The World Trade organization is facing disruption after 20 years of preventing trade wars
A year into President Donald Trump’s term, many observers are concluding that the administration’s “bite” against the multilateral, rules-based trading system will not be as bad as its “bark.” As evidence, they note that it is not withdrawing from the North Atlantic Free Trade Agreement (NAFTA), but pursuing a renegotiation of it and the Korea-US bilateral free trade agreement (KORUS). Only very recently have a few import restrictions on solar panels or washing machines been announced. But it would be a mistake to think that US foreign trade policy does not pose substantial risks to supply chains.
The administration has repeatedly claimed that the World Trade Organization, established in 1994 to negotiate trading rules and resolve trade disputes and now including 164 countries, is a “disaster.” As evidence of persistent discrimination against the US, the President claims that it loses all its cases at the WTO and has fewer judges than other countries.
The facts tell a different story. The US has been a complainant at the WTO more often than any other country and has prevailed in 91 percent of those adjudicated cases. During President Barack Obama’s Administration, the US was largely undefeated, including in 16 cases against China. The US also has more cases brought against it than any other member and loses most (89 percent) of those that end in adjudication. That is roughly in line with the win-lose rates of other countries.
It is also untrue that the rules for appointing panels of judges discriminate against the US. A large number of disputes are settled before litigation. Unresolved disputes are handled by a three-person panel drawn from a WTO-approved list of qualified individuals. None can be from a country involved in the dispute. Decisions may be appealed to a panel of three members chosen on a rotating basis from seven standing full-time members of the appellate body who serve four-year terms. So far, the US has had one member on that appellate body. True, the US doesn’t have majorities on the dispute settlement panels, but neither does any other country.
Over the past months, the Trump administration has been blocking the appointment of appellate body members. There should be seven members, but there were only four as of January. Three more terms expire by the end of 2019. Three members are needed to rule on any individual case. Meanwhile, cases in the backlog are building up and taking longer to resolve. The system is close to collapse; EU Trade Commissioner Cecilia Malmström has stated that the US risks “killing the WTO from the inside.”