TWN Info Service on WTO and Trade Issues (Mar18/08)
12 March 2018
Third World Network
       
DG warns on trade wars, but silent on Trump denigration of WTO
Published in SUNS #8638 dated 9 March 2018

Geneva, 8 Mar (D. Ravi Kanth) - The World Trade Organization (WTO) remained understandably concerned Wednesday about the United States President Donald Trump's proposed safeguard actions on steel and aluminum citing dubious national security considerations, but remained conspicuously silent over his remarks that the WTO is "a catastrophe" and "the World Trade Organization makes it impossible for us to do good business."

On 26 February, President Trump, in unsolicited remarks before the global broadcasting channels, had said "We lose the cases, we don't have the judges, we have a minority of judges."

Trump also lashed out at India for imposing 50% tariffs on Harley Davidson motorcycles.

Subsequently, the US President ratcheted-up his safeguard campaign threatening that he is not bothered by "trade wars." He said "trade wars are good and easy to win."

In a veiled attack on Trump's invocation of the "trade war" threat, the WTO director-general Roberto Azevedo, without referring to the US President or the proposed safeguard actions on steel and aluminum, said: "In light of recent announcements on trade policy measures, it is clear that we now see a much higher and real risk of triggering an escalation of trade barriers across the globe."

Azevedo did not mention by whom and which country or countries the trade policy measures were announced, though it is common knowledge that there is the only country, the United States, which is resorting to the unilateral trade measures.

"Once we start down this path, it will be difficult to reverse direction," said Azevedo, using a famous remark by Mahatma Gandhi that "an eye for an eye will leave us all blind."

(The trade wars threat), Azevedo said, will leave "the world in deep recession."

Surprisingly, when a president of the world's largest trading nation is openly abusing the WTO by calling it a "catastrophe" and that it works against the interests of the US, neither the WTO director-general nor the Secretariat had any comment or assessment that the charge was baseless and without evidence.

Asked at a press briefing after the General Council meeting on 7 March to clarify whether there is any response to Trump's characterization of the WTO as a "catastrophe", the WTO spokesperson Keith Rockwell responded: "No comment."

When pointed out that the director-general had chosen to issue a statement after President Trump's threat of a trade war but not on his damaging remarks that the WTO is a catastrophe, Rockwell repeatedly said: "no comment, no comment."

Such is the selective response from the WTO to remarks from the US President and the repeated US actions to paralyze the WTO's highest adjudicating body for trade disputes. So far, only one country has brought the WTO to heel on two fronts - the negotiating and dispute settlement fronts.

But, for inexplicable reasons, director-general Azevedo has refrained from pointing a finger directly at the country which remains a source of all untoward developments at the WTO.

When the African Group decided to block the Trade Facilitation protocol in early 2014, Azevedo had travelled several times to key African countries and exerted pressure through the US to give up their opposition to ratifying the protocol, pointed out an African trade envoy who asked not to be quoted.

Why is it that the director-general now remains silent when the US blocked the reappointment of Korea's Seung Wha Chang for a second term at the Appellate Body (AB) or when the US has repeatedly blocked the launch of a selection process for filling three vacancies at the AB, trade envoys ask.

Yet, Azevedo is ready to subtly up the ante on plurilateral initiatives for e-commerce, investment facilitation, and disciplines for micro, small and medium enterprises even though they were rejected multilaterally at Buenos Aires more than two months ago.

Even though he continues to operate as the chair of the Doha Trade Negotiations Committee that was established in 2002, he refuses to speak about the unresolved Doha issues.

Nonetheless, when the United States President Donald Trump signalled that "trade wars are good" and "easy to win," he revived the memories of the Boston Tea Party of 16 December 1773.

That was primarily a political protest against the Tea Act of 10 May 1773 enacted by the colonial ruler Britain.

The Sons of Liberty in Boston, Massachusetts, which spearheaded the protest, led in destroying an entire shipment of tea sent by the East India Company. The retaliation by the native Americans, according to several historians, led to the American Revolution.

In effect, the Boston Tea Party could be counted/reckoned as one of the first trade wars in which a measure imposed by the British government led to an unstoppable retaliatory action on the shores of America. Prior to this historic event, the Dutch East India Company and the British East India Company had triggered off many trade wars but the native populations remained unsuccessful in their retaliatory actions.

Subsequently, the United States, Britain, France, and the Netherlands among others slapped high import duties for a period of more than 150 years to build their domestic industries until another unilateral measure called the Smoot-Hawley Tariff of 1930 by the US led to another bout of tit-for-tat retaliatory measures.

However, several economists have argued that the Smoot-Hawley Tariff followed by the Reciprocal Tariff Act of 1934 was part of a larger macroeconomic program of President Franklin D Roosevelt in response to the Great Depression. Nevertheless, the passage of the Smoot-Hawley Tariff exacerbated the Great Depression, according to economic historians.

