I found the "sense of Congress" on various WTO issues in the Senate's United States Innovation and Competition Act of 2021 bill to be interesting, and it made me wonder about the process for coming up with this part of legislation. Many of these points I've heard previously from U.S. government officials, but some were new. Let's go through them now. They start with "findings" in sub-section (a) and then go on to the "sense of Congress" in sub-section (b).
It all starts off fine in the "findings":
SEC. 73006. SENSE OF CONGRESS ON LEADERSHIP AT WORLD TRADE ORGANIZATION.
(a) Findings.--Congress makes the following findings:
(1) The United States had led the formation, as well as reform, of rules governing the multilateral trading system since World War II.
(2) The United States is a founding member of the World Trade Organization (in this section referred to as the ``WTO'') and a key architect of the organization.
I don't have an objection to any of that.
It then says:
(3) The United States secured important commitments in the WTO to facilitate trade in goods and services, to prevent the application of non-scientific restrictions on United States agriculture, and to protect United States intellectual property.
No objection here either, except that I wanted to note that for those in the U.S. government or NGOs or elsewhere who are concerned with "sovereignty," the latter two points are two areas where the United States has pushed, and continues to push, for rules that undermine domestic regulatory autonomy.
Skipping ahead a bit, we get to this:
(5) The fundamental purpose of the WTO is to create space for members to negotiate with each other, and the WTO reserves to those members exclusively the right to negotiate and adopt rules that reduce and eliminate trade barriers and discriminatory treatment.
(6) The prompt settlement of disputes in which a member of the WTO considers that its rights are being impaired by the actions of another member is essential to the functioning of the WTO and the maintenance of a proper balance between the rights and obligations of members.
(7) The WTO's dispute settlement function, including in particular the Appellate Body, has increasingly failed to enforce the rules of the WTO in a timely manner, and has usurped the negotiating prerogative of members by creating new obligations and rights that are inconsistent with or not included in the rules negotiated by members.
(8) The creation of those obligations and rights undermines--
(A) the WTO's negotiating function by discouraging members from making concessions; and
(B) the WTO's dispute settlement function by encouraging overuse of the process and undermining its legitimacy, including by preventing free market economies from responding to globally trade distortive practices by nonmarket economies.
A couple points here. First, I frequently hear the claim that WTO dispute settlement rulings have undermined the WTO's negotiating function, but that sounds wrong to me. I haven't seen evidence of that, and anyone involved in WTO negotiations whom I've asked about this says it's not true. There are clearly problems with negotiating new agreements and liberalization at the WTO, but they are primarily due to other factors.
With regard to failing to enforce the rules in a timely manner, that's certainly true, and I've proposed some fixes here.
As to whether the dispute settlement function "has usurped the negotiating prerogative of members by creating new obligations and rights that are inconsistent with or not included in the rules negotiated by members," I think "usurped" is too strong, but it is inevitable that dispute settlement is going give you interpretations of the rules. I would note here that many such interpretations were pushed by the United States, and I'm not sure they would want to give them up.
Now we get to China:
(9) The WTO does not have sufficient rules to discipline the distortive economic policies of nonmarket economies, such as policies relating to excess capacity and forced technology transfer, the special treatment those economies afford to state-owned enterprises, and their massive and opaque industrial subsidies.
I'm not sure if the existing WTO rules are sufficient, but there are rules, and many of them are untested, so I think it would be worth taking them out for a spin.
Now there's something about reforming DS rules:
(10) There is long-standing bipartisan support in Congress to reform the WTO to address those failings.
(11) The current presidential administration, as well as prior administrations, raised concerns about the failings described in this subsection and have made reform of the WTO a top priority of United States trade policy.
(12) The United States urges WTO members to work constructively with the United States to assess the reasons why the existing WTO rules have proven inadequate in order to create an atmosphere within the WTO that is conducive to the development of new rules less subject to jurisprudential drift.
My sense is that many WTO Members have been bending over backwards trying to figure out what would satisfy the United States here. The ball is in the U.S. court, and many of us hope to hear something soon.
They close with this:
(13) The guiding principle for reform of the WTO, and the lens through which WTO members should consider specific reform proposals, is the restoration of the WTO's capability and capacity for negotiation among members.
