In the last post, I said that going through USTR's 2020 Trade Policy Agenda and 2019 Annual Report page by page and responding to every point "would be exhausting and would probably not achieve much." But I'm going to do a little bit of it anyway, just for fun. I will focus on the section entitled The World Trade Organization at Twenty-Five and U.S. Interests, which starts at p. 38 of the PDF. Here goes!
With regard to the GATT vs. the WTO, the report says:
Under the GATT system, between 1947 and 1994, there were eight negotiating rounds – each of which led to lower tariffs and fewer trade barriers among all GATT Members. But in the twenty-five years since the WTO began operation—though there have been some positive agreements that address discrete aspects of trade—Members have not reached a significant new multilateral market access agreement. As a result, most of the fundamental rules that govern global trade were negotiated before the WTO even came into existence.
In my view, significant liberalization isn't going to happen unless governments want to liberalize. I suppose we can pick out this country or that country as deserving the most blame, but from what I can tell, all major governments, including the United States, have resisted liberalization. Everyone wants to focus on other Members' protectionism, while ignoring their own. Liberalization won't happen in that environment.
On China, the report says:
scholars estimate that China’s accession to the WTO has contributed to the loss of millions of jobs in the United States, primarily in the manufacturing sector.
I'm skeptical of the job loss numbers that have been put out there (the Autor et al. number of two million or so has been undermined by various critiques), and also that things would have been much different if China hadn't joined the WTO, but none of this is provable and we are all just basing our conclusions on instinct.
On WTO dispute settlement, the report says:
Over the last quarter century, the United States has become the chief target of litigation at the WTO, and has at least partially lost the overwhelming majority of cases brought against it. 155 disputes have been filed against the United States, while no other Member has faced even a hundred disputes. According to some analyses, up to 90 percent of the disputes pursued against the U.S. have resulted in a report finding that a U.S. law or other measure in question was inconsistent with WTO agreements. This averages out to five or six successful WTO disputes against the United States every year.
The United States has also filed 124 complaints against other countries, and has succeeded at a similar rate. With all the trade barriers out there, why not file more?
On U.S. economic growth, the report says:
When considering the effects of the WTO Agreement on the interests of the United States, it is instructive to compare U.S. economic performance and trade flows before and after 1994, the year the United States joined the WTO. ...
...
The U.S. economy grew at an average annual rate of 3.5 percent under the GATT system (1947–1994). Considering only economic data for the immediate twenty-five years before the United States joined the WTO (1969–1994), the economy grew by an average annual rate of 3.0 percent. In the twenty-five years since joining the WTO, growth has slowed to an average annual rate of 2.5 percent.
Given all the other things going on in the economy during the periods in question, I'm very surprised to see it implied that the creation of the WTO caused U.S. GDP growth to slow.
On tariffs, the report says:
The U.S. average bound tariff rate and applied most-favored-nation (MFN) rate are both 3.4 percent. In comparison, Brazil’s bound tariff rate is 31.4 percent, and its applied rate is 13 percent. India’s bound and applied tariff rates are 48.5 percent and 17 percent, respectively.
Under current WTO rules, these rates are locked in place with no sunset clause or meaningful mechanism to allow the United States and other Members to address enormous differences. It is not reasonable to accept that because the United States agreed to such disparities many years ago, when economic and geopolitical conditions were very different, that the United States should tolerate them in perpetuity. Commitments on tariffs should keep pace with the realities of the global economy rather than locking certain countries into nonreciprocal rates.
I don't think the tariffs are locked in place. I think that, for example, if the United States offered up some farm subsidy liberalization in exchange for tariff lowering by other countries, we could probably get it. Or if that's too sensitive, maybe offer to scale back IP protection a bit.
On trade deficits, the report says:
The United States simply cannot sustain substantial increases in its trade deficit year after year, decade after decade. ...
To the extent this is a problem, it can and should be solved by addressing its causes, which are mostly macroeconomic in nature. U.S. savings (both government and private) should be increased significantly. The report also says:
Moreover, the establishment of the WTO has ushered in an era of massive global trade imbalances. While neutral market factors contribute to these long-running imbalances, that the imbalances remain unchanged for decades, despite varying periods of growth and recession, indicates there are other, non-market factors at play.
The imbalance figures have changed drastically during periods of growth and recession, which I think helps make my point that the imbalances are not that important. If your growth is up and that leads to a rising trade deficit, which has happened frequently, consider yourself lucky!
More on the trade deficit:
In sum, it is unfair and unsustainable for the United States to accept the status quo under current WTO conditions that help contribute to enormous and ever-growing trade imbalances. While the U.S. trade balance may not be the only indicator of economic health, it is an indicator of how equitably the United States is treated by its trading partners and how well it is faring as a Member of the WTO.
There is lots of protectionism out there, and I applaud everyone's efforts to identify such measures and eliminate them. But "trade imbalances" are a terrible way to approach the issue.
On solutions to the Appellate Body crisis, the report says:
USTR recently issued an extensive report that details the systemic problems with the WTO Appellate Body and dispute settlement process and addresses the correct approach to all of the issues identified.
On a lot of the issues identified in the USTR report on the Appellate Body, I'm not sure I understand what approach USTR thinks should be taken. DSU Article 11 and GATT Article III:4 are good examples. I understand what they don't like, but what precise alternative do they support? I'd love to see them lay out the alternative and make the case for it.
On technology transfer, the report says:
Forced technology transfer is inconsistent with an international trading system based on market principles and undermines growth and development. Members should develop norms, core disciplines, and effective means to stop harmful forced technology transfer policies and practices, including through enforcement tools and the development of new rules.
In its accession protocol, China has agreed to some norms in this area. The U.S.-China phase one deal elaborates on these. I think it would be great to develop norms for the WTO membership as a whole. Someone should propose it.
On the value of the WTO generally, the report says:
It is difficult now, twenty-five years after its inception, to declare the WTO a success for American interests. Indeed, the organization in many ways ignores and enables unbalanced trade and unfair trade practices.
There's an implication here that the GATT was better for the U.S. economy than the WTO. Of course, the GATT did not include rules on intellectual property protection, whereas the WTO does. My sense is that many countries think they got a bad deal in the Uruguay Round and some probably wouldn't mind going to back to the GATT. A lot of American interests would be much worse off under the old regime though.
