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Undermining the spirit of WTO

Undermining the spirit of WTO




As promised by Donald Trump during his campaign for Presidential elections, the World Trade Organization (WTO) became the target of a first concrete attack when the US administration declared on 2nd March, 2017 that it was not bound by the body’s rulings. A letter sent from the United States Trade Representative (USTR) to the Congress on 1st March reviewed the terms under which the US had joined the WTO when it was founded in 1995 and insisted that “the Congress had made clear that Americans are not directly subject to WTO rulings.” The text entitled “The President’s 2017 Trade Policy Agenda” also stated that Trump’s government will aggressively defend American sovereignty over matters of trade policy. As a clear break from the past precedent and in a rebuke to the 164-member WTO, the document also said that American trade goals “can be best accomplished by focusing on bilateral negotiations rather than multilateral negotiations.”

While the tone of the USTR’s letter was quite aggressive, the response of the WTO director general was soft. He said that it was clear “that the US has a variety of trade concerns, including about the WTO dispute settlement system” and “I am ready to sit down and discuss these concerns and any others with the trade team in the US whenever they are ready to do so.” China, as expected, also sought to position itself as the defender of the international trade system, and said that it will continue to support the “open and unbiased” WTO. It also reiterated that “China would like to work with all WTO members to ensure that the WTO can play an important role in global trade.”

Obviously, the position taken by the US is in accordance with the threat posed by Donald Trump when, contrary to the viewpoint of all previous US administrations, he had called the WTO “a disaster” during his election campaign. Some of the analysts at that time had tried to downplay this threat by calling it an election campaign tactic but this does not seem to be the case. The contents of the USTR’s letter to the Congress shows that the new administration is serious about changing and reducing the role of WTO in world trade order and if this was not possible, the US could even go a step further and withdraw its membership. If the US follows its own way, other countries may also like to devise their own policies for their own interest and this will be an open invitation to protectionism and a death knell to the open, free trading system. In short, the latest US stand on the WTO is indeed vexing and could be the forerunner of a host of possibilities. If the US continues to be obstinate, the worst possibility could be reversion of the global economies to the days of protectionism, with a highly negative impact on world trade, global growth and employment of factors of production like capital and labour. Recessionary tendencies all over the world could re-emerge with all the negative consequences. Donald Trump probably does not fully understand the consequences of his “America First” doctrine and “Buy American and Hire American” policy. Perhaps, he is upset over the bulging US trade deficit and China’s and India’s growing surpluses and wants to counter this adverse position by hiding behind the wall of protectionism. The US also does not feel satisfied about the dispute mechanism settlement of the WTO because of delays and backlogs although it has heard more than 500 disputes on subsidies, customs and tariffs, etc., and made more than 300 rulings since 1995. The WTO, however, cannot force the countries to abide by its rulings but only authorise retaliatory measures. Overall, the step contemplated by the US is a highly regressive one and could have negative consequences for the world economies. The best way forward could be the suggestion of WTO Director General, Roberto Azevedo, that all the major countries could sit together, listen to the grievances of all the stakeholders seriously, and find a way to keep the global trade more open and free. This is the only way to ensure optimal utilisation of the world’s productive resources. So far as Pakistan is concerned, it could only “wait and see” and hope for an early deal. A free trade regime would very beneficial to the country because of its open economy.



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