WTO Weaknesses Laid Out During Georgetown Law Panel

A Trump administration official, the former U.S. trade representative during the George W. Bush administration and a prominent trade lawyer discussed the weaknesses of the World Trade Organization -- and globalization more generally -- during a session at the Georgetown Law International Trade Update March 7.

Kelly Ann Shaw, who works on international trade in the White House, asked: "Are the [free trade] policies that we've been pushing, are the ideals, are the values that we've had really actually working in today's economy? And I think the answer to a lot of that is 'no.'" Shaw, a special assistant to the president, also said that as the administration tries to convince Congress to ratify the new NAFTA, they're "really trying to build a bipartisan political consensus in terms of our trade policy. I mean we have to remember that when President [Donald] Trump came into office, part of the reason he was elected was because of the fact that so many individuals in our country were not feeling the positive effects of trade, in fact they felt very harmed by ... our trade agreements. So we need to change that."

She was responding to a question from the moderator on whether the administration recognizes that its continued imposition of tariffs on Mexican and Canadian steel and aluminum is a major obstacle to ratification of the new NAFTA. She did not acknowledge that the administration could solve it by ending the tariffs, and instead said, "We'd love to see the [Section] 232s with Canada and Mexico resolved as soon as possible," and noted that other countries agreed to quota arrangements.

Terry Stewart, who frequently brings AD/CVD cases on behalf of the steel industry, and former U.S. trade representative Susan Schwab criticized the use of Section 232 tariffs as dangerous, saying that other countries could argue that imports are damaging their economic security, just as the U.S. has. Schwab also said that if the U.S. argument was that Chinese metals were making their way into U.S. commerce through circumvention, there are other tools available to combat that.

The trio spent most of their time talking about the WTO.

Schwab, trade representative during the George W. Bush administration, said the WTO has some major weaknesses, including the fact that major emerging economies such as China and Brazil are "elephants hiding behind the mice" -- in other words, they are using truly disadvantaged developing countries as an "excuse to block forward movement" in trade liberalization.

Stewart agreed, "We are stuck at the WTO ... because there is a lack of consensus among the power players" that they want to move negotiations forward. "Doha [Development Round in 2001] failed because there was no landing zone when [China, India and Brazil] believed they should be doing very little" to liberalize, he said.

While it's the Trump administration that has been known for bold moves to confront the status quo, Schwab threw out a revolutionary idea herself. She suggested that if major economies continue to block negotiations "maybe we ought to be thinking about variations on MFN [the Most Favored Nation clause]. If you don't want to be a player, you shouldn't hold it up for everybody else."

Because of the looming deadline of no quorum on the WTO appellate body -- that will happen in December -- Stewart thinks it's possible some reforms in dispute settlement adjudication are possible. "Whether or not that happens obviously is still a jump ball."

Shaw said the issues with dispute settlement overreach are problematic, but "it's not the heart of the issue with the WTO, from the U.S. perspective," she said. "The developing country issue is really significant," she added, referring to the fact that countries have self-designation, and developing countries are allowed to have higher tariffs, and if there are commitments to liberalize, they have less responsibility to meet those.

Schwab also complained that even when the dispute settlement appellate process is complete, countries don't always comply. She pointed to Airbus subsidies and to the fact that China has still not given access to U.S. financial companies for electronic payments. China said it would do so when it acceded to the WTO, and then lost a case on the same topic in 2012.

She did not spare the U.S., either, saying that the conclusion of the Brazilian cotton case in 2014 was not exactly in the spirit of the WTO -- she characterized it as the U.S. paying bribes to Brazilian farmers (see 14100119). "It's one thing to win a case, it's another thing to change behavior," she said. She said it's frustrating to businesses "because if they're spending millions of dollars on cases and then the problem doesn't get solved...." She said if this doesn't change, "the system has no credibility."