China, which is a great economic power, is considered a Developing Nation within the World Trade Organization. They therefore get tremendous perks and advantages, especially over the U.S. Does anybody think this is fair. We were badly represented. The WTO is unfair to U.S.
— Donald Trump, April 6, 2018
That’s a quote from the vaunted presidential Twitter feed and when it hit back in April it came as no surprise.
Trump’s populist platform is built in part on an express disdain for globalization and multilateralism and the World Trade Organization is an easy target. In fact, the WTO is in many ways the perfect target for Trump, as it represents a collective that presides over a global trade regime that he variously blames for gutting flyover America and destroying U.S. industries.
The tweet cited above presaged a series of stories about Trump’s plans for the WTO. On June 29, Axios reported that Trump has “repeatedly told top White House officials he wants to withdraw the United States from the WTO.”
“He’s [threatened to withdraw] 100 times. It would totally [screw] us as a country,” one source who’s conferred with Trump on the issue reportedly said, before paraphrasing (maybe) the President as follows:
We always get f*&ked by them [the WTO]. I don’t know why we’re in it. The WTO is designed by the rest of the world to screw the United States.
Later that morning, Steve Mnuchin was dispatched to Fox News to do some damage control.
“There’s no breaking news here,” Mnuchin told Maria Bartiromo, before promising not to use the term “fake news” and then immediately using the term “fake news” after an elated Bartiromo jumped at the opportunity to goad him into employing Trump’s favorite derisive media meme which has since morphed into “enemy of the people”. Here it is in creepy slow motion:
You're welcome… pic.twitter.com/MUNpopm5mz
— Heisenberg Report (@heisenbergrpt) June 29, 2018
Axios defended their story and just three days later, published the details of what they said was a “leaked draft of a Trump administration bill – ordered by the president himself – that would declare America’s abandonment of fundamental WTO rules.” Here were the key points from that memo:
Why it matters: The draft legislation is stunning. The bill essentially provides Trump a license to raise U.S. tariffs at will, without congressional consent and international rules be damned.
The details: The bill, titled the “United States Fair and Reciprocal Tariff Act,” would give Trump unilateral power to ignore the two most basic principles of the WTO and negotiate one-on-one with any country:
- The “Most Favored Nation” (MFN) principle that countries can’t set different tariff rates for different countries outside of free trade agreements;
- “Bound tariff rates” – the tariff ceilings that each WTO country has already agreed to in previous negotiations.
“It would be the equivalent of walking away from the WTO and our commitments there without us actually notifying our withdrawal,” said a source familiar with the bill.
You’ll note that the acronym for the proposed bill (the United States Fair and Reciprocal Tariff Act), could potentially be “FART”. The prospect of Trump blowing up the global trade order with a “FART” plan was too much for the internet, which erupted into a veritable frenzy.
Asked by Axios to describe the plan, one source called it “insane”.
Well, On Thursday, as part of a sweeping interview with Bloomberg that covered every topic imaginable, Trump said he might still pull the U.S. out of the WTO depending on how the organization acts. Here are some quotes:
If they don’t shape up, I would withdraw from the WTO. It was the single worst trade deal ever made.
In the last year, we’re starting to win a lot. You know why? Because they know if we don’t, I’m out of there.
Do note that he characterizes every trade deal made prior to his presidency as “the worst deal ever made.”
Also, don’t forget that this administration’s characterization of the WTO is misleading at best and designed to deceive gullible Americans at worst. Here’s the reality, from The “Economic Report of the President”:
The efficacy of WTO dispute settlement mechanism remains an area of active debate. Davis (2012) finds that the United States gets better outcomes via formal WTO adjudication than negotiation, increasing the probability that the complaint will be resolved and decreasing the time it takes to remove the barrier in question. Mayeda (2017) finds that the United States has won 85.7 percent of the cases it has initiated before the WTO since 1995, compared with a global average of 84.4 percent.In contrast, China’s success rate is just 66.7 percent. Most U.S. WTO cases target China (21) and the European Communities (19). When the United States is the respondent, it still wins 25 percent of the time, a rate that is better than the global average rate of 16.6 percent (Mayeda 2017). In comparison, the EU and Japan have won 0 percent of the cases brought against them, while China has won only 5.3 percent of the time (Mayeda 2017). Nonetheless, because countries may initiate or decline to initiate cases based on their perceived probability of obtaining a favorable outcome in the WTO dispute process, comparisons of WTO dispute statements between countries should be taken with at least some skepticism.
And just who signed off on that report, the skeptics/Trump fans among you might well ask? Well, I’m glad you’re curious and I’m happy to answer that via the following screengrab from page 11):
Read more on Trump and the WTO: