The meeting between President Trump and Chinese President Xi Jinping during the G-20 summit meeting in Argentina failed to yield a new trade deal, it did, however, yield a 90-day truce. But Trump has already signaled that if there is no “real deal” it’s more tariffs for China.
As I’ve explained before, there are plenty of other remedies to push back against Beijing’s unfair trade practices that don’t involve clobbering the U.S. economy. Chief among these is the specific targeting of companies identified by the U.S. as violating laws or agreements. But there’s another tool that the Trump administration should leverage as well: the World Trade Organization.
The WTO has a built-in mechanism to work out disputes between member countries like the U.S. and China. Dispute Settlement Understanding offers a binding legal framework for countries to challenge trade practices and for the trade body to enforce consequences.
That works because joining the WTO is essentially like joining a huge trade deal with every other member nation. To join, countries have to agree to all sorts of regulations promoting free trade and can be held accountable through the organization with real consequences.
That should work in Washington’s favor, as China has clearly violated a number of WTO provisions. The U.S., as a member nation itself, can hold it accountable through DSU for everything from anti-competitive rules to lack of intellectual property protections and even the much talked about Made in China 2025 initiative.
Such legal challenges targeting state-subsides to key sectors, intervention and a slew of Beijing’s other anti-free trade policies would almost certainly prevail in dispute settlement, paving the way for the U.S., in coordination with other members of the WTO to hold China accountable on terms that it has already agreed to.
Instead, the Trump administration has done the opposite. As Claude Barfield explains in AEIdeas, the administration is “undercutting one of its own goals.”
Barfield outlines how instead of working to challenge China through the WTO, the Trump administration has worked against the functioning of the trade body. Not only has Trump publicly leveled criticism at the WTO and threatened to leave, but his administration has also failed to support reforms that would enable it to function.
The U.S. has blocked appointments of new WTO judges, which the organization desperately needs, and refused to even consider proposed reforms while also refusing to propose reforms of its own.
This Washington-created impasse means that the U.S. has effectively prevented itself from challenging China. Worse, as U.S. legitimacy wanes from failure to engage, China’s active role is giving Beijing greater clout in WTO reforms.
If Washington is serious about pushing China to reform, this is the wrong way to do it. Trump would do far better to engage with allies in the WTO, create meaningful reforms and pursue legal remedies rather than engaging in a trade war in hopes of a new deal. After all, many of the administrations stated goals could already be enforced through the WTO.
But, if the U.S. continues to purse it’s trade war while blocking reforms in the WTO, it may well find the tables turned with Washington on the losing end of a challenge from China over tariffs.
