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Trump’s hate for the World Trade Organization already has analysts spooked

His trade policies are already “hollowing out the WTO from within”

by David Gilbert
Jun 29 2018, 3:55pm

Global markets wobbled Friday on news that Donald Trump was reportedly sick of the U.S. getting “fucked” by the World Trade Organization and wants out. But whether he actually pulls out of it — and he can’t without Congress’s support — experts say Trump’s trade policies are already “hollowing out the WTO from within” and damaging U.S. business prospects around the world.

A report from Axios Friday, citing a source who’s discussed the global trade group with the president, said Trump believes “we always get fucked by them [the WTO]. I don’t know why we’re in it. The WTO is designed by the rest of the world to screw the United States.”

“He’s [threatened to withdraw] 100 times,” the source said. “It would totally [screw] us as a country.” Indeed, some analysts have called Trump’s “America First” approach more like “America alone.”

The U.S. pulling out of the WTO would cause market chaos across the world, and just the rumor of it caused markets to stutter Friday morning, though they have since recovered.

Asked about Trump’s desire to withdraw, a spokesperson for the trade group told VICE News: “The WTO has not received any communication from the United States indicating any plans to leave the organization.”

Trump himself has not yet commented on the report, but his Treasury Secretary Mnuchin sought to steady the markets by denying the story on Fox Business, saying that the Axios story was an “exaggeration.” However, he did add that Trump “has concerns about the WTO. He thinks there’s aspects of it that aren’t fair.”

Trump cannot unilaterally withdraw from the WTO. It would require an act of Congress before the U.S. could leave the group, but even if Congress demurs, the damage will already be done.

“Even if Congress didn't act to support the move, [Trump] is creating such uncertainty around the global trading system that it is only going to be detrimental to U.S. citizens doing business abroad,” John Ferguson, an analyst with the Economist Intelligence Unit, told VICE News. “There is no economic upside here.”

But the U.S. is already taking several steps to undermine the work of the WTO.

"The larger concern is that Trump is hollowing out the WTO from within, and we have really seen that play out with the imposition of tariffs on the import of steel and aluminum in the name of national security," Marianne Schneider-Petsinger, geo-economics fellow at U.K.-based think tank Chatham House, told VICE News.

The imposition of those tariffs on June 1 has led to a global backlash and retaliatory tariffs on U.S. exports from the EU, India, Turkey, Canada, Mexico and others. It has also led to China filing a complaint with the WTO about Trump’s actions.

And this leaves the WTO in a very difficult position.

Should it rule and side with the U.S., it opens the door for other countries to impose their own trade barriers in the name of national security, which Schneider-Petsinger says could lead to a flood of protectionist measures.

Alternatively, if it rules against the U.S., the "Trump administration would very likely ignore the ruling or pull out completely," Schneider-Petsinger said.

The U.S. is also blocking new members being appointed to the appellate body.

The WTO's appellate body is typically made up of seven members, but it currently only has four and in December that number will be reduced to three. With a minimum of three members required to investigate any case, the U.S. is creating a situation where next year the primary function of the WTO could cease to operate.

“Potentially if you are looking into next year, when the term of a third panelist comes to an end, we really are looking into a non-functioning WTO appellate body," Schneider-Petsinger.

Pulling out of the WTO would add to a growing list of international institutions that Trump is withdrawing from or seeking to undermine, including the NATO, the U.N., the Paris agreement and even the EU.

"He is absolutely just upending the international order that the U.S. built since the end of the Second World War,” Ferguson said. “The WTO benefits the U.S. greatly, and a lot of the laws of the WTO align and were made to align with U.S. law.”

Earlier this month at the G-7 summit, Trump reportedly told French President Emmanuel Macron that the EU is worse than China in relation to trade.

On Thursday night, Donald Tusk, president of the European Council, said that Trump was putting “immense pressure” on NATO, and it could result in the breakup of the alliance.

“Despite our tireless efforts to keep the unity of the West, trans-Atlantic relations are under immense pressure due to the policies of President Trump,” he said.