Trump’s flawed strategy on how to deal with the WTO
Rather than seek to undermine the World Trade Organisation, the American leader should look for ways to strengthen it
China is not the only target of US President Donald Trump’s protectionism; he also has the World Trade Organisation in his sights.
To the American leader, the two are intrinsically linked, the latter to blame for the benefits he perceives as having been unfairly given to the former. But his thinking ignores the advantages of a globalised trading system, with rules for fair play and mechanisms for dispute resolution.
Shunning the established order and taking unilateral action by imposing tariffs neglects the reality that Beijing will respond in kind and if there is a trade war, neither country will win.
Trump’s views were clearly on show in a social media posting last week that took aim at the WTO for treating China, which he referred to as “a great economic power”, as a developing nation. “They therefore get tremendous perks and advantages, especially over the US,” he tweeted. “Does anyone think this is fair?”
His line towards both has been consistent since before he took the presidency 15 months ago, but rather than use the organisation’s mechanisms to work for a solution, he has turned to rhetoric, protectionism and a policy of obstruction.
There are growing fears that he intends to go further, tearing apart the rules that have fared the world so well. President Xi Jinping defended globalisation and open markets in his keynote speech at the Boao Forum for Asia and the Chinese ambassador to the WTO last month called on members of the organisation to defend it from being wrecked by the US.
Trump has not gone to the extremes expressed on the campaign trail of 45 per cent across-the-board penalties on Chinese trade and withdrawal from the WTO, but he still adheres to the mercantile approach of exports being good and imports bad.
The result has been volleys of criticism, violation of rules and most damaging, blocking the appointment of judges to the WTO’s appeals court.
There is no more powerful instrument in the WTO, judges being able to pass rulings on trade disputes between countries. The moves mean that by the end of this year, the court, which should have seven judges, will be left with a bare minimum of three.
But Washington has not fully disengaged, having on March 14 launched a WTO challenge against India on export subsidies.
The US is not wholly wrong in its criticism of the WTO; as the body’s own officials admit, it is in dire need of reform. How that is to be achieved given that most of the world’s countries are members and they work through consensus will be challenging.
But to claim in its 23 years of existence it has failed the world is flawed thinking; as China has proved, it has lifted hundreds of millions around the world from poverty and steered global development and prosperity. Instead of weakening it, Trump should help make it work better.