Trump’s New WTO Report Makes Some Okay Points!

Yesterday, Trump’s USTR put out a blistering 174-page critique of the WTO’s Appellate Body. It echoes criticisms long made by progressives, and indeed, features an extended appendix quoting Dems like Sen. Sherrod Brown (D-Ohio). (…)

Much of the substantive criticism focuses on the AB’s activism with respect to so-called “trade remedy” measures, or those policies like anti-dumping measures that allow a country to smooth out sudden or “unfair” import shifts, which I discuss here: (…)

But USTR also spends a good chunk of time discussing a trend we’ve seen in AB decisions over the last decade or so, which basically explodes so-called “national treatment” or “non-discrimination” standards into a hunting license to go after virtually any regulation.

WTO members had intended this to be a backstop against explicitly (or de facto) protectionist policies but it has since become a tool to challenge, in the report’s words, “any measure that has a detrimental impact on imports — no matter how small or accidental, or whether it is due to the conscious choice of exporting producers or the result of market changes”. Much as it’s unwise for domestic judges to get too involved in micromanaging government, “panels and the Appellate Body are not equipped to conduct such an inquiry and to second-guess the myriad policy determinations involved in many regulations.” (…)

The report is light — as in MIA — on fixes to the system. Moreover — while it correctly recounts the fairly minimalistic role negotiators thought the AB would play in the leadup to the Uruguay Round — it reads as a bit naive. Yes, WTO members never wanted AB members to call themselves “judges”, and the US Congress wouldn’t have liked it if they had.

However, it is functionally the same thing when you create a body in charge of making unappealable rulings.

As the report itself notes, “If a citizen does not like how his or her country is operating at the WTO, that citizen can vote out the administration and vote in a new administration, which can change course

… But citizens of the various nations that participate in the WTO can do nothing if they do not like how an Appellate Body member interprets an agreement.”

That looks and smells a lot like judicial review, and similar promises were made at the US Constitutional Convention. Right or wrong, naive or not, the US is now throwing its weight around, and will likely succeed in getting some changes to the body… even if it’s not being explicit itself in the four corners of this latest intervention. One or two postscripts here: the expansiveness of “national treatment” in trade jurisprudence is one reason I am less sanguine about the “pared back” investor-state dispute settlement in the new NAFTA. (…) True heads will recall that USMCA separates ISDS claims into three camps: 1) All investors get all rights through 2022; 2) US-MX investors w government contracts in oil, gas, a few others sectors get most rights in perpetuity; 3) all other US-MX investors get “only” non-discrim. Get ready to see some expansive national treatment and MFN claims — they’ll be the new flexible standard, like “fair and equitable treatment” used to be. Also, USTR faulted the Appellate Body for relying on subsequent state statements and practice in doing its job — rather than only on official WTO member agreed to interpretations.

I can see the arguments on either side here. On the one hand, it’d be desirable from a sovereignty perspective to keep the leash of delegation pretty tight. On the other hand, states are really busy and new WTO agreement is hard. It seems reasonable for the AB to be pragmatic.

(Taken from this Twitter thread.)

I write about democracy, political economy, and trade. Fellow at the Roosevelt Institute and Roosevelt Forward.