Jamieson Greer on the Rules-Based International Order
At an Atlantic Council event yesterday, Greg Ip of the WSJ asked U.S. Trade Representative Jamieson Greer about how he sees the "rules-based international order" in the trading system these days:
Ip:
We heard the phrase rules-based international order so many times, but I think the only thing we all agree on now is that it's dead. It died some time between 2016 and 2017, but it might have already been dying by that point. What is your vision of what replaces that order, if anything? I could have explained that [order] when it was the WTO, and nested in that were a group of bilateral and plurilateral treaties. What will govern the rules of international trade going forward, if, in fact, there are such rules?
Greer:
Well, first of all, I'd say, from what I would think is a realist view, the question is, was it ever alive at all, right? I think sometimes we kind of have white lies we tell ourselves in international relations to paper over the actual power politics that really control everything.
I would say with the WTO, it has a baseline set of commitments that were agreed to many years ago. There hasn't been a lot of development there. That's why we as the United States are layering over the WTO commitments bilateral agreements that we believe put America's interests first and are also in the interests of these other countries to be able to maintain access to the U.S. market in ways that are beneficial for them. So, I think we have some of those underpinnings, but where they can't – I mean, the WTO can't fix overcapacity, right? They can't even be transparent among their own members and publish notices of new rules. You know, they can't fix overcapacity. So we're gonna have to deal with that, either on our own or with willing partners. So I think it's gonna be interest-based.
There's a tendency to talk in all or nothing terms about these issues ("the rules-based international order" is "dead," "power politics ... really control everything"), but I think more nuance here can be useful. The role of power vs. rules in the trading system has always been a matter of degree, and that's still the case today. We may have moved in a power-oriented direction (based on unilateral power and new bilateral agreements derived from that power), but the traditional rules are still very relevant in the relations between the vast majority of governments that are part of the trading system. The U.S. has decided to opt out to a great extent, but that hasn't led to much change in how others are acting towards each other, and the WTO is still accomplishing a lot. (Perhaps having people think the WTO is dead is politically advantageous though, allowing WTO Members to do their work quietly without attracting negative attention?)
With regard to why the U.S. has opted out, Greer's statements about overcapacity offer a partial explanation. The view of many people in Washington seems to be that WTO rules can't help with issues such as overcapacity, whereas unilateral action based on U.S. power can. I think this gets things backwards, and that in fact, WTO rules could be very helpful in addressing the Chinese non-market practices that are a key source of the Chinese overcapacity that is of concern. But of course, someone has to bring WTO complaints to make this happen, and for whatever reason governments have been reluctant to do so recently on core non-market practices such as subsidies and SOE behavior.
As to the unilateral approach, it has been in use for a while now, so we can start to evaluate how effective it has been. It's hard to pinpoint an exact starting date for the unilateral efforts, but it was probably some time early in the first Trump administration. It then continued under the Biden administration, and presumably will stay in place throughout the second Trump administration. So far, however, I'm not sure there is much evidence that the unilateral efforts have moved China in a market-oriented direction or reduced overcapacity.
What I would say to U.S. politicians and policymakers is that if we are still talking about Chinese overcapacity at the end of Trump's second term, that will mean it has been over 10 years of using the unilateral, power-based approach without success. At that point, I think it would be worth (1) taking another look at the broad Chinese commitments to market-orientation made as part of its WTO accession, (2) finding a way forward on U.S. participation in WTO dispute settlement, and (3) using the WTO dispute process to address China's non-market practices (as has been done successfully before). (I'm going to set a calendar notification for November 8, 2028, the day after the next U.S. presidential election, to check on the status of things and come back to this point!)