Views expressed by Alan Yanovich.1
The World Trade Organization (WTO) experienced some of its most challenging times during the first Trump administration. While the Biden administration has been relatively kinder to the WTO, it still remains critical of the multilateral trading system. This week saw the presidential nomination of Donald J. Trump at the Republican National Convention in Milwaukee. Meanwhile, in Geneva, the United States delegation took the floor at China’s Trade Policy Review to call out China for “operat[ing] its non-market economy in a ‘predatory’ manner”.2 As the WTO delegates prepare to leave Geneva for the summer break, a looming question that will be increasingly on everyone’s mind is whether the WTO is robust enough to survive a second Trump administration.
My answer is a cautious “Yes”. Below I discuss several key factors that could determine whether the WTO survives and how they might influence the future role of the WTO.
Will the friends of the WTO continue to see residual value in it?
We have to be realistic. The WTO’s ability to constrain US trade policy has weakened considerably and is likely to weaken more under a second Trump administration. The best-case scenario that can be expected from a second Trump administration is benign neglect and even that is not the only plausible scenario.
The question is how much residual value other key members (e.g. Canada, the European Union, Japan, Korea, Switzerland, China, Australia, New Zealand, Brazil) will see in a WTO that, in practice, does not regulate their trade relationships with the United States. The WTO’s weakened ability to regulate trade relations with the United States is a huge loss, that is for sure. Yet, the scope of other trade covered by the WTO should be sufficiently large to provide an incentive to these countries to keep the faith in the WTO. While some of these countries have a vast network of free trade agreements (FTAs) that would give them some security should the WTO fail, the network is neither broad nor wide enough to entirely replace the WTO. Also, the need to comply with WTO rules can help stave off internal protectionist pressure as well as pressure from allies to take protectionist actions against certain countries. How much political capital they invest in supporting and driving the WTO will be one of the most decisive factors in determining whether the WTO survives a second Trump administration. To their credit, many of these countries already have taken a bigger role in the WTO since US leadership started to wane. But the next four years could require them to become even more proactive if the WTO is going to continue being relevant.
Would the Trump administration allow the WTO to continue operating?
Three scenarios seem plausible. A first scenario is one of neglect in which a second Trump administration effectively would ignore the WTO’s rules but would not actively seek to obstruct the WTO’s operations. The WTO’s role regulating trade relations with the United States would continue to weaken. However, it would still play an important role regulating trade relations between the other 163 members. WTO members may even continue their efforts to modernise WTO rules through plurilaterals and other initiatives. Some of these members still may hold hope that the United States can be brought “back into the fold”, while others may resign themselves to “ride out” the administration. This scenario partly describes the situation during the first Trump administration if one ignores the blocking of the appointment of adjudicators to the WTO Appellate Body. In this scenario, the WTO is more likely to survive, albeit with the risk of further weakening, unless the other 163 members succeed in their efforts to modernise the rules without the participation of the United States.
A second scenario is one in which a Trump 2.0 administration decides to actively disrupt the operation of the WTO. Concerns about this scenario may already be reflected in the proposal recently submitted regarding African countries to bring forward a decision to reappoint the Director-General. A threat to the WTO’s budget is another concern. Survival of the WTO in this scenario is not assured.
While some may consider that paralyzing the WTO would be in the US interest, such a move would be short-sighted. WTO rules protect US exports of goods, services and intellectual property rights. The US network of trade agreements does not have the geographic breadth of the WTO and has remained largely static for several years. Relying on unilateral action alone to fight foreign trade barriers is inefficient. Thus, there may still be sufficient incentives for a second Trump administration to play the role of an absent parent but without entirely blocking the operation of the WTO.
The third scenario is one where a second Trump administration pursues a “WTO minus China” strategy. This could take the form of tariffs clubs within the WTO that exclude China. The clubs could be sectoral, along the lines of the proposed Global Arrangement on Sustainable Steel and aluminium, or broader in scope. These clubs would undermine the Most-Favoured Nation (MFN) principle, a key tenet of the WTO. However, some would argue that such clubs are no different than FTAs, which are allowed.
