ABSTRACT
The Trump Administration’s imposition of steep and discriminatory tariffs on much of the world with which the United States trades is often seen as a fundamental attack on the World Trade Organization (WTO), which may not survive unless extreme measures are taken, such as the removal (or voluntary withdrawal) of the United States from the WTO. This article questions this narrative, arguing that there are strong reasons to believe that the WTO has the resilience to survive and evolve despite the tension between the transactional power politics of trade and the values of legalism and non-discrimination that are emblematic of the multilateral trading system embedded in the WTO. A historical perspective reveals that the multilateral trading system has always been confronted with gaps between the ideology and ideals surrounding trade multilateralism and, on the other hand, the reality of the system, where rules and their enforcement are shaped by power and where non-discrimination is often honored in the breach. The system has adapted and accommodated to power politics. Proposals to remove the United States from the WTO would themselves constitute violations of international law, as the WTO constitution or charter does not contain any provision for expulsion of a WTO Member, much less any objective criteria for so doing. In recent years, the WTO has pivoted to new roles and agendas—generally under the rubric of inclusive trade—that deviate from the rule creation and enforcement through dispute settlement focus that many observers still see as the entire basis for the WTO’s existence. It is more equipped to withstand the current trade winds and to ride the waves than is appreciated by those with nostalgia for days when the WTO was widely seen as the poster child for neoliberal globalism in a neoliberal era, as well as for the post-Cold War liberal narrative of the global rule of law.
I. INTRODUCTION
Can the WTO withstand the Trump tariff shock, or is some kind of radical action needed if there is still to be a meaningful multilateral trading system? Even before the tariff shock of the last months, the WTO was frequently criticized as moribund or paralyzed. But the Trump approach to tariffs seems a complete antithesis to the values and ideals underlying the WTO rule of law, nondiscrimination, predictability, certainty, and transparency in the regulation of trade. Paulsen and Ciuriak state the stark opposition between “rules-based governance” and Trump’s “exercising coercive power and weaponizing the networked global economy for geopolitical and domestic economic objectives.” Baldwin warns: “The global implications are stark. By violating key World Trade Organization principles like non-discrimination and tariff bindings, Trump’s tariffs risk cascading protectionism worldwide.”
Multilateral economic governance has, however, taken significant shocks in the past and lived to see another day. In the 1950s, the United States threatened to leave the General Agreement on Tariffs and Trade treaty (GATT) (the multilateral trade institution that morphed into the WTO in 1995) unless its member states found a way of accepting domestic U.S. agricultural policies despite their clash with GATT rules. In 1971, Richard Nixon unilaterally destroyed the gold standard as the anchor for international monetary relations—creating a revolution in global finance, and at the same time imposing an extra ten percent across-theboard tariff on imports. The IMF and the GATT survived. Based on past crises, one should not underestimate the potential resilience of the WTO.
This paper is intended to provide a nuanced assessment of the possible consequences or outcomes for the WTO of the Trump tariff shock. Part I presents an inventory of the conflicts that exist between the Trump tariffs and the legal norms of the WTO. Part II seeks to move beyond the simple power against rules story to unpack the legalist ideology or narrative(s) surrounding the WTO—particularly the “rules enforcement” notion as well as the Most-Favored Nation (MFN) ideal of nondiscrimination in trade. This paper illustrates how, throughout the GATT era but also ever since the WTO came into existence, there has been a gap between the ideology and ideals surrounding trade multilateralism and, on the other hand, how the WTO is a messy place where accommodations to power happen all the time, where rules and their enforcement are shaped by power, and where nondiscrimination is often honored in the breach and equality is elusive. In Part III, this paper assesses proposals that have emerged in response to the Trump tariff shock, ranging from expelling the United States from the WTO to the creation of a new multilateral trade institution that would replace the WTO (but might exclude both the United States and China from its membership). In Part IV, this paper shows how the WTO has been, for some time, evolving and adapting in light of geopolitics and crises, pivoting to new or changed roles and priorities that reflect the waning of neoliberalism, the new geopolitics, and the challenges of emergency trade governance in situations like the pandemic. This has been a story that has been ignored by those who see the WTO as an institution that lives or dies by its ability to create large new trade-liberalizing agreements and to enforce rules through legalized dispute settlement.
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