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  June 6th, 2023 | Written by

International Trade Irrelevance – the Danger Facing the WTO

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Organizations don’t take kindly to being pushed around. In this instance, it’s the World Trade Organization (WTO) being pushed. Yet the “aggressors” argue it’s for its own good. 

Founded in 1995 just after the fall of the Berlin Wall, the WTO was hailed as a collaborative success. A globalized coalition of 164 member states, the WTO provides a framework for negotiating agreements among member countries. Most of the agreements surround quotas and tariffs with the WTO weighing in on dispute resolutions where needed. 

An astounding 98% of global trade and GDP is represented in the WTO. Members pay an annual fee and the general consensus is the body has helped in reducing barriers thus boosting overall trade. However, China’s prominence in its share of global trade continues to trouble US policymakers. Some feel the WTO’s strict enforcement of the trade rules has hampered US jobs and granted China an unfettered path to greater influence.

The most powerful appendage of the WTO is arguably its Appellate Body. Akin to a supreme court, the Appellate Body hears appeals and can uphold, reverse, or simply modify legal findings. The Obama Administration made headlines with their vetoing of Appellate Body arbiter appointments back in 2016, and Donald Trump continued the course thwarting even more appointments under his administration. From a US interest standpoint, the WTO was pushed to a near paralyzation of the Appellate Body by 2019.

Under President Biden, the pushing isn’t letting up. Up for proposal is the WTO only allowing a trade dispute to move from a non-binding to a legally-binding judgment (within the Appellate Body stage) if both the defendant and the plaintiff agree to jointly advance. Moreover, there is a discussion on rolling back the Appellate Body’s prior interpretations of trade law. The US proposes to allow countries to determine for themselves when a national security exception can be invoked as opposed to the Appellate Body deciding. 

Most of the WTO members are interested in a strong Appellate Body. When former President Trump instituted tariffs on European aluminum and steel imports in 2018 with a national security justification, the larger community bristled. Yet, administrations from both sides of the aisle stateside are largely interested in a weaker Appellate Body. An anonymous Geneva trade diplomat suggests this is really the US on an island arguing within the larger context of a Sino-American rivalry. 

The Inflation Reduction Act passed under President Biden embeds a host of incentives for goods made in America. This is arguably illegal under WTO rules as is a critical minerals deal the US recently made with Japan. China is cozying up to developing countries, especially in Africa, while a Biden or Trump presidency in 2024 would continue to put pressure on the WTO. The international body was under similar pressure in 1999 but risks irrelevance especially if its biggest members are not interested in the benefits of membership.