Can Donald Trump the WTO?
Yes—it’s another piece covering Donald Trump’s policies—but don’t leave quite yet; I promise to not fall into the enticing leitmotifs typical of the current status quo for journalistic coverage of Trump. Allow me to explain.
Be it on the left or the right, there seem to be two major fissures into which commentators fall whenever Trump’s name is mentioned—sardonic, arrogant insouciance, and melodramatic fear-mongering. Those in the former camp will attempt to write the entire Trump phenomenon off as a manifestation of angry whites too ignorant to see that his proposals are all nonsense and that he is leading them to an inevitable slaughter in a general election; they don’t deem his policies worthy of analysis because they believe the probability of his winning is zero. Those in the latter camp will attempt to spin every Trump statement as an apocalyptic forecast, harking a potential Trump presidency as the harbinger of immediate international Armageddon. Both seem, to me, ridiculous. The first comes with the assumption that Trump’s campaign has exposed nothing useful whatsoever; whereas, I concur with scholars like Dani Rodrik and Paul Krugman who believe that the populist wave of support behind a candidate like Trump has highlighted a failure of the US system to share adequately the fruit of globalization and international trade equally amongst the US population. The second sacrifices the reality of the US constitutional system of checks and balances in favor of exaggeration for the sake of ratings and clicks; after all, what would attract more viewers—a piece that recognizes the relative impotence of the US presidency given the division of power between the three branches of government, or one that harks Trump as a Hitleresque totalitarian who will destroy the world?
As with most political polemics, clinging to one ideological line doesn’t lead to much in the way of constructive discussion. Thus, I will not caricaturize Trump using a broad, ideological brush. Nor will I go soundbite-hunting (which honestly requires little creativity during this campaign cycle) in order to cherry-pick quotations that could then be falsely described as Trump’s trade policy. Instead, wary of the aforementioned chasms that flank me on both sides, I will attempt to go straight to horse’s mouth to analyze Trump’s trade policy reform proposals, basing myself only on his one and only official campaign position paper that pertains to trade—“U.S. – China Trade Reform.”
A few final disclaimers before proceeding to the targeted analysis are apposite. First, the paper the policy paper under scrutiny here only directly apostrophizes China; however, the policies proposed implicate much more than the bilateral US-China trade relationship. As a result of this, even though this is the only trade-related policy paper of Trump’s, we can deduce a great deal from the suggestions therein when it comes to understanding Trump’s broader approach to trade. Trump’s trade policy paper does contain a variety of economic figures used to justify the proposals therein. I will not be fact-checking any of these myself; there are plenty of better-suited sources that do precisely this type of work. My intention is to examine Trump’s major reform proposals, explicating both the international legal mechanisms they target, as well as the potential effects they would have if carried out in their entirety.
Distilling the signal from the noise
Some have called the Trump campaign “substanceless,” arguing that he is all talk with no concrete policy proposals. While hyperbolically effective, that is not true when it comes to trade; there are certainly enactable proposals contained within Trump’s policy paper. That said, there is also a great deal that is simply talking point fodder disguised as policy. There are many examples of this type of non-policy proposal peppered throughout the paper—too many for each to be explained in this article—hence, I want instead to begin by offering a framework for sifting through these purely rhetorical proposals, identifying a few glaring examples of strong words, without any legal authority behind them.
When looking for practical trade proposals that could actually be enacted, it is important to remember that the executive branch in the US has relatively little power in determining trade policy. The U.S. Constitution is perfectly clear in its delegation of trade authority to the Congress, not the Executive. Article I, Section 8 gives Congress the sole authority “to regulate Commerce with foreign Nations.” This power is no longer absolute, however. In the 20th century, it was quickly discovered that logrolling in the Congress was a political tendency that would make crafting trade deals in the Congress alone untenable. As such, the so-called “fast track presidential authority” to broker trade agreements was created by the Trade Act of 1974. While this act did delegate the authority to negotiate trade agreements to the President, it is an impermanent power that must be persistently re-authorized by the Congress. Even today—an age that many would commonly believe is dominated by trade agreements in-the-works such as TTIP and TPP, the president’s authority is very limited. The only TPA authority currently active is the Trade Preferences Extension Act of 2015, which grants the Obama administration limited “power to negotiate major trade agreements with Asia and Europe.” In short, the next president of the United States will have to seek renewed TPA from Congress, and even if it is allotted, any deals made or tariffs proposed are entirely at the mercy of congressional approval. With all this in mind, we can craft a strategy for identifying concrete proposals—finding the signal amidst the noise. We should interrogate every proposal by inquiring: what mechanism is being used to accomplish the policy aim (tariffs, duties, etc.), and what legal entities ultimately control said mechanisms.
As an example of a proposal that is backed by no concrete policy, let’s examine one of Trump’s suggestions regarding a harmonization of environmental and labor standards:
China’s woeful lack of reasonable environmental and labor standards represent yet another form of unacceptable export subsidy. How can American manufacturers, who must meet very high standards, possibly compete with Chinese companies that care nothing about their workers or the environment? We will challenge China to join the 21st Century when it comes to such standards.
As can be seen, this proposal offers the perfect opportunity to test the framework laid out previously. We see very clearly that there is a policy aim—ensuring that the US and China are both held to similar environmental and labor standards—but there is no mention of the mechanism that would be used to accomplish this policy aim. This is surprising, because resorting to tariffs as a default policy tool is a well-documented favorite of Trump’s. Even though the paper mentions no mechanisms and thus cannot be analyzed as policy, we can still answer the second question of our framework, because there is a legal entity that does in large part oversee the standards that Trump would like to see more equally followed: the World Trade Organization (WTO). In fact, this is not an outlier; in most of the instances in Trump’s trade policy paper where a policy aim is announced without a specified mechanism or legal entity being referenced, the issue likely falls under the umbrella of disputes for which the WTO already serves as a forum. This incongruence hints at what I find to be the most confusing and, in my estimation, untenable characteristic of Trump’s trade policy. It seems to argue on various fronts for vigorous US reengagement at the WTO, pressuring other countries—namely China—via the WTO dispute settlement mechanisms more than ever before, while concomitantly arguing for the brandishing of tariffs and other protectionist measures the likes of which the US has not seen since Herbert Hoover held the presidency.
