Trump’s War on the WTO: Undermining the Dispute Settlement Body

By Anna Schwartz
Anna Schwartz is a sophomore at the University of Pennsylvania studying Political Science, French, and Economic Policy.

​The purpose of the WTO is to promote fair, efficient, and free global trade. At the heart of the WTO is its Appellate Body (AB), which resolves conflict between member states through processes of appeals and dispute settlement. Seven members serve on the AB with four year terms that are renewable once. The judges are balanced to reflect a range of nationalities, but do not act on behalf of their countries. Rather, they are experts in international trade who are chosen to temporarily speak for the WTO [1]. Through the reduction of the AB and threats of noncompliance with WTO decisions, President Donald Trump is executing a multi-pronged attack on the global trade system.

Gradual eroding of the AB by the United States is not new. Specifically, the US has objected to decisions against US anti-dumping policies. A country is considered to be “dumping” when they lower export prices to undercut competition and form a monopoly in an international market. Retaliatory tariffs aim to bring the product up to a fair price, but the WTO has found that the US abuses them in the steel industry [2, 3]. Consequently, the AB board members who rule against the US become unliked by the US [4]. The US expresses its dissatisfaction with these members by threatening the AB as a whole.

Blocking the reappointment of judges undermines the court by freezing its procedures and weakening its legitimacy. Since terms expire every four years, members must be renewed or new members must be selected to take their spots. The appointments are approved by consensus, so any nation in the WTO can veto a new or returning judge. To hear an appeal, at least three members are required. If the body shrinks to two members, it is rendered irrelevant. Moreover, any reduction in the size of the AB diminishes its validity. Since the judges are diversified to represent geographical regions with distinct customs, fewer members leads to a smaller reference base of legal principles. Former president Barack Obama was the first to use this strategy during his administration: he decided not to reappoint two American members and then blocked the appointment of a South Korean member. Yet following months of protests from other members of the WTO, Obama agreed to the appointment of two new members from South Korea and China [5]. At the end of Obama’s term, six judges sat on the AB. Trump has adopted the approach to all but destroy the dispute settlement system. 

Throughout his time in office, Trump has vetoed the reappointment of all members who have reached the conclusion of their four year cycles, and failed to nominate replacements. In December 2018, the US trade representative blocked the most recent reappointment. Only one appellate each from the US, China, and India remain [6]. If he acts consistently going forward, the AB will fall apart later in 2019, when two of the last three judge’s terms are set to expire [7]. While Trump conducts an underground assault on the AB, he conducts a second, more public attack with his rhetoric.

Trump has not hid his contemptment for the WTO. In August 2018 he announced that “if they don’t shape up, I would withdraw from the WTO.” Even further, he claims that the US has “rarely won a lawsuit except for last year,” but “in the last year, we’re starting to win a lot… Because they know if we don’t, I’m out of there” [8]. However, of the 54 cases brought by the US over the life of the WTO, it won at least one finding in its favor in 49 of them, or 91 percent of the time. Of the 80 cases brought against it, a WTO panel ruled against it in at least one aspect in 69 cases, or 86 percent of the time [9]. In US-China disputes over the last sixteen years, the win-loss ratio is 19-0, with four cases pending [10]. Thus the US wins about as much as it loses, if not more. Its record with China is particularly favorable. Still, Trump releases statements saying the contrary, damaging the organization's reputation. 

At every available opportunity, the president chips away at the foundations of the global trade system. In response to a Chinese complaint in March 2019, Trump announced that import tariffs are necessary to national security. If filed to the WTO, the argument would set a bad precedent: a broad definition of security that could justify any unfair trade practice [11]. In the same month, the dispute settlement body attempted to meet to discuss Venezuela’s effort against American tariffs. Trump refused to approve the agenda because he did not want to recognize president Nicolas Maduro’s regime. Event schedules must pass by consensus, but approval is historically a formality. A WTO agenda has not been turned down since 1999. [12]. Both examples show Trump’s willingness promote his political interests at the expense of the WTO. Whether it is through the diminishment of the AB or the devaluing of its name, Trump is likely to cripple the fundamental conflict resolution mechanism of international trade.

Works Cited
[1] "Appellate Body Members." WTO. Accessed March 27, 2019. https://www.wto.org/english/tratop_e/dispu_e/ab_members_descrp_e.htm.
[2] Elsig, Manfred, Mark Pollack, and Gregory Shaffer. "Trump Is Fighting an Open War on Trade. His Stealth War on Trade May Be Even More Important." The Washington Post. September 27, 2017. Accessed March 27, 2019. https://www.washingtonpost.com/news/monkey-cage/wp/2017/09/27/trump-is-fighting-an-open-war-on-trade-his-stealth-war-on-trade-may-be-even-more-important/?utm_term=.a18a96c3376f.
[3] "Technical Information on Anti-dumping." WTO. Accessed March 27, 2019. https://www.wto.org/english/tratop_e/adp_e/adp_info_e.htm.
[4] Elsig, Manfred, and Mark A. Pollack. “Agents, Trustees, and International Courts: The Politics of Judicial Appointment at the World Trade Organization.” European Journal of International Relations 20, no. 2 (June 2014): 391–415. doi:10.1177/1354066112448201.
[5] Ibid., at 2.
[6] Ibid., at 1.
[7] Hillman, Jennifer A. "How to Make the Trade War Even Worse." The New York Times. December 17, 2018. Accessed March 27, 2019. https://www.nytimes.com/2018/12/17/opinion/trade-war-china-wto.html.
[8] Micklethwait, John, Margaret Talev, and Jennifer Jacobs. Bloomberg. August 31, 2018. Accessed March 27, 2019. https://www.bloomberg.com/news/articles/2018-08-30/trump-says-he-will-pull-u-s-out-of-wto-if-they-don-t-shape-up.
[9] Ibid., at 8.
[10] Schott, Jeffrey J., and Euijin Jung. "In US-China Trade Disputes, the WTO Usually Sides with the United States." Peterson Institute for International Economics. March 12, 2019. Accessed March 27, 2019. https://piie.com/blogs/trade-investment-policy-watch/us-china-trade-disputes-wto-usually-sides-united-states.
[11] Lawder, David. "U.S. Says Rejects WTO's 'straitjacket' of Trade Obligations." Reuters. March 02, 2019. Accessed March 27, 2019. https://www.reuters.com/article/us-usa-trade-china/u-s-says-rejects-wtos-straitjacket-of-trade-obligations-idUSKCN1QJ01R.
[12] Keaten, Jamey. "US Ratchets up Dispute with Venezuela's Maduro at WTO Body." Associated Press News. March 26, 2019. Accessed March 27, 2019. https://apnews.com/800ad6751ae54c518e144af9603ef782.
Photo Credit:  Matthew Bey 
https://worldview.stratfor.com/article/trump-and-wtos-uncertain-future
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