It would appear that Donald Trump has simply no clue at all about how the World Trade Organisation works. For if he did he’d not make a threat so risible as thinking of withdrawing America from the WTO. He’s entirely missed the point of the entire arrangement – it’s to limit the tariffs that other people can charge upon your exports. Well, that plus a mechanism by which we all get to hold governments to the promises that they make – it being generally thought that capricious government is not a good thing.
And yet we get this:
Donald Trump has threatened to pull the United States out of the World Trade Organization if it doesn’t “shape up” and treat the US better. The US president issued the threat against the international trade body during an interview with Bloomberg news.
The WTO was established to provide rules for global trade and resolve disputes between countries.
Mr Trump says the body too often rules against the US, although he concedes it has won some recent judgments.
He claimed on Fox News earlier this year that the WTO was set up “to benefit everybody but us”, adding: “We lose the lawsuits, almost all of the lawsuits in the WTO.”
The first effect of leaving the WTO would be that the tariffs faced by American exports could leap, soar. This isn’t, to put it mildly, what Trump desires.
The complication comes from what is known as “most favoured nation” status plus the very point of WTO membership in the first place.
If you’re not a WTO member – and there aren’t that many countries which aren’t – then you can charge any tariff upon imports you like. Obviously, it’s best if you charge none but that’s not how domestic politics works. So, you join the WTO and agree not to charge more than a certain amount. Then you also agree that other WTO members will all be treated the same. So, if you charge less than this maximum allowed to one country, on one product, then you’ve got to charge all WTO members that same lower rate on that product.
That is, the WTO lowers tariff levels. So, Trump wants to have lower tariffs on US exports and also wants to leave the WTO? Not sensible, is it? We can even look at non-MFN or WTO tariffs that the US charges. Beverage and tobacco products are 16.8 % under WTO MFN, 92% when not. And the thing is, near every other country also has those sorts of differences in tariff rates. If you’re outside the WTO then your exports are going to have those sorts of charges added to them. Just not what Trump wants, is it?
As to the court cases, the dispute resolution, all this is is an insistence that governments live up to the promises they’ve made at the WTO. Seems reasonable enough, right? And if the US is losing such cases – which it doesn’t actually – then that’s just a reflection of how the US isn’t holding up to the things it has agreed to. You know, if the Feds kept getting dinged because they were violating Roe v Wade then we’d say that’s the Fed’s fault, not the courts, right?
Trump’s simply wrong about trying to get out of the WTO, he just doesn’t grasp the most basic facts about it.