Trump threatens to withdraw from WTO: Another alarm

US President Donald Trump wants to use the WTO to serve more US interests. Photo: AP

WTO must "choose"

In just one year, US President Donald Trump has twice threatened to withdraw the US from the WTO - the institution that helps establish and operate the global trading system.

On August 13, Mr. Trump said he would take action if the organization did not amend its provisions, which he said “favored” China. Speaking at an event in the state of Pennsylvania, the US President made it clear that Washington would leave the organization if the US was “forced.” Mr. Trump repeated the argument that the US had been at a disadvantage for many years, and at the same time expressed his determination not to let this situation happen again.

Exactly one year ago, the White House boss threatened to withdraw from the WTO when criticizing this organization for its unfair treatment of the US, and asserted that Washington did not need to comply with the principles of this international trade organization. Following President Donald Trump, US Trade Representative Robert Lighthizer also accused the WTO of interfering with US sovereignty, especially in anti-dumping cases, to balance interests in a fair competitive environment.

The statements of the Donald Trump administration have somewhat damaged the image of the WTO and created the feeling that the US is a “victim” of the global trading system.

However, the US has repeatedly won trade disputes mediated by the WTO, most notably the US lawsuit against the European Union (EU) for subsidizing aircraft manufacturer Airbus, causing harm to its US rival Boeing. In fact, before taking the role of the victim at the WTO, the US also made it impossible for the organization to function normally. The Trump administration has partly paralyzed the WTO by blocking the appointment of new members to the appellate body of the Dispute Settlement Body - the body that arbitrates in trade cases.

According to Chad Bown, a trade expert at the Peterson Institute for International Economics, the US's move to weaken the WTO has caused lasting damage and not all of it can be restored. The WTO was established to provide rules for global trade and resolve trade disputes between countries. Therefore, if the US - the world's leading economy - withdraws from the WTO, it will seriously weaken the multilateral trading system that the US helped build.

The global order established after World War II is facing problems with the US-China strategic competition. Photo: Reuters

America will have to come first

The US President's warnings are probably not only related to the disadvantages that the US has suffered due to the WTO. The real intention that Mr. Trump is aiming for is bigger than that. When the US has set the rules, created the game but now wants to quit the game, the implication here is that Washington is moving towards a new game with new rules, but the US is still the author of the rules and director of the game. That is, Washington wants to re-establish the monopoly position of the USD and US trade as in the Bretton Woods system which was born at the end of World War II.

After more than two decades since the WTO was established, many economic and political entities have emerged strongly, challenging the US, thereby changing many mechanisms created and controlled by the US, thereby affecting US interests. According to analysts, this is the main reason why President Trump wants to withdraw the US from the WTO or the WTO must be reformed in a way that ensures the US's position and interests as in the Bretton Woods system.

In addition, the current US administration advocates establishing bilateral trade agreements, where the US can best exploit its absolute advantage in terms of political, economic, and military strength - to force the other side to make concessions, thereby maximizing benefits. This is something that is not easy to achieve in a multilateral mechanism. Trade experts agree that President Trump wants to integrate bilateral mechanisms into multilateral mechanisms, thereby creating an uneven playing field, where the US sets the rules for relationships. On the contrary, if other countries bring their issues to the WTO for resolution, the US believes that the WTO interferes with their sovereignty, especially in anti-dumping cases. Therefore, President Trump's request for WTO reform is actually to want this institution to create an uneven playing field.

It is unlikely that the US will "give up the game"

With its leading position in the world economy and the complex connections of the globalization era, the US withdrawal from the WTO could have a greater impact on the global economy than the escalating trade war launched by Mr. Trump with China. For the US, no longer being a member of the WTO means that the world's number 1 economy will face many disadvantages. In this case, other WTO member countries can increase import tariffs on US goods, impose "annoying" requirements, making it difficult for US companies to compete in the world market. In addition, the US will no longer be able to handle unfair trade practices based on the WTO dispute settlement system. Choosing to turn its back on the world, the US will be isolated in the global playground.

For the world economy, the US withdrawal from the WTO would have a negative and serious impact, causing increasing instability in trade. If the US cuts its WTO ties, it can raise tariffs at will and force other countries to take countermeasures. The result would be a global crisis.

Alternatively, the US could leave the WTO and pressure other countries to do the same or not respect the organization’s rules. Such chaos would not be a solution to the problems of international trade, let alone America’s ambition to set the global rules of the game. Therefore, Mr. Trump will only apply the option of both threatening and promoting changes from within by reforming the WTO’s apparatus and operations to suit US interests./.