Stressed In An Age of Populism: Recommendations for Changes in U.S. Trade Law and Policy

03/09/2017

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Alan Wm. Wolff

Introduction

The Rule of Law

What I want to do this morning, given the level of interest in this room in international trade law, is talk about the structure of the legal system governing international trade, both the rules set by international agreements and those set by statute, point out what are in my view some major deficiencies, and suggest how they might be remedied.

Having been an unwilling witness to some of the recent developments in trade agreements, I realize that, given the temper of the times, as represented by the trade positions taken by Bernie Sanders, Hillary Clinton, and more importantly Donald Trump and his closest advisors, my suggestions are not going to be adopted this year or next, and may not be given consideration for some time after that. And perhaps they will no longer be necessary by then. But I commend the specific changes that I will propose in these remarks for your consideration, and to those in the Congress who value the international trading system, recognizing that it has shortcomings that also need attention. There will at some point be trade legislation, whether to implement an agreement under “fast track” procedures under Trade Promotion Authority (TPA) or freestanding, as regular legislation. The most likely is the latter – in the extension of the Generalized System of Preferences (GSP) which expires at the end of this year or in a Miscellaneous Tariff Bill (MTB). Whichever course presents itself, at that point serious debate should take place as to the most appropriate course for U.S. trade policy and its implementation, with appropriate changes in law adopted.

The Legal System Governing International Trade

The origins of America’s approach to constructing the modern framework for international trade can be found in the Reciprocal Trade Agreements Act of 1934, and in the vision for world trade contained in the Atlantic Charter, issued by President Franklin Roosevelt and Prime Minister Winston Churchill in August 1941.

The 1934 Act gave authority to the President to begin the process of chipping away the 1930 tariff wall through trade agreements. The tariffs imposed by the United States and its trading partners had deepened and lengthened the Great Depression. The 1934 Act was used as authority to conclude bilateral agreements which would have been very limited in effect had Secretary of State Cordell Hull not put in an unconditional most-favored-nation (MFN) clause in the agreements — the benefits would not be limited to the signatories other than through dealing primarily with products of chief interest to the two parties. Note that this differs profoundly from a series of bilateral and regional free trade agreements that are preferential in nature — the opposite of MFN. It may be that Secretary Hull’s use of an MFN clause in bilateral agreements helped stimulate a recognition that a multilateral approach was essential if trade was to be liberalized, otherwise these bilateral deals would always be constrained by the need to avoid giving away too much in the way of trade benefits to free rider third countries.

The Second World War interrupted progress on the bilateral agreements, but it also gave rise to post war planning. An early glimpse of what was to come can be found in the two economic paragraphs contained in the Atlantic Charter. Churchill and Roosevelt pledged their countries to endeavor “to further the enjoyment by all States, great or small, victor or vanquished, of access, on equal terms, to the trade and to the raw materials of the world which are needed for their economic prosperity; and stated their desire “to bring about the fullest collaboration between all nations in the economic field.”

From these beginnings, parallel tracks continued to be taken over the next three quarters of a century — with enactment of a number of statutory compacts between the President and the Congress loosely termed “trade negotiating authority”5 and in an iterative process of multilateral negotiations to construct a rules-based world trading system — first in the Havana Charter for an International Trade Organization (the ITO, that the U.S. did not ratify), but then in the General Agreement on Tariffs and Trade (GATT) which the Executive Branch forged ahead with without the express approval of Congress until the 1970s, and finally the creation of the World Trade Organization (WTO) in the Uruguay Round in 1994.

These two elemental legal foundations, domestic statutes and multilateral rules, with the addition of some free trade agreements — most prominently NAFTA, are the legal framework for America’s conduct of international trade.

There is no more important subject to be addressed in this two-day conference than the rule of law. The rule of law must govern what our government can and should do in the field of international trade. It must be a key purpose of the international trade bar to assure in matters large and small that this is what in fact happens – through our interventions before administrative and policy agencies of the Executive Branch, through appearances before Congress and the International Trade Commission, before U.S. courts and international tribunals, and in the press. Everything that we do should be viewed through this lens.

View the PDF with full remarks below: Alan-Wolff-IIEL-Issue-Brief-April-2017-Final
 

Ambassador Alan William Wolf is a former Senior Counsel in the International Trade group at the global law firm, Dentons LLP and current Deputy Director General at WTO.

Copyright © Institute of International Economic Law 2017. All rights reserved.

The remarks were originally published here.