Trump is hell-bent on decimating WTO

Trump is hell-bent on decimating WTO

A logo is pictured outside the World Trade Organization (WTO) headquarters in Geneva, Switzerland. REUTERS

Ever since Donald Trump took charge as US President, he has made systematic efforts to demolish the very foundation of the World Trade Organisation (WTO) which is at the centre of ‘free’ and ‘fair’ trade based on transparent and non-discriminatory rules. 

At the 11th WTO ministerial conference held in Buenos Aires in December 2017, the US rejected the demand of developing countries to find a “permanent solution” to stockholding for food security which was agreed to four years ago at the 9th ministerial in Bali. Worse, it has dumped the Doha Development Agenda (DDA), which has been assiduously pursued by all members of WTO since 2001.

Second, in complete defiance of rules under WTO, it has hiked import duty on steel and aluminium to 25% and 10% respectively, which has hit several countries (except for some preferred friends of the US) across the globe. Further, it targeted $50 billion worth of Chinese goods entering the US and has since expanded the ambit to cover another $200 billion. Trump has also questioned the very rationale of allowing China to be a member of the WTO. The US administration has sought to justify the levies on ‘national security’ considerations. Under WTO rules, this ground can be invoked only under rare circumstances. It can’t be done as a matter of routine. Imagine the chaos it will lead to if every member starts hiking duties using this argument.

Third, under his much trumpeted “Buy American, Hire American”, Trump in April 2017 signed an executive order directing federal agencies to review the H-1B visa programme, with the aim of ensuring that only “most-skilled and highest-paid applicants” were successfully processed. H-1B visas are issued to foreigners who have expertise in specialised areas to work in America for a temporary period.

The US Citizenship and Immigration Services (USCIS), which administers these visas, is already implementing measures that severely restrict or delay their grant. These include, among other ways, stopping ‘premium’ processing of applications, more rigorous interview/procedural requirements and denial of employment to spouses of those working in the US. 

Last year, the Intellectual Property and Internet Subcommittee of the House of Representatives voted to pass a law “Protect and Grow American Jobs Act (HR 170)” whose provisions literally prohibit entry of H-1B visa-holders. The bill was passed by the House Judiciary Committee during a mark-up hearing. After passage by the full house and a similar version of the bill by the Senate, Trump will sign it into law. 

Fourth, Trump has blocked appointment of members of the appellate authority of the WTO’s dispute settlement body (DSB). Currently, there are only three members against the required strength of seven; that will go down to just one next year when two members. The entire process of adjudicating disputes — arising from non-compliance with the rules — revolves around the appellate authority. If even this is rendered dysfunctional, the WTO will be seriously undermined.

Finally, the US President has put the last nail in the coffin by attacking a fundamental principle underlying the WTO’s working. In a recent report — Reinvigorating Trade and Inclusive Growth — by the World Bank and the International Monetary Fund, to which the WTO secretariat is also a party — the US-led IMF/WB has raised a question on the time-tested practice of bundling negotiating issues in “giant all-or-nothing trade rounds”.  

The report argues that the extant practice had become “extremely difficult to manage” and suggested plurilateral trade pacts involving fewer countries as the way ahead. Put simply, Trump is casting a doubt on the efficacy of trade talks involving all nations and its consensus-based decision-making process, in which all members must agree on issues.

In short, the overarching motive of the US administration under Trump is to drive negotiating activity on matters pertaining to international trade in goods and services out of the WTO. This needs to be nipped in the bud. Else, the very existence of the multilateral body will be in jeopardy.

Following the collapse of 11th WTO ministerial — there was not even a formal communiqué, which is customary on conclusion of every such meeting — Commerce Minister Suresh Prabhu convened an informal meeting of WTO members in New Delhi in March. He urged members to “find ways to identify common ground for reinvigorating the WTO”.

India needs to go beyond pious declarations and seriously engage with other developing countries as well as developed countries to preserve the sanctity of multilateral rules and ensure that the WTO stays relevant. It should avoid measures of the type implemented in recent months — for instance, hike in import duty on dozens of items, including refrigerators, air-conditioners, telecom equipment, etc., — which could be used by Trump to justify his own unjust actions.

However, a big responsibility lies on the US, which needs to shed its hegemonic stance, show restraint and work in a spirit of mutual accommodation with the rest of the world. It must recognise that in an inter-dependent system, whereby countries realise a sizeable portion of their GDP from trading with others, increasing barriers to trade — both tariff and non-tariff — will only be counterproductive. 

There is an urgent need for all member countries to make concerted and coordinated efforts to think through what they can do to resurrect a rule-based international trade and investment regime under the aegis of the WTO. The exercise can yield positive results only when each one of them, especially developed countries and the better-off among developing countries, are guided by a spirit of what they can give, instead of the current obsession with what they can take, to achieve the common good.

The big-wigs can, perhaps, take an initiative at the political level. Prime Minister Narendra Modi must use his clout in the international arena to move this forward. 

(The writer is a New Delhi-based policy analyst)