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TWN
Info Service on WTO and Trade Issues (Sep25/04) Geneva, 1 Sep (D. Ravi Kanth) — United States President Donald Trump on 29 August announced a “Historic Pocket Rescission Package” that seeks to cancel $5 billion in foreign aid and international organization funding, particularly for the United Nations, as well as $29 million to the “toothless” World Trade Organization (WTO). For the past two years, the US has not paid its annual contribution to the WTO, which is based on its share of global trade. However, it remains unclear whether the cancellation of $29 million to the WTO applies to the current or previous financial year, according to people familiar with the development. Ironically, the Trump administration’s rescission order has come amid allegations of a publicity stunt by WTO Director-General Ms Ngozi Okonjo-Iweala, who reportedly displayed at the entrance of the WTO headquarters a memento from a US Congressional Delegation on 6 August in recognition of the WTO Secretariat’s services and contributions. The move followed the appointment of a senior White House economic official, Ms. Jennifer DG Nordquist, as a WTO Deputy Director-General, a development noted by several sources familiar with the matter. Ms Okonjo-Iweala commences her second term as DG on 1 September. In a week marked by seemingly tumultuous developments, President Trump appeared to signal a potential shift toward gradually withdrawing from various multilateral bodies, including the United Nations, the International Labour Organization (ILO), several financing initiatives under the Paris Agreement on climate change, and the Paris-based Organisation for Economic Cooperation and Development (OECD), among others. Although the rescission order was issued under the Impoundment Control Act, the US Congress had not been informed prior to the announcement of the recession package, according to media reports. On 29 August, the Wall Street Journal (WSJ) reported that President Trump sent a letter to the congressional leadership indicating his intent to cancel the funding of the activities of the State Department, international assistance programs, and the US Agency for International Development (USAID), invoking his authority under the Impoundment Control Act – a power typically limited to pausing spending under specific circumstances. Under the Act, Congress must approve the rescission order within 45 days, or else it will lapse. The WSJ suggested that without congressional approval, the proposed rescission package could fall flat. RESCISSION OF FUNDING FOR GLOBAL BODIES A close examination of the Trump administration’s approach to rescind funding for international initiatives suggests an unprecedented rupture with Washington’s long-standing role as a rule-setter in multilateral institutions that it helped establish after the Second World War nearly 80 years ago, said an analyst, who requested anonymity. According to President Trump’s proposed “pocket rescission”, the US administration seeks to cancel: * $3.2 billion in funding for USAID, an agency established to support poverty alleviation programs in developing countries. * Approximately $400 million per year for global climate initiatives, including a partnership with the Green Climate Fund, for the Barbados Blue-Green Bank for climate change mitigation; $650,000 for micro-insurance for smallholder farmers and micro-businesses in Colombia for climate disaster response; $24.6 million to build climate resilience in Honduras; $38.6 million for biodiversity and low-emissions development in West Africa. Additionally, the Trump administration seeks to rescind $521 million in funding to international organizations that “do not support major US policies or priorities” or “have been operating contrary to American interests for many years.” These include: * $45 million to the Pan American Health Organization (PAHO), the regional arm of the World Health Organization (WHO), due to “credible accusations of forced labor and human trafficking of Cuban doctors.” * $75 million per year to the United Nations Educational, Scientific and Cultural Organization (UNESCO), which the White House accused of working to “advance divisive social and cultural causes,” promoting a “globalist ideological agenda” through the UN’s Sustainable Development Goals, and fostering “antisemitism and anti-Israel sentiment.” * $29 million to the “toothless” World Trade Organization (WTO), which for decades has “aided and abetted global trade cheating by the Chinese Communist Party”. * $107 million to the International Labour Organization (ILO), which the administration described as an entity that “works to unionize foreign workers and punish US corporate interests abroad.” * An unspecified reduction in US contributions to the OECD, for facilitating “a harmful global tax deal” that allows other nations to dictate American tax policy. * US budget support for numerous smaller organizations, including the Colombo Plan Council for Technical Cooperation, the International Tropical Timber Organization, and the Pan American Institute on Geography and History. * $2.3 million for desert locust risk reduction in the Central Region and Horn of Africa, with emphasis on “gender equality,” “interculturality,” and support for “indigenous peoples.” TIME FOR US TO QUIT GLOBAL BODIES? It is widely acknowledged that over the past three decades, the US has shaped the WTO rules to align with its domestic policies, including maintaining agricultural subsidies worth over $180 billion under the guise of “Green Box” exemptions; enforcing costly patents through the TRIPS Agreement; and promoting services liberalization under the GATS, which has significantly benefited US exporters. Since the conclusion of the Uruguay Round of trade negotiations, developing countries have negotiated vigorously for special and differential treatment (S&DT) provisions. While tangible gains have been limited, they have benefited from the predictability of the multilateral trading system under the WTO, according to officials familiar with the process. Moreover, the collective bargaining power of developing countries has proven stronger than their individual voices – a contrast that is evident when comparing the provisions in their bilateral free trade agreements (FTAs) with advanced economies versus those enshrined in the WTO agreements. The potential withdrawal of