Despite a number of challenges, the U.S. business community continues to regard the global rules-based trading system embodied by the World Trade Organization (WTO) as indispensable. While the WTO was created in 1995, it built on the foundation of the 1947 General Agreement on Tariffs and Trade (GATT). Combined, the WTO and the GATT have revolutionized world trade.
Eight successful multilateral negotiating rounds have helped increase global trade from $58 billion in 1948 to well above $20 trillion today. This 40-fold increase in real terms has brought a rising tide of commerce to nearly the entire world—perhaps especially the United States.
The benefits for American companies and workers go far beyond simple tariff elimination. The WTO guarantees that U.S. firms operating abroad will receive “national treatment” (i.e., the same rights and responsibilities granted local firms) and “most-favored nation (MFN) treatment” (i.e., treatment as good as that afforded firms from the most favorably treated country).
In addition, the arbitrary use of technical regulations or standards to block imports is all too common. The WTO provides rules to guard against this kind of protectionism in disguise. WTO rules also prohibits supposed “sanitary” measures that lack a clear basis in science and are protectionist in intent.
American firms rely on these rules – every day of the year – all around the globe.
If the U.S. Congress passed legislation withdrawing the United States from the WTO, the other 163 WTO Member States – representing 99% of the world economy – would be free to raise their tariffs against U.S. exports as high as they liked – and Washington would have no legal recourse. U.S. firms would also lose the protection of the WTO’s rules against discriminatory treatment.
In recent years, the long impasse in the Doha Development Agenda negotiations led many to call into question the WTO’s role as a forum for market-opening trade negotiations. In this context, it is difficult to exaggerate the importance of recent successes achieved by the WTO.
The first of these wins is the Trade Facilitation Agreement (TFA). Its entry into force in early 2017 made it the first multilateral trade agreement reached since the WTO’s founding. The TFA is a cost-cutting, competition-enhancing, anti-corruption agreement of the first order. As WTO members implement it, it is streamlining the passage of goods across borders by cutting red tape and bureaucracy and establishing common approaches to the mundane but important task of clearing goods through customs. Implementation of the TFA has the potential to increase global merchandise exports by up to $1 trillion annually, according to the WTO.
Speaking for American companies trading and investing around the globe, the U.S. Chamber’s message has been that implementing the TFA is an excellent opportunity for developing countries. Implementation is a way for a country to signal to the global business community and donor agencies that it is open for business and ready to receive foreign direct investment.
Another recent success of the WTO is the expansion of product coverage of the 1996 Information Technology Agreement (ITA), which has delivered a cornucopia of innovative technology products to the world. The deal reached in December 2015 to eliminate tariffs on hundreds of new tech products invented since the ITA was first negotiated will multiply its benefits. (83 WTO members belong to the original ITA, and 54 are members of the supplemental, expanded pact.)
The new products added range from high-tech healthcare devices to advanced semiconductors to software media. Implementation of the expansion began on July 1, 2016, and it will be largely in place by 2019.
All told, approximately $1.3 trillion worth of tech goods will be traded duty-free under the ITA expansion, a sum greater than global trade in automobiles and three times greater than trade in clothing, according to the WTO. By one estimate, this expansion of the ITA could add an estimated $190 billion to global GDP annually.
However, the WTO needs reform. The WTO must become more nimble as a forum for negotiations by making it easier for members to pursue new market-opening trade agreements. Achieving consensus in an organization of 164 member states is obviously challenging, but the absence of consensus cannot be permitted to block negotiations among those seeking to tear down trade barriers or update trade rules.
The U.S. Chamber strongly supports the move to seek new “plurilateral” agreements covering large numbers of WTO members but not necessarily all. Good examples of such trade agreements include the WTO’s Government Procurement Agreement and the aforementioned ITA. One area ripe for negotiation in a plurilateral format is e-commerce, where 76 WTO Member States recently announced plans for negotiations.
Similarly, the U.S. Chamber looks forward to the day when negotiations resume for a Trade in Services Agreement (TiSA), which stalled in late 2016. This negotiation was not properly taking place within the WTO but on its doorstep (with national governments’ ambassadors to the WTO negotiating). But in the long run, this prospective high-standard trade agreement covering services could potentially become a WTO agreement, as has happened in the past.
The U.S.-China trade negotiations of recent months also underscore the need to put teeth into the WTO’s promises on issues ranging from subsidies to the need for state-owned and state-invested enterprises to act on the basis of commercial considerations, as the United States has discussed at length with the governments of Japan and the EU.
In addition, WTO dispute settlement plays a central role in the global rules-based trading system. The United States has been a major beneficiary of WTO dispute settlement, bringing and winning more cases than any other WTO Member. In fact, the United States has won or favorably settled 75 out of the 79 completed WTO cases it had brought (as of 2016). These wins include cases against discriminatory Chinese taxes on U.S. auto exports, EU subsidies in the aircraft sector, and India’s ban on U.S. poultry. The U.S. could not have secured these wins unilaterally.
The U.S. Chamber supports efforts to improve the effectiveness of the WTO dispute settlement system. As the Office of the U.S. Trade Representative has pointed out, U.S. governments have raised serious concerns about “overreach” in Appellate Body rulings for more than 15 years, noting rulings that it argues are not clearly supported in WTO agreements.
In frustration, the Trump administration has upped the ante by blocking appellate body appointments. The United States has come under fire from other WTO members for not offering concrete proposals to resolve its complaints. Now, a crisis looms: In December, the Appellate Body will be reduced to a single member and left completely unable to function.
WTO members are wrestling with these issues. The U.S. Chamber believes WTO members should review and agree on rules dealing with the scope of what can be decided by the Appellate Body with regard to U.S. concerns about judicial overreach. Limits on actions by judges after their term has expired must also be clarified.
However, we cannot throw out the baby with the bathwater. The U.S. Chamber urges all member states to redouble their efforts to overcome the impasse on these issues before the blockage over the appointment of Appellate Body members completely immobilizes WTO dispute settlement.
In short, the WTO has beaten expectations to deliver commercially significant benefits in recent years. The U.S. business community is committed to working to ensure that the organization continues to deliver measures to boost growth worldwide. A healthy WTO is squarely in the national interest of the United States.