This is a guest post from Petros Mavroidis:
This time it is different. It is difficult to say how serious it is, but it is different. President Trump’s trade policy is a decisive turn towards unilateralism followed by bilateral deals. This combination is a blow to the multilateral edifice the US has helped establish. Only time will tell how serious this turn to unilateralism is. This Administration has accustomed the world to erratic behaviour, so a turn in the opposite direction — a lifting of tariffs and respect for multilateral treaties -- cannot be excluded out of hand.
The US, with help from its allies, helped build the multilateral trade regime back in the late forties. The Roosevelt Administration, and Cordell Hull, a champion of multilateralism, were decisive in bringing about the GATT, the WTO’s predecessor. It did so, even though it did not manage to get what it considered a reasonable quid pro quo, the immediate elimination of the imperial preferences (that favoured the British over the US industry in the procurement of raw materials). As Hull repeatedly stated, it was the duty of the US, the leading nation in the post-WWII era to bring about international cooperation, even if it meant that some of its economic interests would not be fully served. This was the price to be paid for providing the scaffolding for sustainable cooperation in the trade field. The American Law Institute work on this score, to which I contributed a small part, provided ample evidence to this effect.
In the subsequent years, the GATT grew in membership, and expanded in new areas. The US was not always happy with the evolution, and some of its battles with the EU made headlines. More than anything else, it was the EU farm policy that proved to be the apple of discord between the transatlantic partners. But there was more. The US did not appreciate the unwillingness of developing countries to expand the coverage of GATT rules to trade in services and protection of intellectual property rights.
To achieve as much, the US quite often had recourse to aggressive unilateralism. Section 301 of US Trade Act of 1974, an obscure instrument that private agents could use to alert the Administration to their concerns about foreign trade policies, became a household name, appearing everywhere in the late eighties and early nineties in news regarding trade and economic policy. The Reagan Administration made a decisive turn towards unilateralism. But it never threatened that the US would leave the multilateral institution. When the moment came, the US refrained from unilateral enforcement of trade rules as quid pro quo for new, multilateral rules on services, IP rights, and a more effective dispute settlement system.
This time it is different. Recourse to unilateralism is gauged in rhetoric threatening the very existence of the multilateral institution. Unilateral imposition of tariffs, abusive invocation of national security interests, hostile attitude towards the dispute adjudication institutions, all these actions point toward a return to isolation, and away from the edifice that the US helped build.
A number of pundits have said that this attitude is due to a belief that trade is a zero-sum game and to electoral promises of Making America Great Again that must now be cashed. But there is no serious clear explanation of how these tariffs and this hostile attitude will accomplish anything good.
What is clear is that this attitude is not the expression of a genuine concern to fix the world trading system. The Trump trade agenda is misleading and disingenuous. It is misleading because bilateral trade deficits per se do not suggest that any nation is taking advantage of another or that there is any imbalance in benefit, for the same reason that a medical doctor purchasing flowers from a florist does not request that the florist purchases medical services from him in return. It is disingenuous because the current administration avoids mention of the the surplus that the US enjoys in trade in services. The overall picture is decisively not what the President portrays it to be.
This is not to deny that the system needs fixing. The Doha round has been stalling for almost twenty years now, and no one has the courage to pronounce it dead. The WTO membership, the world trading community, is locked in a totally unsustainable integration mode: variable geometry is possible in the EU, a much more homogeneous group of countries, and almost impracticable in the WTO, the body with the most heterogeneous membership possible.
At the moment when leadership is needed, the world’s (still) leading nation is busy recoiling in an unprecedented (not so) splendid isolation. The WTO is a forum for cooperation. Disputes are resolved by impartial judges, and not through recourse to unilateral threats and measures. Reducing its relevance is bad omen for cooperative solutions in an era where the world is in dire need for positive signals following an unprecedented barrage of abject unilateralism. Will the next Cordell Hull please stand up?
Petros C. Mavroidis teaches trade law at CLS, NYC.