the US from the WTO, following the cancellation of funding by the Trump administration and its characterization of the organization as “toothless”, would likely harm the US more than the developing countries, said a former Indian trade envoy, speaking on condition of anonymity. While developing nations may face higher tariffs – such as the 50% tariff previously imposed by the US on India and Brazil – this could ultimately serve as a blessing in disguise. Market forces would encourage export diversification and reduce reliance on the US market, whose share of global imports has steadily declined to 16%. Even if tariffs are lowered through bilateral negotiations, the lack of certainty about future tariff hikes would discourage long-term investment in export sectors targeting the US. Instead, investment would likely shift to new products and new markets, the trade envoy noted. Therefore, the trade envoy said, “developing countries should encourage this trend by providing incentives to their exporters through targeted schemes and subsidies to find new markets and add value to their exportable products.” More importantly, the trade envoy said that developing-country governments “can turn these challenges into opportunities.” The BRICS coalition – originally comprising Brazil, Russia, India, China, and South Africa -and its six new members, including the United Arab Emirates, Indonesia, Egypt, Ethiopia, Iran, and Saudi Arabia, can serve as a growth pole for South-South trade and investment. If the US were to withdraw from the WTO – a scenario deemed highly unlikely given its structural interests in global trade – Washington would not only suffer economic losses but also geopolitical and geoeconomic setbacks, weakening its position in the global order, said a trade analyst who requested anonymity. “In the WTO, developing countries will emerge as a stronger force,” the analyst added. Meanwhile, the US withdrawal from international organizations could pave the way for a more meaningful global compact and a people-centric international order, said a former UN official, also speaking on condition of anonymity. US APPEALS COURT REJECTS TRUMP’S TARIFFS While the Trump administration has advanced its proposal to cut funding to international organizations, it suffered a significant legal setback on 29 August, when a US federal appeals court struck down the reciprocal tariffs imposed by President Trump under the International Emergency Economic Powers Act (IEEPA). In a majority ruling, the court held that President Trump had overstepped his authority under the IEEPA – a law enacted in 1977 – by imposing reciprocal tariffs on nearly all US trading partners in April. In page 34 of the ruling, the majority noted: “A variety of statutes use “tariff” or “duty” or the like when conveying presidential authority, whereas IEEPA does not,” indicating that the IEEPA does not authorize tariff imposition. The voided reciprocal tariffs accounted for about 70% of projected tariff revenue in 2026, according to estimates from the Tax Foundation, though the Trump administration plans to increase levies under other legal authorities unaffected by the ruling. The invalidated measures included a baseline 10% tariff on imports from virtually all countries; higher tariffs on nations the administration labeled as “bad actors” on trade; and additional tariffs on Canada, China, and Mexico. However, the ruling did not affect sector-specific tariffs, such as the 50% duties on steel, aluminum and copper. In its unsigned opinion, the federal appeals court majority stated that while IEEPA grants the President “significant authority” during a declared national emergency, none of these powers explicitly include the ability to impose tariffs, duties, or taxes. The court emphasized that the statute contains no mention of terms like “tariff,” “tax,” or “duty.” The court reiterated that “when Congress intends to delegate to the President the authority to impose tariffs, it does so explicitly,” underscoring that the US Constitution vests the power to tax – and by extension, impose tariffs – exclusively to the legislative branch. The decision invoked the “major questions doctrine” – a principle previously used by the US Supreme Court to strike down expansive executive actions, such as the Biden administration’s student debt relief plan – on grounds that such transformative policies require clear Congressional authorization. Notably, the ruling did not follow partisan lines – judges appointed by both Republican and Democratic presidents were divided in their opinions. On 30 August, President Trump responded on his Truth Social media website, criticizing the federal appeals court ruling. “The appellate court majority that ruled against most of the president’s tariffs has it wrong,” he said. He argued: “Whether you like tariffs or not, the act at issue does, in fact, grant the president broad powers to declare an emergency.” He further claimed that: “Even more, the Constitution, under Article II, grants the president broad powers to make foreign policy. The president’s lawyers are obviously aware of this, which is why the executive orders at issue rely, in part, on serious foreign policy considerations – including, as an example, Mexico, Canada, and China, which the president has determined are not doing enough to prevent the flow of deadly drugs into our country.” According to President Trump, “The combination of broad authority and Article II powers trumps the issues raised by the court’s majority.” He added: “Moreover, judges should not be the final decision-makers about such matters, as they’re exercising authority that was never delegated to them, and they should not substitute their own policy preferences for the president’s.” He maintained that only Congress can address the issue, saying that: “Congress can amend the law or pass a new law curbing the president’s power here.” Yet, President Trump cautioned: “Congress does not have boundless power, and it could run into separation of powers issues, given Article II and the president’s foreign policy authority. The Supreme Court will, once again, rule on this.” He signaled confidence in a favourable outcome, stating that: “In the past, Justices Thomas, Gorsuch, and Kavanaugh have noted the broad authority of the president in circumstances similar to this. I expect Justice Alito would concur.” +
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