Any attempt to exclude China would raise tensions in the WTO. A strong response from China can be expected. Moreover, candidate Trump has spoken about raising tariffs on all imports across the board, not just those originating from China. A second Trump administration might raise tariffs and then seek concessions from trade partners (other than China) in exchange from bringing them down again. This would be seen as an attempt to renegotiate its WTO obligations and would certainly create frictions with other trading partners. Meanwhile, many of these trading partners also are likely to resist effort to exclude China. It is hard to see how these tensions would be resolved. What is clear is that this scenario would put the WTO under severe strain.
Will China agree to address some of the concerns raised by its trade partners?
The United States has justified some of its trade actions by arguing that they are necessary to confront with a Chinese regime that doesn’t “play fair”. US concerns about Chinese overcapacity and the role of state-owned enterprises are shared by many WTO members.3
China should have a strong interest in preserving the WTO given its role providing stability to trade relations with many of its trading partners and in preventing further fragmentation. But other WTO members expect China to do more to address the concerns of other WTO members. WTO members want China to make more information available about its subsidies, at all levels of government. It could also show more willingness to address overcapacity and make commitments on state-owned enterprises. If it does not, the frustration with the WTO framework will grow among partners other than the United States. These partners also will see unilateral action as the only effective way to address concerns with Chinese policies, further increasing internal tensions at the WTO.
Can WTO members overcome India’s obstructionism?
India has been obstructing WTO initiatives for many years, including attempts to move forward among smaller groups of WTO members (so-called “plurilateral” initiatives). Its position is unlikely to change in a second Trump administration. Members’ frustration with Indian obstructionism has been growing. Some members are taking a firmer stand against it and pushing for changes to WTO decision making. Members will need to continue to challenge India and to seek ways to make decision making more flexible. The problem is that a second Trump administration may not want decision making to be more flexible and may prefer a hamstrung WTO. What role India would take in such a scenario, and other members’ reactions to it, would prove critical for the organisation’s survival.
Will WTO members find a balance between trade and national security?
National security concerns will continue to weigh heavily on future trade policy. Invocation of national security as a justification for trade measures is likely to continue and may even grow under a second Trump administration. Indeed, it was the first Trump administration that used national security to justify trade measures on steel and aluminum.
The United States has put forward a consistent position on national security at the WTO, under which there can be no independent review of a country’s invocation of the security exceptions. This position is unlikely to change in a second Trump administration. If anything, the position is likely to harden.
My sense is that most other WTO members are uncomfortable with giving countries absolute discretion on the invocation of the security exceptions. Invocation of security as a justification for trade measures will continue to generate tension in the system. Although a written accommodation may be unrealistic (including because the United States would likely block it), a tacit, political accommodation on the issue could be an option.
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Given the above, the survival of the WTO is by no means guaranteed. Much will depend on the political capital that other WTO members are willing to invest in preserving it, China’s willingness to address concerns raised by many WTO members, as well as the approach ultimately taken by a second Trump administration. Overcoming Indian obstructionism would help modernise the WTO, which, in turn, will make survival more likely. However, the inability to move forward is more of a medium-term than an immediate threat. Finally, there will always be some tension between trade and national security. A more robust political process (as opposed to litigation) would allow the WTO to contribute to managing those tensions.
What role would the WTO play then if it survives? The WTO will continue to be caught between the geopolitical rivalry between the United States and China. It is increasingly difficult to conceive of a scenario in which the WTO regulates both trade with the United States, on the one hand, and trade with China, on the other hand. It looks likely that a Trump 2.0 administration will either feel unconstrained by the WTO and ignore it, or it would seek to drive a wedge between China and other WTO members. Neither scenario will appeal to other WTO members who would much rather be able to rely on WTO rules in their trade relations with the United States and who also see value in the WTO for their engagement with China. WTO members will need to be strategic. It is in most members’ interest to preserve the WTO.
1 Any views expressed in this article are solely those of the author. This article does not necessarily reflect the views of Akin, its lawyers or its advisors. I am grateful for comments and suggestions from Rachel Polan, Hannes Sigurgeirsson, Marco Tulio Molina and Yujin McNamara.
2 https://geneva.usmission.gov/2024/07/17/u-s-statement-at-the-trade-policy-review-of-the-peoples-republic-of-china-2/
3 See, for example, E. Farge, “China’s industrial support programmes lack transparency, WTO says”, Reuters, 17 July 2024, available at: https://www.reuters.com/markets/asia/chinas-industrial-support-programmes-lack-transparency-wto-says-2024-07-17/