US returns to WTO reform debate, but on terms that unsettle the system

It is unusual for the United States’ (US’) federal government, under President Donald Trump, to take a constructive approach to multilateral affairs. It is far more likely to exit agreements, declare them disadvantageous and abrogated, and generally take a “burn it all down” approach to global governance. The President himself has long believed that trading arrangements are in particular designed unfairly as far as the US is concerned. It is both unexpected and welcome, therefore, that Washington has submitted a memorandum to the World Trade Organization (WTO), detailing its concerns when it comes to the operation and possible reform of the institution. It has also paid its dues to the WTO for both 2024 and 2025. This suggests that even the Trump administration retains some hope that the institution might be salvaged. It should be noted that subverting the WTO is not a priority of the Republicans alone. The previous administration of Joe Biden did not just delay payments but also continued to veto the operation of the organisation’s appellate body, without which it is toothless when it comes to dispute settlements. And when the WTO ruled that restrictions imposed on the import of steel and other items in the first Trump term was illegal, it was the Biden administration that declared that it was refusing to acknowledge or follow the ruling.

 

The US’ memorandum is revealing of the various ways in which Washington now believes — to an extent across parties — that the WTO is not working properly. Some of these complaints are widely shared. For example, it has identified the self-identification of economies as “developing” and thus deserving of “special and differentiated treatment” as a problem. In the past year, China said it would give up developing-country privileges. But both the US and many emerging economies will believe that Beijing held on to these privileges for too long, thereby discrediting the system. The US wants these henceforth restricted to the least developed economies. It has also called for a more transparent investigation into illegal export subsidies. This is again an ongoing problem when it comes to China. Many of its trading partners are of the belief that hidden subsidies for capital, power, and water break WTO rules — but, because of the opacity of the Chinese system, no accountability is imposed. The US correctly believes this is unsustainable.

 

Both these issues, and others, are concerns that the rest of the world might well have been willing to engage with. It is unfortunate that the US believes it is unnecessary to create a broad coalition for such changes rather than trying to shift the governance architecture single-handedly. On the other hand, the US has additional complaints, around which it might struggle to develop a coalition. One of these is its attack on the very concept of the “most favoured nation”, or MFN, which is the bedrock of multilateral trade agreements. Rather than negotiating bilaterally in such a way that specific countries benefit and others lose out, the MFN norm means that all trading partners with that status automatically benefit when a country’s trade rules change. Abandoning this norm would lead to chaos — but the largest economies would be least hurt, which is why Washington has undermined it. India must argue against this development, as well as the unnecessarily broad expansion of “national security” as a reason for tariff walls. But New Delhi must also recognise that some US demands — such as for the recognition of plurilateral agreements — will be broadly popular. India has overused its veto at the WTO, and the growth of plurilateralism is a natural blowback.