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Rewriting the Rules of World Trade

Is the Trump administration out to wreck the multilateral framework of the WTO to its advantage?

If the recently concluded 11th Ministerial Conference of the World Trade Organization (WTO) at Buenos Aires during 10–13 December 2017 is anything to go by, then the United States (US) seems bent upon wrecking the multilateral framework of the WTO. The US Trade Representative (USTR), Robert Lighthizer not only ensured that there would be no agreement on subjects that had been mandated for decisions, but also made certain that the conference would end without any “ministerial declaration.”

Early signs of such a dismal outcome were discernible in November at the Asia–Pacific Economic Cooperation forum in Vietnam, where US President Donald Trump pitched for an “America First” trade policy. Expressing strong disapproval of multilateral approaches, Trump made clear that the US would pursue “mutually beneficial commerce” via bilateral trade agreements. Holding a weak US leadership responsible for the huge trade deficits that had “stripped” the US of jobs, factories and entire industries, he went on to accuse the WTO of treating the US unfairly.

At the WTO’s Ministerial Conference, the USTR paid short shrift to the “cotton-four”—Benin, Burkina Faso, Chad, and Mali—who had compromised on the extent of domestic support and market access just to get the US to agree. Such conduct can best be described as the condescension of an oligarch even as his subjects are confronted with a matter of life and death. Similarly, in relation to India and many other developing countries, the USTR reneged on Washington’s earlier assurances on arriving at a permanent solution for public stockholding to ensure food security. Add to this the USTR deriding the appellate body of the Dispute Settlement Mechanism, blocking the filling of vacancies therein and thereby creating a backlog of pending cases. Of course, a closer look at what has been unfolding in and on the sidelines of the WTO would make it evident that the US has not been the only patronising oligarch in dealing with the developing and least-developed countries. On most matters, the European Union, Japan, and Canada have been its close ally, especially on issues concerning China.

For some time, the US has been regarding the Doha Round of multilateral negotiations as good as “dead.” One needs to note that the USTR’s statement at the conclusion of the conference mentioned that the US “need(s) a result on agriculture that is based on the realities of today, rather than a 16-year-old, outdated and unworkable framework,” a clear deprecating reference to the foundational structure of the Doha Development Round. Moreover, even as the multilateral framework of the WTO was being eroded, initiatives on a number of “plurilateral” agreements (with voluntary membership and on issues that have not been covered by the WTO) —on investment facilitation, electronic commerce, and disciplines for micro, small and medium enterprises—were announced.

It may be recalled that the General Agreement on Tariffs and Trade (GATT) emerged from negotiations to reduce tariffs launched by the US in 1946. This concluded with an agreement signed by 23 countries (including India) in October 1947. In the event of US Congressional hostility to ratifying the Havana Charter of March 1948, signed by 53 countries, to establish a proposed International Trade Organization to oversee international trade, the GATT remained in operation until it was replaced by the WTO in January 1995. Although the 70th anniversary of the GATT in October 2017 has largely been ignored, we must ­remember that the US, the prime mover of the post-World War II multilateral trading framework, seems to have decided to be the central figure in wrecking that very substructure.

The GATT was firmly controlled by successive US trade administrations. Each round of multilateral trade negotiations was conceived to coincide with significant changes in US trade policy. So, for instance, in the mid-1950s, the agricultural sector was removed from the jurisdiction of GATT rules. This suited the Treaty of Rome, then being negotiated to establish the European Economic Community, and the economic principles of what was to become its Common Agricultural Policy. In 1958, the textiles and clothing sector was taken out of the authority of GATT rules, orchestrated jointly by Japan and the US. With the Uruguay Round (1986–94), however, these sectors had to be brought back into the purview of the GATT in order to widen its remit to include commercial services, intellectual property, and trade-related investment measures. But, as earlier, under the auspices of the WTO, in a setting characterised by a lack of democratic accountability, a handful of developed nations have continued to exercise influence in trade and trade-related policies, adversely affecting all sectors of the world’s subordinate economies.

The Trump administration is not out to wreck this profoundly unequal system. It just wants to reset the rules governing it, in order to offset the relative economic decline of American capitalism and re-establish the US as the undisputed top dog in the global economy.

Updated On : 9th Jan, 2018

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