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 a sweeping 10 percent tariff on all imports and 60 percent on goods from China. The threat is likely to be carried out, as Trump, a self-styled “tariff man,” thinks the hefty custom duties would make up for the budgetary shortfall that will result from his planned income tax reduction.
If this happens, a world tariff war that wrecks the global economy will likely ensue. Moreover, Trump’s egregious and foolhardy notion will shake the multilateral trading system to its roots, since it would shatter the bedrock of the organization by effectively depriving all other WTO members of their fundamental right — most-favored nation status.
Trump threatened to take the U.S. out of the WTO during his first presidential term. Although his threat did not materialize, the resignation of the director-general of the organization, Roberto Azevedo, is attributed in part to his 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.
Although she says that she is “not a protectionist Democrat,” Kamala Harris has emphasized that U.S. global leadership works “to the direct benefit of the American people” — which could be an echo of Trump’s “America first” mantra.
As such, it is inconceivable that Harris’s trade policy will diverge much from Trump’s: Like Trump, she would prioritize “fair trade” over “free trade.” Moreover, a Harris administration can be expected to view trade issues through the prism of geopolitics, abusing WTO’s national security exception rules and weaponizing trade tools.
Convinced that the global trading system is rigged against the United States, a Harris administration is unlikely to emerge as a champion of the multilateral system. Rather, it would stand ready to ditch WTO rules if 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 of Chinese imports — part of which the WTO has said contravenes its rules — are not to be scrapped any time soon, if at all. In addition, contrary to the will of all other 140 or so WTO members, as well as Washington’s own pledge to fully restore the functioning of the dispute settlement system of the world's top trade body this year, it would, in all probability, go on paralyzing the appellate body until after the highest court of the organization is reshaped in America’s image.
Apparently, whatever may be the outcome of the November election, the White House will continue to fan the flames of protectionism worldwide, placing the WTO in jeopardy. Also worrisome is an increasingly inward-looking European Union, whose ever-more protective trade policy threatens to enfeeble the multilateral trading system.
The bloc had generally been thought of as an advocate of the multilateral trading system for playing an active and constructive role in the WTO. It led the creation of the multiparty interim appeal arbitration arrangement, an answer to the freezing of 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.
Recent years, however, have witnessed the EU drifting toward an isolationism that had not previously been seen in the bloc. A course correction is being undertaken.
Brussels seems to have lost its appetite for supporting an open market. It has dragged 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 is more, the EU has strengthened 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 titled “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 followed strictly. And it intends to act unilaterally if needed.
“This unilateral approach,” said Niclas Poitiers, a trade expert at the economics think tank Bruegel, “ 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 — that is, unless the bloc’s own interest is under threat. It kept silent, for example, over Trump’s, and also Joe 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.
Moreover, Brussels often becomes Washington’s accomplice in dismantling the trading system by joining forces in taking protectionist measures. For example, to qualify European-made EVs for U.S. subsidies under the controversial U.S. Inflation Reduction Act, Brussels concluded an agreement with Washington on a highly limited number of minerals and tried to pass it as a free trade agreement, which requires that virtually all trade be covered. 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 an anti-subsidy disguise.
Worse still, Brussels acts on its own in adopting and enforcing restrictive trade policies that work, intentionally or not, to chip away the multilateral trading system. Its initiatives on so-called 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 be ready to challenge them.
