HOW TO TORPEDO WTO RULES

The Trump administration has crafted a draft bill ordered by the president  that would declare America’s abandonment of World Trade Organization rules. The bill essentially provides President Donald Trump who has argued for a better position for the U.S. in big trade pacts  a license to raise U.S. tariffs at will, without congressional consent and largely outside of the international rules governed by the WTO.

The bill, titled the “United States Fair and Reciprocal Tariff Act,” would give Trump unilateral power to ignore the two most basic principles of the WTO and negotiate one-on-one with any country. The first is the “most favored nation” (MFN) principle that stipulates countries can’t set different tariff rates for different countries outside of free trade agreements. The second pertains to “bound tariff rates,” which are the tariff ceilings that each WTO country has already agreed to in previous negotiations. It would be the equivalent of walking away from the WTO and U.S. commitments there without the U.S. actually notifying their withdrawal. The good news is Congress would never give this authority to the president. Whether the draft has legs, its existence is adding to general uncertainty around trade issues. The threat and other actions against trade will feed global uncertainty, which will eventually undermine growth abroad and leave geopolitical voids

The EU has threatened tariffs of nearly $300 billion against the U.S. if Trump carries out auto tariff threats and Canada has started imposing tariffs  on $12.6 billion worth of U.S. goods, such as ketchup and iron, in a retaliatory back-and-forth after Trump slapped fines on steel and aluminum imported into the U.S.

The Arguments advanced for a 'United States Fair and Reciprocal Act'

(l) The United States maintains an open market for goods, with relatively low tariffs, and has long encouraged trading partners, both bilaterally and in multilateral fora, to liberalize their markets;

(2) The United States is the world’s largest importer of goods;

(3) Trading partners of the United States in many instances impose significantly higher tariffs on U.S. goods than the United States imposes on the same or similar goods imported from those same countries;

(4) Trading partners of the United States in many instances impose significant nontariff barriers that greatly undermine the value of negotiated tariff concessions;

(5) The lack of reciprocity in tariff levels and disproportionate use of ​nontariff​ barriers by ​U.S. trading partners facilitates foreign imports, discourages U.S. exports, and puts U.S. producers, farmers, and workers at a competitive disadvantage;

(6) The lack of reciprocity in tariff levels and nontariff barriers contributes to the large and growing U.S. trade deficit in goods, which is a drag on economic growth and undermines economic prosperity;

(7) To date a number of U.S. trading partners have been unwilling, including in multilateral negotiations, to reduce tariff and eliminate nontariff barriers applied to U.S. exports; and

(8) The President of the United States should have a wide array of tools to open the markets of U.S. trading partners and encourage participation in negotiations to liberalize trade in goods on a fair and reciprocal basis, including the authority to adjust tariff rates to reciprocal levels.