The WTO Couldn’t Change China, so Robert Lighthizer Found Another Way
After President Trump imposed steep tariffs on Chinese imports in 2018, Beijing did what aggrieved trading partners typically do: It complained to the World Trade Organization. Last month, a WTO panel ruled in its favor, declaring most of the U.S. tariffs violated the organization’s rules. The victory is hollow. The ruling is subject to appeal to the WTO’s top court, the Appellate Body, but that body isn’t functioning because the U.S. has blocked the appointment of new members. Thus, the “phase one” trade deal the U.S. and China reached in January will, for the foreseeable future, govern their bilateral relationship, not the WTO. The outcome formalizes the reset in U.S. trade policy the Trump administration has pursued since taking office in 2017. Mr. Trump hasn’t destroyed the global-trading system as some had feared, but he has fragmented it. Historically the U.S. sought rules and institutions like the WTO that apply equally to everyone. Under Mr. Trump, the U.S. now crafts its own rules, as it has with China, according to what it considers its own best interest.
The approach has attracted criticism as contrary to historic U.S. support for free trade and multilateralism. Yet it is hard to deny that it has an underlying logic. That is in large part thanks to the person most responsible for it, U.S. Trade Representative Robert Lighthizer. Throughout his long career advising Republican politicians and representing U.S. steel companies hurt by imports, Mr. Lighthizer developed strong views about the many flaws in U.S. trade policy, and how to fix them if he got the chance. Some of the most important involve the WTO, which in 1995 succeeded the General Agreement on Tariffs and Trade (GATT)
Appeals were supposed to be rare, but they are now commonplace, and the Appellate Body, backed by a large professional staff, has increasingly gone beyond ruling on the case at hand to creating a body of jurisprudence to govern future cases.
USTR says up to 90% of cases against the U.S. have led to a finding that some U.S. law or measure violated WTO commitments. True, the U.S. brings lots of WTO cases and wins the vast majority, but what Mr. Lighthizer focuses on is that the U.S. is sued more often than anyone else despite having among the world’s lowest trade barriers. “We’ve had to make changes in our laws, which were never negotiated, never conceded and were never paid for,” Mr. Lighthizer said in an interview. “And the consequences have been, we have fewer people working in good jobs.”
The WTO’s next major flaw, in Mr. Lighthizer’s view, was admitting China as a member in 2001. The GATT worked because it was between countries with similar political and economic systems. China’s authoritarian state-directed economy didn’t fit that mold, and WTO rules couldn’t adequately address many of its practices, from currency manipulation to forced technology transfer. The WTO’s Appellate Body tilted the rules further in China’s favor—for example, by making it difficult to punish anticompetitive subsidies that come via state-owned enterprises, which dominate China’s economy.
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