WTO dispute settlement

The Challenge of Reforming the Global Trading System

Having negotiations just over rules will require flexibility by members because it will be much harder for members to return home and clearly point to “gains” from WTO changes.  In many places, adjustments to specific provisions could even lead to short term challenges. But without any way to address legitimate demands by many members to more accurately reflect the situation in the global trade regime in 2018 and beyond, the system itself is under increasing threat. We have forgotten how important the WTO has become to the business world.  It operates like air.  It is only when it is missing that it becomes obvious how much it was needed. Without creativity and flexibility by all members, the WTO is at risk of evaporating.  The focus ought to be on updating the global rule book, rather than increasingly carving up and out smaller and smaller bits of the economy to be tailored for various member interests. 

Update: The 301 Trade "War" Countdown Has Started With China

The United States has now moved one step closer to dusting off a Cold War trade relic and applying it to China.  In authorizing US Trade Representative (USTR) Robert Lighthizer to investigate whether to self-initiate a Section 301 case against China for alleged unfair trade practices, we have started down a path first traveled in the 1970s and 1980s.  This will give rise to a dangerous trend that could rapidly shake the very system of global rules that have worked well for most firms for decades.  While there appears to be strong pressure from different quarters to Washington to “do something,” it is not at all clear that many understand the power of 301 to destroy the trading system now.

Back to Aggressive Unilateralism in Washington

From the mid 1970s through the early 1990s, the United States pursued a trade strategy that was dubbed by Jagdish Bhagwati as “aggressive unilateralism.”  Under this set of policies, the United States was accused of acting as judge, jury and executioner.  We are going back to the future with the publication of the National Trade Policy Agenda for 2017.  The US crafted a set of policies with built-in retaliation grouped under section 301, special 301 and, especially, super 301, of US trade law.  Under these rules, the United States decided on its own whether trade partners were practicing “fair” trade.  If not, the US could require unilateral liberalization without any concessions from the United States.