Ever since, Donald Trump took charge, he has made systematic efforts to demolish the very foundation of World Trade Organization [WTO] which is the epitome of ‘free’ and ‘fair’ trade based on transparent and non-discriminatory rules.
At the 11th WTO ministerial conference held in Buenos Aires during December 10-13, 2017, the USA rejected the demand of developing countries for finding a ‘permanent solution’ to stockholding for food security which was agreed to four years ago in the 9th ministerial held in Bali. Still worse, it has dumped the Doha Development Agenda [DDA] which has been assiduously pursued by all members of WTO ever since 2001.
Second, in complete defiance of rules under WTO, it has hiked import duty on steel and aluminium to 25% and 10% respectively which will hit several countries [sans some preferred friends of USA] across the globe. Further, it targeted US$ 50 billion worth of Chinese goods entering USA and has expanded the ambit to cover another US$ 200 billion. Trump has also questioned the very rationale of allowing China to be a member of the WTO.
The US administration has sought to justify the levies on ‘national security’ considerations. Under the WTO rules, this ground can be invoked only under rare circumstances. It can’t be done as a matter of routine. Imagine the chaos this will lead to if every member starts hiking duties using this argument.
Third, under his much trumpeted “Buy American, Hire American”, on April 18, 2017, Trump signed an executive order directing federal agencies to review H-1B visa program with the aim to ensure that only “most-skilled and highest-paid applicants” were successfully processed. H-1B visas are issued to foreigners who have ‘theoretical’ and ‘technical’ expertise in specialized areas to work in local [read American] companies for temporary period.
As a follow up, the US Citizenship and Immigration Services [USCIS] which administers these visas, is already implementing measures which severely restrict or delay their grant. These include inter alia stop ‘premium’ processing of applications, more rigorous interview/procedural requirements and denial of employment to spouses of those working in US.
Last year, the Intellectual Property and Internet Subcommittee of the House of Representatives voted to pass a law “Protect and Grow American Jobs Act [HR 170]” whose provisions literally prohibit entry of H-1B visa holders. The bill was passed by House Judiciary Committee during a mark-up hearing. After passage by the full house and a similar version of the bill by the Senate, Trump will sign it into law.
Fourth, Trump has blocked appointment of members of the appellate authority of WTO dispute settlement body [DSB] [currently, there are only 3 against required strength of 7; the number will reduce to only 1 next year when 2 members retire]. The entire process of adjudicating disputes – arising from non-compliance with the rules – revolves around the appellate authority. If, even this is rendered dysfunctional, WTO will be seriously undermined.
The President has put the last nail in the coffin by attacking a fundamental principle underlying WTO working. In a recent report – Reinvigorating Trade and Inclusive Growth – by World Bank [WB] and International Monetary Fund [IMF] to which WTO secretariat is also a party – US led IMF/WB has raised a question on the time-tested practice of bundling negotiating issues in “giant all-or-nothing trade rounds”.
The report argues that the extant practice had become “extremely difficult to manage” and suggested plurilateral trade pacts involving fewer countries as the way ahead. Put simply, Trump is casting doubt on the efficacy of trade talks involving all nations and its decision making process based on consensus, in which all members must agree.
In short, the overarching motive of US administration under Trump is to drive negotiating activity on matters pertaining to international trade in goods and services outside the WTO. This needs to be nipped in the bud or else, the very existence of the multilateral body will be in serious jeopardy.
In the follow-up to the collapse of 11th WTO ministerial [there was not even a formal communique which is customary on conclusion of every such meeting], Indian commerce minister, Suresh Prabhu convened an informal meeting of WTO members in New Delhi [March 19-20, 2018]. He urged members to “find ways to identify common ground for reinvigorating the WTO”.
India needs to go beyond rhetoric/pious declarations and seriously engage with other developing countries as well as least developed countries [LDCs] to preserve the sanctity of multilateral rules and ensure that the WTO stays relevant.
At the same time, it should avoid measures of the type implemented in recent months [for instance, hike in import duty on dozens of items including refrigerators, air-conditioners, telecommunication equipment etc purportedly to tame its current account deficit] which could be used by US administration as a handle to justify its own unjust and malafide actions.
However, a big responsibility lies with USA who needs to shed its current hegemonic stance, show restraint and work in a spirit of mutual accommodation with the rest of the world. It must recognize that in an inter-dependent world whereby countries realize a sizeable portion of their GDP from trading with others, increasing barriers to trade – both tariff and non-tariff – will only be counterproductive.
There is an urgent need for all member countries to make concerted and coordinated efforts to think through what they can do to resurrect a rule based international trade and investment regime under the aegis of WTO. The exercise can yield positive results only when each one of them [especially developed countries and better-offs among developing countries] are guided by a spirit of what he or she can give [instead of the current obsession with ‘take’] for achieving the common good.
The big-wigs can perhaps, take an initiative at the political level. Modi may use his clout in the international arena to move this forward.