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Shakespearean Tragedy at WTO

Dec 24, 2021
  • Zhou Xiaoming

    Former Deputy Permanent Representative of China’s Mission to the UN Office in Geneva

“Fair is foul, and foul is fair.”

This line, chanted by witches at the start of Shakespeare’s “Macbeth,” aptly describes America’s paradoxical presence in the World Trade Organization today: The Biden administration has opted to stay in the top global trade body while mentally deserting the very multilateralism that the WTO represents. The U.S. dreams of leading the WTO, but its actions are alienating members and weakening the group.

When President Joe Biden announced to Congress in February that “America is back,” there was audible relief at the WTO. His predecessor, Donald Trump, was highly critical of the organization for being unfair to U.S. interests, and had threatened to pull Washington out. The election of Biden was perceived as a blessing for the multilateral trading system — an expectation that Biden would abandon Trump’s unilateral trade policy in favor of global trade and international institutions. In the eyes of many, the U.S. looked set to revive multilateralism and revitalize the organization. Its track record thus far has proved otherwise. 

In the area of dispute settlement, the Biden administration has kept the appellate body of the WTO in the deep freeze into which Trump had placed it. In October, the U.S. vetoed, for the 47th time, the appointment of judges to the highest court of the organization, thus single-handedly crippling what other members of the WTO considered essential to building a stable and predictable rules-based system.

Washington has criticized the dispute settlement system as “overreaching” and bureaucratic. And yet, to the dismay of all other members, it refuses to engage seriously in discussions to reform the body. It has not responded to the proposal brought by more than 100 members over a year ago. And it did not want to bother itself with presenting a proposal of its own. The U.S. blockage, according to the delegate from Mexico, who spoke on behalf of all other members, has no legal basis and strips other members of their rights.

This has grave consequences for the organization and for global trade. It renders the WTO’s rules unenforceable. According to the Australian delegation, a logjam of 21 appeals have accumulated since December 2019, when Trump paralyzed the appellate body. By stripping the organization of any teeth to enforce trade disputes, the Biden administration has put the entire system of global trade rules at risk.

Analysts say that shutting down the appellate body could work to America’s benefit. For one thing it gives Washington ample leeway on trade policy. The Biden administration must have had this immunity in mind.

In the matter or rules, despite its professed commitment to the rule of law, the Biden administration is perpetuating the violation of international trade laws, thereby eroding the authority and credibility of the multilateral trading system.

In September last year, an expert panel of the WTO ruled that the U.S. had violated its treaty obligations under the General Agreement on Tariffs and Trade by imposing levies on Chinese goods valued at more than $200 billion. It further recommended that the U.S. bring its measures “into conformity with its obligations.” Eleven months into office, however, the Biden administration has continued to snub the ruling by keeping the measures intact.

Of late, though, there have been reports that Biden is considering cutting back on some of the tariffs. Regrettably, Washington’s possible move is not motivated by any felt need to observe WTO rules. It is driven by domestic inflationary pressures and the necessity to ease the financial burden on U.S. manufacturers and consumers wrought by the punitive tariffs on Chinese imports. Further, Washington intends to use its illegal 301 claim as a bargaining chip to extract concessions from China. Apparently, the Biden administration couldn’t care less about the ruling or about WTO rules in general.

Ironically, Washington made an appeal against the ruling of the expert panel to the appellate body — the very court it had shut down and had no intention of resurrecting. The move was widely interpreted (and rightly so) as a bid to conceal its malodorous lack of regard for international trade rules.

In trade negotiations, the Biden administration has worked to undermine efforts to reach agreement on the reform of agricultural subsidies, an area viewed by developing members as critical to remedying inequality and creating a level playing field. The Aggregate Measurement of Support, or AMS, an annual level of support for agricultural products for producers, allows developed members to enjoy high subsidies. Consequently, the U.S., together with the EU, Japan and Canada, enjoys over 90 percent of the AMS. The subsidies by these developed members, estimated at $300 billion a year by the Organization for Economic Cooperation and Development, has displaced millions of small farmers in poor countries and deprived them of a livelihood by creating overcapacity.

Over a decade or more, America’s staunch opposition to liberalized global agricultural trade was largely responsible for the collapse of the Doha Round talks. The Biden administration’s reluctance to give up the privilege the U.S. had gained when it dominated rule-making has doomed the negotiations on agricultural subsidies.

To be fair, the Biden administration has been seen on occasion as attempting to endear itself to other members. It joined the consensus in endorsing Ngozi Okonjo-Iweala as director-general of the WTO in February. However, it did so only after South Korea’s Yoo Myung-hee, the candidate Washington supported, withdrew from the race. The administration also backed the proposal to waive intellectual property rights related to COVID-19 vaccines. Again it made the move only after six months of vehement opposition to the motion by India and South Africa. It is reasonable to believe that the change in position was intended to repair America’s tarnished image over its vaccine hoarding, for which it had received fierce criticism.

With Trump’s “America first” tenet very much alive in Washington, the Biden administration’s policy on the WTO is to serve U.S. interests, not to champion the multilateralism the world has known. Washington has come to view the WTO as a tool for the advancement of its own narrow self-interest, even at the expense of other members and the world trade body as a whole. Presumably, the question Washington asks is not what the U.S. can do for the WTO, but what the WTO can do for the U.S.

The Biden administration’s commitment to the WTO mirrors its ambition — shape the global economic order and maintain the dominant position of the U.S. globally. There is a danger, therefore, that the keener U.S. is on the WTO, the further it will push the organization away from multilateralism.

Contrary to what appears to be a positive factor, America’s role in the WTO continues to be that of the leading saboteur. As far as the Biden administration’s renewed interest in the WTO is concerned, what appears to be fair may be indeed foul.

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