As President Trump tries to make good on campaign promises to get better deals for America, he has his sights set on the World Trade Organization, which he feels has treated the U.S. “very, very badly.” A leaked bill, obtained by Axios, puts starkly what many have known for a long time: Trump is no fan of the WTO and he doesn’t think that the U.S. should have to play by the rules it helped to set. Regardless of what the president thinks about the international trade body, however, undermining the WTO will hurt the United States.
The draft bill, with the unfortunate title of United States Fair and Reciprocal Tariff, or FART, Act, would allow the president to ignore basic principles of the WTO and negotiate with individual nations and do so without the approval of Congress. Specifically, the bill would undermine the WTO’s “most favored nation” principle which prevents countries from imposing different tariff rates for different countries outside of free trade agreements and bound tariff rates, which prevents raising the tariff ceiling that each WTO country has already agreed to.
This leaked bill seems like a Trump pipe dream that would never get approval from Congress, but it’s important to take seriously Trump’s dislike of the WTO and its potential consequences.
Indeed, on Monday, Trump targeted the WTO warning that “we will be doing something” and emphasizing the need for the U.S. to be treated “properly.” This warning comes as the Trump administration wants greater ability to impose unilateral tariffs and as U.S. allies Canada and the European Union are bringing the U.S. to WTO courts over steel and aluminum tariffs.
The WTO, created in 1995, regulates international trade and replaced the General Agreement on Tariffs and Trade formed in 1948. The WTO generally works to safeguard free trade and provide a forum for resolution in trade disputes between countries. Most importantly, it offers a degree of stability and predictability that has allowed for the rapid expansion of trade networks among nations — to the benefit of everyone involved, including the United States.
Without participation in the WTO, the U.S. would lose access to markets abroad and the WTO dispute mechanism. U.S. firms would also suffer from the loss of the “most favored nation” principle, which could lead to higher tariffs, higher production costs, and resulting in fewer profits and fewer jobs.
It is true that, at times, the WTO has forced the U.S. to change policies Congress didn’t want to change, however, the WTO has largely agreed with the U.S. The WTO has generally sided with America and, despite the efforts of countries like China to avoid playing by the rules, ensured that free trade, the back bone of modern globalized development, continues apace.
Although Trump has denied plans for a U.S. withdrawal from the WTO, the draft bill and his continued bashing of the organization, along with recent tariffs, are more than enough to threaten free trade, which, in turn, undermines American economic interests and our position as a global leader. Trump should realize it’s better to be part of an organization where we can call most of the shots than to go it alone.
