effective part.” In other words, it could signal more economically damaging trade wars – and fewer ways to prevent such trade wars in the future.

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