AMERICA AND THE FUTURE OF THE WTO

Global trade liberalisation is likely to continue only bilaterally and re-gionally in the coming years. Multilateral negotiations have not made serious progress for years on account of the many and diverse interests that encumber the WTO. One of the key issues is that emerging econo-mies are not ready to liberalise as much as the developed countries would prefer. Moreover, the WTO is not capable of tackling the most pressing new issues related to digital trade, e-commerce, services and investment.

Agreement on deep regulatory issues is more likely to be achieved among like-minded country groupings.

Negotiations at the WTO had already stalled before Trump’s arrival on the scene. However, there is a worrying development regarding dispute settlement, which is the most efficient and functioning part of the WTO.

For a while, the US has been voicing criticism of the highest organ of the dispute-settlement system, the Appellate Body (AB).

The WTO Appellate Body is a seven-member, independent court that takes the final decision on the interpretation of WTO law and its appli-cation to WTO members. AB members are nominated and appointed by member governments, and serve a maximum of two four-year terms. In the first half of 2016, during the Obama administration, the US blocked the re-appointment of a South Korean judge to the Appellate Body, cit-ing his role in a series of decisions with which the US disagreed. This was heavily criticised by other WTO Members as amounting to meddling with the independent judiciary. In the end, another Korean national was appointed, but in August 2017 he unexpectedly resigned, taking up a position as trade minister in the Korean government. The US has since blocked the recruitment of new judges, exacerbating the risk that the WTO could effectively run out of judges. In a statement in August, the US said it would not move forward with the appointment procedures before its systematic concerns about WTO dispute settlement were addressed. The goal thus seems to be to pile pressure on other WTO members to accept US plans for reform, which appear to be going potentially as far as opening the door for individual WTO member states to block appeals rulings in certain cases.

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The US attitude has raised fears about Trump’s reaction at any major negative WTO ruling against the US during his term. This is not likely to occur in the near future, as the US managed to score an important victory at the beginning of September 2017. In the Boeing Case, the US won a dis-pute against the EU with the AB overruling a lower-level finding that $8.7 billion in tax incentives awarded by Washington State to Chicago-based Boeing for the development of the 777X jetliner constituted a violation of WTO law on subsidies. It would be tempting to read something political into the ruling, but the case is part of a long-running trade dispute, with both Airbus and Boeing scoring wins and enduring losses. The broader dispute on airline subsidies continues at the WTO, with claims being made by both the EU and the US.

The international community should be most worried about the US administration’s shifting stance on the principal governing structures of world trade. During a rare public appearance in Washington in September 2017, US Trade Representative Lighthizer sent mixed signals on whether the administration would be willing to take its trade fights to the WTO. He also contrasted the ways in which Europeans and Americans saw trade agreements: Americans tend to see them as contracts, enforcing a clear-ly-defined set of rights and obligations, whereas Europeans and certain others see them as an evolving form of governance. This comment high-lights the general suspicion and criticism the current US administration is projecting towards the WTO, and global governance more broadly. On the same occasion, Lighthizer argued that the WTO was not equipped to deal with China, and underlined the fact that the US would have to find other ways of defending its companies, workers and farmers, and its market-based economic system (Center for Strategic & International Studies 2017).

6.8 CONCLUSION

So far, the implications of Donald Trump’s “America First” agenda for the long-term trade policy of the US remain limited. The withdrawal from the TPP will have significant and far-reaching strategic consequences for America and the world economy, but it appears to be the principal sac-rifice that had to be made in light of the President’s campaign promises.

As for the rest, it is too early to say.

Trump’s actions would nevertheless indicate that he is relying on his own playbook, namely threatening and possibly bluffing. He already has two significant successes in this respect. First, he managed to curb Chinese

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steel imports, and second, he has opened the NAFTA renegotiation process.

However, his motives remain hard for outside observers to pin down, and it is unlikely that he really believes trade is as harmful to the US as he maintains in his public statements. Nevertheless, his strategy seems to have worked so far. However, continued threats tend to lose their power if they are never acted upon, and it may become increasingly difficult to lure other countries into making concessions as they become increasingly aware of Trump’s reluctance to carry out his threats.

Concluding and renegotiating trade agreements takes time, which Trump may run out of sooner rather than later. His re-election is uncer-tain (should he not be forced to step down beforehand), and he may not even choose to run for another term. The main trading partners of the US may therefore decide to lie low and avoid confrontation in the hope of dealing with a more reasonable administration in a few years’ time. This is especially the case with multilateral trade deals, TTIP in particular. How-ever, existing frameworks of global governance need to be safeguarded against gradual erosion or full-blown crisis. The US attitude towards the WTO’s well-functioning and respected dispute settlement is especially worrying. Other WTO Members, and especially the EU, should support it as a cornerstone of the global trading system. The central interest of the US for decades has been to assure that the world economy is (increasing-ly) open and rule-based. As long as the current president refrains from pursuing that agenda, whether because of political manoeuvring in front of domestic audiences or for ideological reasons, Europeans need to up their game. In addition to defending the existing legal framework, this includes devising new ways of dealing with the emerging economies and finding solutions to challenges of the new economy, especially in the digital sphere.

PART IV