(14) The United States has achieved its trade policy objectives through active leadership at the WTO, and an absence of that leadership would be filled by nonmarket economies that are hostile to a host of United States interests.
Again, I don't think DS reform will have any impact on negotiations, but nevertheless, DS reform is important. The success of negotiations is mostly dependent on whether all countries are willing to give something, rather than just each focusing on areas where they feel someone else needs to make changes.
As to whether "an absence of that leadership would be filled by nonmarket economies that are hostile to a host of United States interests," presumably that means China, but I kind of doubt China is going to fill the U.S. shoes here. Certainly it is an opportunity for China to play a more active role, but I'm not sure China will be leading many new initiatives at the WTO.
Next we get to sub-section (b) setting out the "sense of Congress," including the following:
(b) Sense of Congress.--It is the sense of Congress that--
(1) while the United States finds value and usefulness in the WTO, in order to fulfill the needs of the United States and other free and open economies in the 21st century, significant reforms are needed;
(2) the United States must therefore continue to demonstrate leadership to achieve reforms that restore the effectiveness of the WTO's--
(A) negotiating function;
(B) dispute settlement function so that it transparently, efficiently, and fully enforces outcomes negotiated by members rather than usurping their primacy by creating new rights or obligations; and
(C) rules for special and differential treatment to ensure those rules promote advancement for truly developing countries, rather than becoming tools for globally competitive countries, like the People's Republic of China, to engage in protectionism and market distortions;
(3) the efforts to reform the negotiating function of the WTO should revitalize the negotiating function by providing confidence to members that the WTO operates according to the rules as negotiated and adopted by members;
(4) a revitalized negotiating function must include new rules that reflect the 21st century economy, further combat anticompetitive and protectionist barriers, and ensure disputes are efficiently resolved;
Wait, what is going on in (4)? They want to address "anticompetitive" barriers? That's a vague and potentially enormous category! What do they have in mind by that?
And finally, here are a whole bunch more, which I don't have much to say about, except the one on incorrect interpretations/precedent and the last one:
(5) the United States Trade Representative should continue to lead efforts to work with WTO members to pursue reforms at the WTO that--
(A) ensure the dispute settlement mechanism faithfully applies the rules adopted by members, including by undertaking measures to ensure the WTO's Appellate Body does not create new rights and obligations;
(B) improve public confidence in dispute settlement by promoting greater transparency and efficiency in the conduct of proceedings;
(C) redress the consistent failure by certain members to satisfy their notification obligations under various WTO agreements, including through measures that strengthen accountability;
(D) ensure rules for special and differential treatment are appropriately reserved for countries whose state of development and global competitiveness actually warrants such flexibility;
(E) create new rules and structures that can serve the interests of the United States while promoting peace, prosperity, good governance, transparency, effective operation of legal regimes, the rule of law, and free enterprise; and
(F) expand upon the trilateral negotiations currently underway with Japan and the European Union;
and
(6) the United States Trade Representative should explore and assess specific reform proposals, including--(A) pursuing plurilateral agreements that further the interests of the United States while limiting the benefits accruing to countries that are not parties to those agreements;
(B) efforts to ensure that incorrect interpretations by the Appellate Body, including with respect to the Agreement on Safeguards, the Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994, and the Agreement on Subsidies and Countervailing Measures, are corrected, and not to be deemed precedential;
(C) new rules and norms to address practices of nonmarket economies, such as practices relating to state-owned enterprises, which certain countries often utilize for objectives that cause severe trade distortions; and
(D) better implementation of existing rules, such as the prohibition in paragraph 4 of Article XIV of the General Agreement on Tariffs and Trade on currency manipulation, to ensure that those rules are effective to preserve the rights of free market economies.
On the last one, I assume they mean Article XV:4, and I totally agree that fleshing it out would be helpful. Seems like a daunting task though.
As to ensuring that incorrect interpretations by the Appellate Body are corrected and are not deemed precedential, that seems like a can of worms, because there are a good number of Appellate Body interpretations that took the U.S. side, and I doubt the U.S. would want those thrown out.
I enjoyed reading all this, and I'm fascinated by the process of setting out these "findings" and "senses of Congress." I'm very unclear on what the political or policy implications of this exercise are, and I'd love to learn more from an insider about how they come up with all this.
