RIP, World Trade Organization?

RIP, World Trade Organization?

The United States was hostile to the WTO for years. Then came Donald Trump.


At 2:30 am Eastern Standard Time on Wednesday, December 11, the Geneva-based World Trade Organization will open its doors shorn of its most important power. For the last quarter century, the group’s powerful Appellate Body lorded over the global economy. In more than 140 cases brought against countries rich and poor, on matters ranging from dolphin safety to financial secrecy, three individuals randomly selected from the seven-person body rendered authoritative and final rulings, scrutinizing countries’ sovereign policies for their impact (actual or potential) on trade flows.

Absent a last-minute deal, the board will cease to operate. That’s because on December 10, the four-year terms of two of its last three Appellate Body members will expire. Lacking a quorum, the sole remaining judge—Hong Zhao, a lawyer who otherwise works for a Chinese Ministry of Commerce think tank—will be unable to convene any proceedings. The proximate cause: Since 2017, the Trump administration has vetoed six attempts to fill adjudicator vacancies.

While casual observers might fret that this is yet another way that Trump is tearing down the so-called “global liberal order,” the conflict was really a long time in the making. The famously international-law-skeptical United States only reluctantly agreed to the creation of the Appellate Body in the early 1990s, but was reassured by the Europeans and others that it would rarely be used. Then, things didn’t go quite as Washington planned.

Not 16 months after it began, the Appellate Body issued its first ruling, and it was against the United States’ implementation of the Clean Air Act—precisely what Ralph Nader and his ilk worried about when they lobbied Congress to vote down the Uruguay Round Agreements Act, which green-lighted US involvement in the WTO. The United States went on to lose the vast majority of the challenges brought against it, as did other defendant countries.

A long-held bipartisan concern in the United States is the Appellate Body’s willingness to second-guess American anti-dumping and countervailing duty law, a means by which domestic producers can get temporary reprieve from “unfairly” priced imports—such as those sold below the cost of production. As Brown University’s Nitsan Chorev documents in her book Remaking U.S. Trade Policy, Congress was cajoled into supporting relatively low tariffs through assurances that the United States would retain the ability to selectively reimpose trade restrictions in exceptional circumstances following a domestic legal process. But when the WTO’s adjudicators began ruling against US anti-dumping policy, the Bush administration (hardly a bastion of hardcore protectionist sentiment) publicly accused it of “judicial activism.”

The Obama administration escalated the matter by blocking two members from their second terms. Indeed, after nearly two decades of shocks from increased Chinese imports—and with little indication that the WTO was willing or able to promote change in China’s state-led economic model—a systemic crisis was in the cards even if Hillary Clinton had won the 2016 race.

While trade experts crank out proposals to avert a sustained shutdown, official Washington has accused reformers of tone-deafness. On Friday, a group of pro-trade centrist Democrats and Republicans from Congress called on other countries to work with the Trump administration to address “longstanding concerns” with the Appellate Body. And on an episode of the podcast Trade Talks (a favorite audio haunt of liberal economists and other tariff skeptics), former Trump trade counselor Stephen Vaughn noted that “the Europeans and the Chinese and the Indians put in their own proposal, saying, well, what we really want is to have an Appellate Body with nine members, instead of seven members and an Appellate Body that has a lot more independence and a lot more resources. And all of that, of course, goes completely against the sort of things that the Americans have been talking about”—that is, a return to a less judicialized, more obviously power-based trading system.

While this may sound crude, it is not that far from the reality of how the global economy functions, WTO or no WTO. Since trade enforcement is ultimately about trade retaliation, poorer and smaller economies have always had less capacity to bring the United States to heel than vice versa. The argument for an Appellate Body, then, is that it’s good legitimacy politics to have countries feel that they can have their day in court, and that the United States will feel legally and morally compelled to comply more often than not. The process can cool temperatures and pave the way toward negotiated solutions. But if the process loses legitimacy in the eyes of its main patron, that is destabilizing. International courts that survive and thrive often need to be selectively political—total judicial independence risks backlash.

As it happens, there are indications that the current impasse was driven by independence on the part of WTO staff as as much as by that of its adjudicators. News reports indicate that a long-serving bureaucrat named Werner Zdouc has kept the WTO from correcting course on some of its past jurisprudence, instead steering adjudicators toward extending past precedent even in the non-precedent-bound world of trade law. And scholarship by Krzysztof J. Pelc and Joost Pauwelyn has concluded that it is the WTO staff that are the likely authors of nearly all lower-panel rulings that come before the Appellate Body review. If this staff-level influence is the ultimate source of what is driving US discontent, then a broader culture change and reassessment of the primacy of commerce in our international politics (not just tweaks to pay scales, as some have argued for) is in order.

With the impasse at the WTO, there’s no time like the present to think about what big structural change would look like. Bernie Sanders has been a longtime critic, leading a bipartisan resolution in 2005 to withdraw the United States from the body. Elizabeth Warren, on her part, has proposed ambitious industrial policies that would likely require or benefit from changes to WTO norms.

Even the more centrist candidates like Joe Biden have promised a change from past trade policy. Some observers are even looking back for a model to the 1948 International Trade Organization (signed but never ratified by the United States), which included trade rules alongside pro-labor and anti-monopoly provisions. This tracks a live debate among international relations scholars about whether the United States can and should use its market power to achieve progressive political objectives.

Many of these ideas hark back to those circulating 20 years ago, when progressives shut down the Seattle WTO talks. At the time, Al Gore refused to embrace the protesters—which, in retrospect, would have been an easy way to create distance from Bill Clinton, and in turn, forge a new political alignment that could have beat Trump at his populist game.

We cannot afford to take another 20 years to remake the global economy into something more just and sustainable. But Trump’s impetuous and erratic unilateralism in foreign affairs—coupled with his deconstructing of the administrative state at home—will make that task all the harder for whoever succeeds him.

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