On Tuesday February 4th, 2020, WITA hosted its second annual Washington International Trade Conference (WITC). At the event, WITA held a session featuring hosts of the podcast Trade Talks, Chad Bown and Soumaya Keynes.
Fireside Chat: “Tarrified” of Trade Talks?
By: Madelyn Cunningham
On February 4th, 2020, the WITC featured a fireside chat from Chad Bown, Senior Fellow at the Peterson Institute for International Economics, and Soumaya Keynes, the Trade and Globalisation Editor for the Economist, hosts of the trade podcast, Trade Talks. Keynes started the discussion by pointing out that trade has been a pressing issue in politics recently, so talks about trade issues and policy have never been more important.
Bown and Keynes introduced the main topic of their session: the dissolution of the appellate body of the World Trade Organization. Keynes started with the current state of the WTO, she stated that the appellate body was no longer functioning and about to be reformed, arguing that the prospects of an actual reform are slim given there are no pressing U.S. cases. By taking a historical perspective on the issue, Keynes and Bown set out to understand the problems of the appellate body.
The 1980’s, according to Bown, was the start of this issue’s prevalence in foreign affairs with the creeping protectionism policies in the form of voluntary export restraints. In the 90’s, the competition with the Japanese auto, steel, and technology industries brought imports coming into the U.S. covered by voluntary export restraints up to 12%. Additionally, many American export interests were not covered by GATT, particularly services and intellectual property rights, combined with a lacking dispute settlement system led to the height of the Section 301 era.
Ultimately, Bown explained, the rest of the world disliked this combination, leading the WTO and the Appellate Body to emerge as the negotiator between the United States and the rest of the world in exchange for GATT coverage of services and IP heavy industries. Keynes added that voluntary export restraints do not entirely disappear, but the 12% of imports declined. The idea was to lower them as they created problems, instead relying on safeguards.
Keynes went on to describe the negative implications of anti-dumping, explaining economists are reluctant to these policies. Bown then added that last week, the Trump administration decided to extend the tariffs placed on steel and aluminum for steel-using companies, known as “cascading protection.” While not that much, when analyzing anti-dumping data, it adds up to $5 billion worth of trade coverage. Keynes summed this point up by stating that the tariffs set in place are influenced more so by internal demand instead of a new anti-competitive practice being set up.
Moving on, Keynes discussed that the new system of the WTO came along with a new expectation for dispute settlement through a more technocratic approach. American negotiators felt there was a certain amount of protection for anti-dumping, but this system was eventually used against the U.S., as other countries accused the United States of over-using this system. Keynes added that more than half of the disputes brought against the U.S. were in regards to its trade remedies.
Bown then switched the conversation to discuss “zeroing”, a method of calculating anti-dumping degrees to find evidence of dumping at a higher margin. During the Uruguay round of negotiation, countries wanted the U.S. to lessen their use of zeroing, and when nothing on the matter was stated, both sides assumed victory. Thus complicating dispute settlement even further. Zeroing cases started flooding into the WTO and became the most litigated issue.
Towards trade remedies, Keynes went over the official USTR complaints about the appellate body was not with the rules, but with how the judges handled said rules, especially with maintaining precedence. This could be attributed to problems with personnel in Geneva, but another diagnosis Keynes mentioned was the disconnect between what they were actually doing versus what dispute settlement meant, as many issues were not litigated in documents, thus complicating negotiations.
When looking at the data for trade remedies, Bown stated that there has been a decline in U.S. use of functions like tariffs, and overall the United States has been more open than ever. Thus, the use of trade remedies in the WTO has possibly been pushed too far, starting the problem with the appellate body. There is a common feeling among countries on the hesitance and problems with the litigation approach of the WTO and the current dispute settlement process.
To conclude, Bown discussed how the issues were put off, while the tactics of the Trump administration are new, the concerns have been apparent. Now, we do not have a functioning appellate body, there are a few mini-deals towards an interim appellate body while the issue is being fixed. However the interim solution may last for longer than previously thought.
Chad Bown, Reginald Jones Senior Fellow, Peterson Institute for International Economics
Soumaya Keynes, Trade & Globalisation Editor, The Economist
To view more details about the event, visit the event page here.