Trump administration says US may defy WTO rulings: What does that mean?

The 2017 Trade Policy Agenda will pursue a 'more aggressive,' America-first policy over multilateral trade agreements.

Enter the Global Negotiator in Chief.

On Wednesday night, the Trump administration released the 2017 Trade Policy Agenda to the public. The document, which was also sent to Congress, outlines a new approach to trade, with a focus on tougher bilateral trade deals which President Trump has touted as a way to get better "deals" for the United States.

Included in the agenda was a highly unusual and controversial promise that the US would not be bound by settlements from multinational bodies like the World Trade Organization (WTO) if it deemed that such settlements encroached on "American sovereignty."

Such a pivot, if carried out, could undermine the international rule of law, which has often benefited US companies. It also stands in stark contrast with decades of support for the WTO by the US, which was heavily involved in the creation of the organization even before officially came into being in 1995. The new policy document, however, is in keeping with Trump's dim view of multinational trade agreements and international institutions as unfair to US firms trying to compete on the global marketplace.

But for some economic and political experts, this new agenda not only risks undermining the ability of the WTO to perform vital international trade monitoring but also overlooks the benefits that accrue to the US from a strong WTO able to enforce its own rulings.

“I’m not sure how we can expect other countries to live up to WTO findings if our policy is to just live up to findings that we find acceptable,” Wendy Cutler, the former acting deputy for the US trade representative, told The Washington Post.

The WTO has a number of specific functions, Raj Bhala, law professor and associate dean for International and Comparative Law at the University of Kansas, tells The Christian Science Monitor in a phone interview. These include: serving as a forum for negotiation and monitors the trade laws and policies of its 164 member nations; conducting research on matters relating to trade; educating the public on economic matters; and serving as liaison with other multinational organizations like the UN and World Bank.

But the function most in danger of being undermined by the new Trump agenda, says Prof. Bhala,  is also WTO's most significant role: as an international body with the ability to settle trade disputes.

"The first thing to note about that is that ability is actually [often described as] the 'crown jewel' in the WTO, because it's been the most successful of all the functions," says Bhala. "This organization has handled 500 cases in just 21 years. That's more than any other international legal forum has handled in a similar period of time in human history. So, for people who like the international rule of law, this is a remarkable success story."

That view is not shared by the Trump administration. The 336-page report released Wednesday said that Americans faced an "unfair disadvantage" in global markets, and that by rejecting multinational organizations like the WTO, that disadvantage could be rectified.

"The world in which we find ourselves is one in which there are a number of important players whose legal and regulatory systems are not sufficiently transparent," reads the report. "These countries make it difficult for the global trading system to hold them accountable. The inability of the system to hold those countries accountable in turn leads to a loss of confidence in the system. It is time for a more aggressive approach."

Such a negative perception of the WTO and similar institutions is fairly new to American mainstream politics, says Bhala.

"It was the United States, back in '86 to '94, that wanted a strong, robust dispute settlement system, because it wanted to take other countries to task for trade rules that were blocking American exports and that were not free and that were unfair," says Bhala.

Of course, not every dispute ends in a victory in America's favor. But since most countries comply with the terms of the settlements reached during the settlement of the disputes, the organization is largely seen as an effective and important body within the international community.

"Note that the WTO does not promulgate 'regulations,'" Douglas Nelson, a professor of economics at Tulane University, tells the Monitor in an email. "Ignoring the outcomes of dispute settlements is uncommon, but not unheard of.... However, asserting before any [dispute settlement] process begins that WTO determinations do not apply to the US is unheard of, and deeply corrosive of the institutions the US has labored long and hard to create."

By declaring an intention to ignore these warnings, he says, the US is "cashing in" an organization highly beneficial for the US in favor of an empty political gesture.

"This is rather like saying: 'I'm going to rob this bank, and I don't recognize the right of the courts to find me guilty,'" Dr. Nelson adds. "It is true that this (i.e. going through a dispute process in good faith) is a minor surrender of sovereignty, but the benefits of a stable world trading system far outweigh such minor costs."

In Congress, House Ways and Means Committee Chairman Kevin Brady, (R) of Texas, issued a statement defending the WTO, even while agreeing with Trump's stated attempt to strike a better deal for American workers. "I strongly believe that our current trade agreements – including the WTO – have been successful for Americans because these agreements establish a firm rule of law to hold our competitors in check and open markets for us to sell our goods, services, and farm products. However, I agree with President Trump that we should improve our trade agreements to make them better serve Americans workers."

Thea Lee, the deputy chief of staff at the AFL-CIO, expressed a similarly mixed view to The Washington Post. “On the one hand, we would agree with certain parts, that our trade policy has not been aggressive or consistent enough in looking out for the interest of American workers,” she said. “We don’t necessarily agree that we need to go completely outside the international trade system.”

For Bhala, the idea that the US would try to pursue its own interests outside of the international system is exactly the problem.

"We've long seen [Trump], threaten free trade agreements, like the Trans-Pacific Partnership and NAFTA, and want to bring those FTA [Free Trade Agreements] either into renegotiation, or to reduce them from regional agreements to bilateral agreements, like US-Canada or US-UK," says Bhala. "This recent threat from the Trump administration is an escalation in 'trade war 'rhetoric from the FTA level to the world level, to the mulitilateral level.

"And that makes it more dangerous," he adds.