The weekly trade merry-go-round: Trump wants to withdraw from the WTO

It’s Monday before July 4th, and the president wants to celebrate early with another trade policy shock. As reported by Axios on Friday, and then picked up widely by other press sources, Trump has “repeatedly,” and quite recently, threatened to withdraw the US from the World Trade Organization (WTO). He admonished his staff: “The WTO is designed by the rest of the world to screw the United States.” And in an interview with NBC’s Chuck Todd, the president had asserted: The WTO is a disaster” and “we are going to renegotiate (the WTO agreement) or we are going to pull out.”

Once again, as I have previously noted regarding Larry Kudlow, Trump’s beleaguered staff is left to sweep up the streets after the president’s carriage has passed by. In this case, Treasury Secretary Steve Mnuchin issued a classic Washington “non-denial denial.” He called the report “fake news” but only actually claimed that it was an “exaggeration.” He then conceded: “The president has been clear… that he has concerns about the WTO,[that] he thinks there’s aspects that are not fair, he thinks that China and others have used it to their own advantage, but we are focused on free trade.” (Later on Air Force One Friday, the president told reporters that he wasn’t “pulling out” of the WTO “at this point,” but again blasted the organization as “unfair” to the US.)

This has set off another legal debate, foreshadowed earlier with similar withdrawal threats regarding NAFTA and the US-Korea free trade agreement. Trade scholars are divided as to whether a president can unilaterally, and independently, withdraw from trade agreements, with some holding that the executive’s broad authority over foreign affairs gives the office sweeping authority. Others hold that, given the fact that the US Constitution gives final authority over interstate and foreign commerce definitely to Congress, that Congress must be part of any withdrawal process. In any case, only Congress could change implementing legislation associated with a trade agreement.

In a fundamental sense, the legal arguments may be irrelevant. The Trump administration is already gravely undermining the legitimacy of the WTO by the president’s expression of contempt for the body, and by specific actions that have stymied further multilateral progress. Here the well-honed skills of US Trade Representative Robert Lighthizer have been a crucial factor. Lighthizer is steeped in WTO law and practice, and he has overseen a series of US stands to undermine the working of the organization: from refusing to allow the appointment of new judges, to recently advancing a novel (and spurious) claim that decisions are invalid if the Appellate Body went beyond the allotted time for a judgment. The US also refused to seriously discuss plans for new WTO trade negotiations at a meeting last year in Argentina.

The point is: why endure the political blowback from a full-scale withdrawal when you can achieve the same result through clever attrition?

Update: In another scoop over the weekend, Axios’ Jonathan Swan revealed that some months ago, President Trump had ordered legislation drafted that would “blow up” the WTO. The bill would violate one of the WTO’s founding principles: the “most-favored-nation” provision that mandates that WTO members set the same tariff rates for all other WTO members. Under the proposed legislation, the US would be free to vary tariffs among its trading partners (known in trade jargon as “conditional most-favored-nation”).

White House trade aide Peter Navarro constructed the bill, and it was described to the president, though he was never formally briefed on its exact contents. Oher White House aides – specifically Legislative Affairs Director Marc Short -told Navarro that it was “dead on arrival,” in that Republicans in Congress would never agree to giving the president such a free, unilateral hand. Still, as demonstrated on Friday, the president himself keeps coming back to alleged “unfair” shortcomings of the WTO.

And in an interview with CNBC today, Commerce Secretary Wilbur Ross, after also blasting the WTO, would only say that “it’s a little premature to think about simply withdrawing.” So stay tuned…

This article provided by NewsEdge.