Trump Takes Aim at the WTO

The Trump administration has launched its opening salvo at the World Trade Organization, signaling it would take a much harder-nosed approach to dealing with the trade body.

It criticized the body’s dispute settlement process and asserted the right to ignore rulings that it believes violate U.S. sovereignty, in a policy paper sent to Congress Wednesday. The sharper tone is a shift from previous administrations, but even free trade advocates think the organization could use a revamp.

Here are four areas they would target:

Penalize currency manipulators. The WTO has the power to levy sanctions against its members for unfair trade practices, but it does not recognize currency manipulation as grounds for such a punishment. Many trade experts think this needs to change and they believe the United States could apply some pressure. The Trump administration could bring a case before the WTO to try to force them to label currency manipulation as an illegal subsidy that triggers penalties against countries who engage in it.

The main target is China. The United States has never officially labeled China a currency manipulator, but the country’s past interventions to keep its currency low have long been a sore point in U.S.-China trade relations. At present, China isn’t intervening in its currency, but Wilbur Ross, Trump’s commerce secretary, during his Senate confirmation hearing, accused China of doing just that. It’s a sign that Trump officials will prod the WTO to take a tougher line on currency manipulators, experts said.

Institute penalties for dumping. Right now, the WTO cannot sanction countries for dumping products; only individual member nations can. The European Union, the United States, and the United Kingdom believe this hamstrings the organization from leveling the playing field with China, whose steel and aluminium industries are state-sponsored. China sits on a massive supply of these goods, and its trading partners have accused it of undercutting prices.

Some, however, believe the WTO already has the power to act. Robert Lighthizer, Trump’s pick for U.S. trade representative, told a congressional panel in 2010 that the WTO should use its existing powers to punish China more aggressively for its state support of industry.

Improve the dispute mechanism system. The WTO has been blasted by member nations for being slow to resolve disputes, a problem the organization has acknowledged. A dispute between the EU and China resolved last year took seven years to litigate. Failure to come to timely decisions allows potentially illegal trade practices to continue for years, critics say. Trump could press the WTO to add resources to the dispute process, and to put time limits on decisions.

Update to reflect digital trade. WTO rules don’t account for the trade in digital goods or protections on intellectual property connected to those products. Member nations, the international business community, and trade negotiators all want regulations governing this in place.

Trump could lobby to update the WTO to reflect the digital future of the world economy, to better protect U.S. intellectual property, and to impose punishments for patent theft, said Chad Bown, a trade expert at the Peterson Institute for International Economics. But so far he appears more focused on heavy industry versus high tech.

“Beefs over steel issues affected the U.S. economy 20 years ago,” he said. “Trump needs to speak to the future of the U.S. economy, but he’s shown no interest in updating WTO rules for digital products or advanced manufacturing.”

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