FT: Trump Exploring Alternatives to Taking Trade Disputes to WTO

U.S. would remain WTO member, but officials asked to draft list to level trade sanctions

The Trump administration is exploring alternatives to taking trade disputes to the World Trade Organization in what would amount to the first step away from a system that Washington helped to establish more than two decades ago, the Financial Times (FT) reported.

Incoming officials have asked the U.S. Trade Representative’s office to draft a list of the legal mechanisms that Washington could use to level trade sanctions unilaterally against China and other countries. Their goal, people briefed on the request told the FT, is to find ways that the new administration could circumvent the WTO’s dispute system.

While the U.S. would remain a WTO member under the Trump administration’s plans, the officials’ move reflects the skeptical view many of them have of an institution they see as a plodding internationalist bureaucracy biased against U.S. interests, the FT article noted. It said the development “illustrates how Donald Trump, who has vowed to pursue an ‘America First’ foreign policy, is setting out to test a global economic order that his predecessors helped to build and defend.

Trump has already pulled the U.S. out of the Trans-Pacific Partnership (TPP) trade pact in what Steve Bannon, a senior adviser, described last week as: “one of the most pivotal moments in modern American history.”

“There is growing frustration that this [WTO] system alone is not enough to get countries to honor their trade commitments,” said John Veroneau, USTR’s general counsel during the administration of George W Bush, according to the FT article. “It is clear that the Trump administration is sympathetic to this view.”

The White House refused to say whether it remained committed to the WTO, the FT noted. “We aren’t going to comment on trade policy until we have a USTR in place,” said Lindsay Walters, deputy press secretary. “It would be premature to say that the administration is ‘committed’ to any specific policy until that point.

Comments: This is something we feared could occur, if it is confirmed, and if it does, it is coming sooner than our initial fears thought. Trump and his aggressive trade team are just that – aggressive. But trade policy moves sometimes have a way of sprouting unintended consequences. And this change if taken would likely result in that happening. Trump officials will likely say they are just using “mechanisms” available to them. But any confirmation of this move would at least increase the odds of growing trade policy frictions around the world.

This could also complicate efforts or add another layer to efforts by the Trump administration to pursue bilateral trade agreements, particularly those with countries that had been part of TPP.

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