After more than 240 years, the US is now prepared to enter another trade war this time for rebuilding the domestic steel and aluminum industries that are currently claimed to be in a death spiral, even though it is working at 70 percent capacity, and at a profit, according to US economists and trade law community critical of US announced plans.

[See Paul Krugman's columns in New York Times: A Ranting Old Guy With Nukes on 5 March; The Macro-economics of Trade War on 3 March; and Trade War, What Is It Good For? Absolutely Nothing, 3 March. SUNS. Also, http://worldtradelaw.typepad.com/ielpblog/2018/03/what-a-wto-complaint-against-section-232-tariffs-might-look-like.html; and http://worldtradelaw.typepad.com/ielpblog/2018/03/how-should-countries-retaliate-against-the-steelaluminum-tariffs.html. SUNS]

The Trump administration, in an attempt to accomplish its electoral promises on trade, has invoked section 232 of the Trade Expansion Act of 1962, which allows the US to impose trade restrictions in the name of national security. This particular provision, the Trump administration believes, will enable the Trump Administration to circumvent the core provisions of the World Trade Organization's Safeguards Agreement.

President Trump announced that he intends to impose a safeguard duty of 25% on steel and 10% on aluminum in an attempt to protect the domestic steel and aluminum industries that are allegedly "ripped" off by imports from China, and even friendly countries like the European Union.

"People have to understand, our country, on trade, has been ripped off by virtually every country in the world, whether it's friend or enemy - everybody - China, Russia, and take people that we think are wonderful, the European Union," President Trump told reporters on 5 March.

"No, we are not backing down," he said, asserting that he is not going to spare either Mexico or Canada, which are the major suppliers of steel and aluminum products.

On Wednesday (7 March), the US administration indicated that the steel and aluminum safeguard duties will not be imposed on all countries, particularly Canada and Mexico. Clearly, the US signalled the softening of positions on the safeguard issue.

However, it is very unclear why countries that believe in "free trade" would want to retaliate in response to President Trump`s actions if, from that perspective, higher tariffs harm the country imposing them.

So, responding to a tariff increase with a similar response on selective imports would appear to be a self-harming strategy, said an analyst on globalization, who asked not to be quoted.

"Of course, if the free trade lens is a poor way of understanding international trade relations things might be different," the analyst said.

In an article in SUNS (#8419 dated 10 March 2017), it was argued that the global hegemon is determined to pursue an aggressive version of the "open door" policy that was first implemented in 1898. That policy began under the dubious slogan of saving Cuba from the clutches of the Spanish rule.

Several years after the Cuban war, the American Bureau of Foreign Commerce of the Department of Commerce said: "The Spanish-American war was but an incident of a general movement of expansion which had its roots in the changed environment of an industrial capacity far beyond our domestic powers of consumption... It was seen to be necessary for us not only to find foreign purchasers for our goods but to provide the means of making access to foreign markets easy, economical and safe," as quoted by the historian Howard Zinn in his book - "A People's History of the United States,"- page 306.

The long journey of the "open door" policy continued to manifest under different masks but beneath the surface, there remained continuity, regardless of the destruction and violence it had caused in various countries. It wore, for example, a reformist mask since the setting up of the United Nations, the Bretton Wood institutions of the International Monetary Fund and World Bank, and followed by the General Agreement on Tariffs and Trade in January 1948.

During the last seven decades, the United States, the most powerful nation in history, went on to refine/perfect the "open door" policy in ways that suited its overall trade/economic interests and strategic considerations, including its immediate military and trade priorities, according to several studies by historians and economists.

The creation of the World Trade Organization following the Uruguay Round of Trade Negotiations in 1995 is an apogee of that onward march which began almost a century ago. Although the Uruguay Round started during the reign of the Republican administration in 1986, it was concluded by the Democratic President at the official level in December 1993.

Unsurprisingly, there is always an underlying chain of continuity in the economic and trade policies followed by the global hegemon since the late 19th century. The US control over these so-called multilateral trade institutions is pervasive in almost all aspects. Barring some minor hiccups here and there, Washington ensured a brutal grip on decisions taken at the IMF, the World Bank, and the WTO."

Therefore, regardless of the Trump administration's hyper-sensitive actions which are being severely criticized by many WTO members, the WTO director-general is yet to directly challenge the US either by showing the mirror or rallying members for a common stand against the US postures.

Surprisingly, the director-general is willing to mount an extraordinary effort for bringing multilaterally-discarded new issues into the WTO through an open and inclusive framework. But when it comes to the US, he takes a backseat because of his historic proclivities, according to several current and former trade envoys, who asked not to be quoted.