A trumped-up WTO strategy? – Enforce some rules ardently, while breaking others unabashedly
The internally contradictory nature of Trump’s policy proposal as concerns the United States’ role at the WTO is difficult to untangle, but perhaps no better microcosmic representation of the strategy exists than this paragraph concerning how Trump plans to combat “China’s illegal export subsidies and other unfair advantages.”
The U.S. Trade Representative recently filed yet another complaint with the WTO accusing China of cheating on our trade agreements by subsidizing its exports. The Trump administration will not wait for an international body to tell us what we already know. To gain negotiating leverage, we will pursue the WTO case and aggressively highlight and expose these subsidies.
As we can see, the second sentence intimates that a Trump presidency would not wait for the WTO dispute-settlement process to run its course. While an alternative legal mechanism is not proposed, we can insinuate from the rest of the policy paper that what is implied is that the US would pressure China with countervailing duties and tariffs. That said, the following sentence is a complete reversal; without even skipping a sentence the proposal pivoted from “not wait[ing] for [the WTO] to tell us what we already know,” to “pursu[ing] the WTO case” aggressively.
For the sake of a thought experiment to explore the implications of this internal contraction if actually put in practice, let us assume that Trump carries through on all such promises—both of more aggressive WTO dispute settlement action against China, and of simultaneous tariff use. What would come from this? Those who paint Trump’s policies as perfectly pursuant to John Bolton’s view of international law would be exposed as wrong, because even Bolton, who believes that international law has no moral character and instead is only what states will it to be, acknowledges that certain systems exist—such as the WTO—that can be used by states to secure beneficial outcomes if adhered to. If the two previously mentioned Trump policy proposals were both enacted, the result would be devastating for the United States because of the current structure of the WTO dispute resolution mechanisms.
WTO dispute resolutions over subsidies are governed by the “Agreement on Subsidies and Countervailing Measures,” and given the diverse ways that subsidies can be disguised (which Trump rightly identifies in the policy paper), successfully winning a dispute before the WTO takes time and a great deal of fastidious effort. On the other hand, the levying of a tariff such as those for whose implementation Trump argues all throughout the policy paper, beginning with the very first paragraph of the “Details of Donald J. Trump’s US China Trade Plan,” is in blatant violation of a host of more universal obligations, and Trump’s proposals would bring the US into immediate breach of GATT Article I—the most favored nation principle that WTO members should treat all imports equally—as well as GATT Article II—the restriction of tariffs to a maximum of the “bound rate” established in the tariff schedule.
Why then, would this be so detrimental? Again, it is a matter of the legal mechanisms that undergird these two separate processes. While the WTO dispute settlement for subsidies is a long, complex process, tariffs are the most overt form of protectionism, and, as Scott Lincicome of The Federalist appropriate states, “such an obvious violation of WTO rules would make for the easiest WTO dispute in the organization 20-year history.” Hint, the US would lose.
Thus, the hypocrisy of Trump’s proposals as concern the US’ role in the WTO is damaging not just because they are difficult to understand and ideologically self-contradictory (are we for or against the WTO?); they are prejudicial because if they were actually to be enacted, they represent a fundamental misunderstanding of how the WTO dispute-settlement processes operate, and would lead to disproportionate harm for the United States, while China—the target of all of these policies—would actually be able to impose countervailing duties, and the rest of the WTO member states would be justifiably on China’s side, as they have the strength of numerous international legally binding accords behind them.
But what about efficient breach? International legal scholars agree that’s a thing, so…
No. Allow me to stop you there. Efficient breach definitely is a thing, but to apply it in light of Trump’s policy recommendations here would be a gross misunderstanding of that legal school of thought. Eric A. Posner—the intellectual father of efficient breach—agreed with Bolton, in that both espoused the belief that international law had no moralistic underpinning, and was thus a tool for states to use to maximize their well-being. This is a line that sounds like it would fit very well with Trump’s “America First,” doctrine, but to take the next logical leap and say that Trump’s plan is thus one that might be espoused by the likes of Posner and Bolton, would be to convolute sound legal theory with obfuscous rhetoric.
The principle undergirding efficient breach is that of economic efficiency of trade-offs; i.e., international norms (such as adherence to WTO rules) can be broken if the relative economic efficiency of breach outweighs that of continued compliance. Trump’s international trade policy proposals highlight a variety of key problems that are sadly oftentimes left undiscussed because of the polemical—and thus media-attracting—nature of other claims therein. He addresses many issues that should be addressed by the next president—be it the disproportionate distribution of benefits from international trade amongst Americans, to the need to pursue greater harmonization of compliance with international commercial standards so that some nations are not disadvantaged while others are able to dodge safety and labor regulations. That said, all of these issues are overshadowed by the self-defeating nature of Trump’s policy proposals vis-à-vis the WTO. Without even broaching the cultural, sociological, and political implications of overtly breaching the GATT—a subject which would merit an entire article of its own—Trump’s trade policy is currently plagued by a coherence problem identified by our previously established analytical framework. Even if one agrees with every beginning presumption and aim expressed in Trump’s policy paper, the legal mechanisms in place that govern international trade would result in a terribly inefficient breach. WTO law is not all trumpery, and Trump would do well to remember that that which is rhetorically powerful matters much less than that which is legally efficient.