Trump threatens to withdraw from WTO: Another wake-up call.

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

The WTO has to "choose".

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

On August 13, President Trump stated that he would take action if the organization did not amend its regulations, which he considered "favorable" to China. Speaking at an event in Pennsylvania, the US President clarified that Washington would leave the organization if it were forced to do so. Trump reiterated the argument that the US had been at a disadvantage for many years and expressed his determination to prevent this situation from recurring.

Exactly one year ago, the White House threatened to withdraw from the WTO, criticizing the organization for treating the US unfairly and asserting that Washington did not need to abide by the principles of this international trade organization. Following President Donald Trump's remarks, US Trade Representative Robert Lighthizer also accused the WTO of interfering with US sovereignty, particularly in anti-dumping cases, in order to balance interests in a level playing field.

The statements made by the Donald Trump administration have somewhat damaged the image of the WTO and created the impression that the US is the "victim" of the global trading system.

However, the US has repeatedly won trade disputes mediated by the WTO, most notably the case against the European Union (EU) for subsidizing Airbus, an aircraft manufacturer that harmed its rival Boeing. In fact, before assuming the role of the disadvantaged party at the WTO, the US had already hampered the organization's normal functioning. The Trump administration partially paralyzed the WTO's operations by blocking the appointment of new members to the appellate body of the Dispute Settlement Body – the body that arbitrates trade cases.

According to Chad Bown, a trade expert at the Peterson Institute for International Economics, the US move to undermine the WTO has caused long-term 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 severely weaken the multilateral trading system that the US itself helped build.

The global order established after World War II is faltering due to the strategic competition between the United States and China. Photo: Reuters

America will have to go first.

The warnings from the US President probably don't just relate to the disadvantages America has suffered due to the WTO. Trump's true intentions are much larger. Having set the rules and created the game, and now wanting to abandon it, the implication is that Washington is moving towards a new game with new rules, but the US will still be the author and director of the rules. This means Washington wants to re-establish the dominant position of the US dollar and American trade, as in the Bretton Woods system that was established at the end of World War II.

More than two decades after the WTO's establishment, many economic and political entities have risen strongly, challenging the US and thereby altering many mechanisms created and controlled by the US, thus affecting US interests. According to analysts, this is the main reason why President Trump wants to withdraw the US from the WTO or reform the WTO to ensure the US's position and interests, as in the Bretton Woods system.

Furthermore, the current US administration advocates establishing bilateral trade agreements, where the US can best exploit its absolute advantage—political, economic, and military power—to force concessions from its opponents, thereby maximizing its benefits. This is something not easily achieved in a multilateral mechanism. Trade experts agree that President Trump wants to integrate bilateral mechanisms into multilateral ones, creating an unequal playing field where the US sets the rules for these relationships. Conversely, if other countries bring issues to the WTO for resolution, the US argues that the WTO is interfering with its sovereignty, especially in anti-dumping cases. Therefore, President Trump's demand for WTO reform is essentially an attempt to create an unequal playing field within the institution.

It's unlikely that the US will "give up the game."

Given its leading position in the global economy and the complex interconnectedness of the globalization era, the US withdrawal from the WTO could have a far greater impact on the global economy than the escalating trade war initiated by President Trump with China. For the US, no longer being a WTO member means the world's number one economy will face numerous disadvantages. In this case, other WTO member countries could increase import tariffs on US goods, impose burdensome requirements, making it difficult for American companies to compete in the global market. Furthermore, the US would no longer be able to address unfair trade practices based on the WTO's dispute resolution system. By choosing to turn its back on the world, the US would become isolated in the global arena.

For the global economy, the US withdrawal from the WTO would have serious and negative impacts, causing increasing instability in trade. If the US were to sever its WTO ties, it could arbitrarily raise tariffs and force other countries to retaliate. The consequence would be a global crisis.

Furthermore, the US could withdraw from the WTO and pressure other countries to do the same, or to disregard the organization's rules. Such chaos would not be a solution to the problems of international trade, let alone the US's ambition to set the global rules of the game. Therefore, Trump will only employ a strategy of both threatening and pushing for internal changes through reforming the WTO's structure and operations to align with US interests.