In the United States there is little doubt that Donald Trump will double down on trade protectionism and unilateralism if he returns to the White House. He has vowed to impose sweeping 10 percent tariffs on all imports and 60 percent on goods from China. The threat is highly likely to be carried out as Trump, a self-styled “tariff man,” expects the hefty custom duties to make up for the budgetary short fall that will result from his planned income tax reduction.
If Trump is elected, a world war of tariffs that wrecks the global economy will ensue. Moreover, Trump’s egregious moves will shake the multilateral trading system to its roots, shattering the bedrock of the World Trade Organization by effectively depriving all other WTO members of their fundamental right to most-favored nation status.
Trump has threatened to take the U.S. out of the WTO during his first term in the White House. Although the threat did not materialize at the time, the resignation of the director-general of the organization, Roberto Azevedo, is attributed in part to Trump’s pressure.
There are good reasons to believe that Trump will try again to hijack the world trade body. And he will no doubt continue to freeze the WTO appellate body he paralyzed in 2020.
Trump’s opponent in the 2024 race for the White House is Democrat Kamala Harris. Although she has intoned that she is “not a protectionist Democrat,” she has emphasized that U.S. global leadership is for “the direct benefit of the American people.” Is this an echo of Trump’s “America first” mantra? If so, it is inconceivable that Harris’s trade policy will diverge much from Trump’s. Like Trump’s, it would prioritize “fair” trade over “free” trade. Moreover, a Harris presidency would also be expected to view trade issues through the prism of geopolitics, abusing the WTO’s national security exception rules and weaponizing trade tools.
Convinced that the global trading system is rigged against the U.S., a Harris administration is highly unlikely to emerge as its champion. Rather, it would stand ready to ditch WTO rules when they fail to serve U.S. interests.
True, Harris has been highly critical of Donald Trump’s plans to impose across-the-board tariffs, arguing that the levies would hurt American consumers. However, America’s punitive tariffs on over $400 billion worth of Chinese imports — part of which the WTO said contravene its rules — are not to be scrapped anytime soon, if at all. In addition, contrary to the will of all other 140-some WTO members and to Washington’s own pledge to fully restore the functioning of the dispute settlement system of the world’s top trade body by 2024, it would in all probability go on paralyzing WTO’s appellate body — at least until the highest court of the organization is reshaped in America’s image.
Apparently, whatever the outcome of the November election, the White House will continue to fan the flames of protectionism worldwide, placing the WTO in jeopardy.
What is also worrisome is an increasingly inward-looking European Union, whose increasingly protective trade policy threatens to enfeeble the multilateral trading system. The bloc had generally been thought of as an advocate of the system and for playing an active and constructive role in the WTO. It led the creation of the Multi-Party Interim Appeal Arbitration Arrangement, an answer to the freezing of the WTO’s dispute settlement system by the United States. It also promoted discussions on the domestic regulation of trade in services, e-commerce and investment facilitation.
Recent years have, however, witnessed the EU drifting toward isolationism, something not previously seen in the bloc. A course correction is being undertaken.
Brussels seems to have lost its appetite for supporting open markets. It drags its feet in completing negotiations on a free-trade agreement with the South American bloc of Mercosur countries — more than two decades in the making — for fear that the trade deal would open the EU market to a glut of beef from Brazil and Argentina.
What’s more, the EU has beefed up its arsenal of trade measures suspected of violating WTO rules. In a major departure from the bloc’s long-held multilateral approach, it adopted a new trade strategy it called “An Open, Sustainable, and Assertive Trade Policy” in February 2021. While purporting to ensure open and fair trade, the new policy stresses acting aggressively and unilaterally. While it claims that the multilateral trading system remains an important component of EU trade policy, Brussels more and more views WTO rules as dogma that need not be strictly followed and intends to act unilaterally if needed.
“This unilateral approach,” Niclas Poitiers, a trade expert at the economics think tank Bruegel noted, “allows the EU to further its objectives in a more muscular way.” And Brussels has shown its readiness to use new powers to address, outside the WTO, what it perceives as unfair trade policy and practice.
To start with, Brussels looks the other way when Washington moves to undermine the multilateral trading system — unless the bloc’s own interests are under threat. It kept silent, for example, over Trump’s (and also Biden’s) imposition of punitive tariffs on Chinese goods. Brussels may have been secretly basking in Washington’s bid to blunt the edge of the bloc’s competitor. But such reticence is nothing short of appeasement that dents the EU’s reputation as a champion of the multilateral trading system. Equally serious, it abets Washington in trampling international trade rules.
In fact, Brussels often makes itself Washington’s accomplice in dismantling the multilateral trading system by joining in protectionist measures. To qualify EU-made electric vehicles for U.S. subsidies under the controversial Inflation Reduction Act, Brussels concluded an agreement with Washington on a highly limited number of minerals and tried to pass it off as a free trade agreement, which covers all trade. And in a move widely seen in the world as shielding its uncompetitive automotive sector, it collaborated with Washington in slapping hefty tariffs on Chinese EVs in the guise of being anti-subsidy.
Worse still, Brussel has acted on its own in adopting and enforcing a restrictive trade policy that works, intentionally or otherwise, to chip away at the multilateral trading system. Its initiatives on alleged deforestation, forced labor and supply chain monitoring have reportedly cut imports from the Global South. Meanwhile, its border carbon tax has been criticized by emerging economies such as India, Brazil and South Africa as a pretext for protecting its own industries in violation of global trading rules.
As the trade protectionist tendencies from both Washington and Brussels push the multilateral trading system to the breaking point, the very survival of the WTO is at stake. The world should stay alert and stand up to the challenge.
