Washington Insider The US Assault on the WTO

While many of the world’s trade policy concerns now feature the U.S.-China dispute and the border wall fight, Bloomberg is reporting that there is more. The administration’s attack on the World Trade Organization “has U.S. farmers worried that the president’s ‘America first’ foreign policy approach will hamstring efforts to defend their interests.” The report says that the United States is “strangling the ability of the WTO, which oversees the rules for nearly $23 trillion in commerce every year, to resolve disputes among its 164 members.” But when the WTO’s appellate body becomes incapacitated, as it may later this year, even the U.S. cases – of which there are at least two pending meant to protect American agriculture – would be derailed. “The entire global trading system and the WTO dispute resolution process have been good for U.S. agriculture,” Ben Conner, the vice president of policy at the Washington-based US Wheat Associates, told Bloomberg. If the two U.S. claims are appealed, they “could be among the first to get stuck in legal limbo without a functioning appellate body.” Bloomberg noted that ag has become “a contentious political issue given Trump’s strong support in farm states,” as global players such as China and the European Union use their huge consumption of American commodities as leverage in negotiations. The trade war has led the USDA to predict that farm exports will fall by $3 billion in 2019 and caused the Trump administration to authorize a $12 billion aid package to help farmers affected by the dispute. The context of the report is the decision by the administration to withhold appointments to the WTO’s appellate body to protest what it says are abuses by the dispute settlement authority. The seven-member panel has been reduced to three, the minimum number required to hear an appeal. The panel won’t have sufficient members to consider new rulings after Dec. 10. The WTO is one of several fronts in the administration’s assault on the global trading system that the president argues is tilted against American interests. The Trump administration is locked in negotiations with Beijing aimed at extracting concessions to reduce the US trade deficit with China. He’s also threatened to put tariffs on imports of cars and parts that economists warn would disrupt an international auto industry that spent decades building global supply chains. The Geneva-based WTO is expected to issue decisions this year on two U.S. dispute cases that allege Beijing deployed $100 billion worth of illegal farm subsidies and imposed unfair import quotas that harm US corn, rice and wheat producers. Both cases are “pretty much slam dunks” for the U.S., Jennifer Hillman, a former WTO judge who now teaches trade law at Georgetown University, told Bloomberg. “We really have to fix the appellate body now,” she said. Without it you may “lose the ability to collect your winnings because there won’t be a binding way to force other countries to come into compliance.” A ruling against China in either case could force Beijing to reform its agricultural policies – something that could help make America’s farmers become more competitive. “If we win those cases, we would expect China to appeal,” said Floyd Gaibler, the director of trade policy for the Washington-based U.S. Grains Council. That would leave the status of those claims uncertain and “we are very concerned about this,” he said. In 2017, China imported a total $24.2 billion in American agricultural products. Combined purchases slumped by a third to about $16 billion last year as China’s retaliatory tariffs on American farm goods reduced imports. The administration’s message to farmers is “to be patient and be patriotic – but they are getting very concerned and anxious that they are not seeing an end to this,” Hillman said. Lawmakers like Representative Kevin Brady, R-Texas, are urging the Trump administration to fix the WTO’s dispute settlement problems rather than precipitate its paralysis. “We want that appellate body dispute resolution approach, we want that to work,” Brady said recently in in Washington. “And we need to make reforms to do that.” It is unlikely that the administration will ever be a fan of the WTO or its dispute settlement system, but the international trade regulations are widely perceived as very important to several sectors of the U.S. economy – and pressure to achieve reforms without abandoning the basic structure likely will be intense. This is an important issue that producers should continue to watch closely as this fight intensifies, Washington Insider believes.