In the latest warning from the White House that it is set to unleash trade policy that will be in sharp conflict with generally accepted trade norms, most likely a reference to some form of Border Adjustment Tax, the Trump administration has warned that the U.S. isn't and won't bound by decisions made at the World Trade Organization, in outlining a new trade agenda that "promises to root out unfair practices by foreign countries" and to escalate what are already simmering trade conflicts.
According to a document obtained by Bloomberg News and titled “2017 Trade Policy Agenda”, the US plans to defend its “national sovereignty over trade policy,” the Office of the U.S. Trade Representative said in an annual document laying out the president’s trade agenda. The reason for the loophole: under the terms of its entry into the WTO, the U.S. didn’t abandon its trade rights. “Given this history, it is important to recall also that Congress had made clear that Americans are not directly subject to WTO decisions,” according to the trade office, which takes the lead in negotiating trade deals.
As Bloomberg adds the Trump administration’s skepticism toward the WTO, the Geneva-based body that referees trade disputes, signals a new willingness by the world’s biggest economy to pursue its interests - even if it means undermining the global order the U.S. has led since World War II.
“It reflects their belief that the global system isn’t serving U.S. interests and they’re going to do all they can to rewrite in favor of U.S. interests,” said Adam Taylor, a former senior Canadian trade official based in Ottawa. “The biggest worry is that you can’t have the rules that govern the global trading system being ignored by one party and expect the system to keep functioning.”
The Bloomberg report confirms what we reported several weeks ago when according to the FT, the EU and other US trading partners have begun preparing for a legal challenge to a US border tax proposal in a move that "could trigger the biggest case in World Trade Organization history." The reason is that "the EU and other US trading partners are worried about the impact on their exports and have been deploying lawyers with a view to eventually challenging it before the global trade watchdog."
However, if according to the Trump administration, such claims are unfounded as the US never agreed to be bound by them, it virtually guarantees significant complications when it comes to global trade relations as soon as more details of Trump's protectionist trade policies emerge.
The overarching purpose of the administration’s trade policy will be to “expand trade in a way that is freer and fairer for all Americans,” according to the report. “Every action we take with respect to trade will be designed to increase our economic growth, promote job creation in the United States, promote reciprocity with our trading partners, strengthen our manufacturing base and our ability to defend ourselves, and expand our agricultural and services industry exports,” it said.
These goals can be better met by focusing on bilateral negotiations than multilateral deals, the government said. Trump has withdrawn the U.S. from the Trans-Pacific Partnership, an agreement with 11 other nations. He has also said the U.S. plans to renegotiate the North American Free Trade Agreement with Mexico and Canada and level the playing field with China.
Additionally, the U.S. will work to break down unfair trade barriers in markets that block U.S. exports, while strictly enforcing U.S. trade laws to prevent the U.S. market from being “distorted by dumped and/or subsidized imports that harm domestic industries and workers,” the USTR report said. The U.S. will update existing trade deals as necessary to “reflect changing times and market conditions.”
It is such bilateral relations, however, that concern existing US trade partners who have carefully constructed pre-existing trade arrangements, and which the White House implicitly warns will be abrogated without fears of penalty or legal consequence.
The Trump administration will also resist efforts by other countries, or international bodies such as the WTO, to “advance interpretations that would weaken the rights and benefits” of the U.S. under its trade agreements, the government said.
In short: despite Trump's "paliative" speech last night, at least when it comes to global commerce relations, trade wars are virtually assured.