Trump’s next attack on international institutions and the global trade regime is reportedly going to be the World Trade Organization (WTO), according to a leaked draft bill revealed by Axios and bearing the unfortunate, yet possibly appropriate acronym, “FART” (Fair and Reciprocal Tariff Act).
In fact, it could be the end of America’s involvement in the WTO altogether. That means an end to global trade as we know it.
In other words, we’re talking about draft legislation that would give Trump carte blanche to do pretty much anything he wants to from the U.S. perspective, with complete disregard for decades of WTO rules. Tariffs could be applied at the president’s whim, and even without Congress signing off on them.
Shortly after Axios reported the leaked draft, the White House responded, with a watered down version.
Commerce Secretary Wilbur Ross gave the markets a bit of a breather on Monday morning by saying the U.S. withdrawal from the WTO wasn’t imminent, describing the talk as a “little premature”, The Hill reported.
"We've made no secret of our view that there are some reforms needed at the WTO," Ross said in a CNCB "Squawk Box" interview.
Trump also said Friday that he had no plans to abandon the WTO, even if the body isn’t treating America fairly, to his mind. Related: Stocks Slide Lower After New Round Of Trade Tariffs
That statement seems to suggest that we are intended to view the alleged draft bill as a reflection of Trump’s frustration with the WTO rather than an actual piece of legislation.
That’s a sentiment that certainly fits Trump’s profile. So, too, would be the sentiment that the draft bill wasn’t “leaked” so much as it was passed around to ensure that the world, and the WTO, got wind of it.
Most likely, it’s a threat: This is what will happen if the international body doesn’t undergo some changes.
But the WTO isn’t something you just pull out of. Congress has to vote on it every five years, and the next vote is scheduled for 2020. But the draft bill reported by Axios seems to possibly remove that hindrance and give Trump the power to bypass Congress on tariffs, so perhaps it could also give him the power to withdraw the country from the organization. But it would have to pass into law first.
And in the meantime, most feel that support for the WTO in Washington—Trump aside—is rather strong.
“It would be the equivalent of walking away from the WTO and our commitments there without us actually notifying our withdrawal,” one source familiar with the bill reportedly told Axios. “The good news is Congress would never give this authority to the president,” the source added, describing the bill as “insane.”
One of Trump’s biggest beefs with the WTO is that it let China join the club in 2001, facilitating what he’s called the biggest “job theft in the history of our country”.
On Monday, the Chinese president penned an article for local media marking the 17th anniversary of the country’s WTO accession and lauding what he called “China’s increasingly close” relations with the rest of the world.
The article promised that Beijing would “steadfastly deepen reform and opening-up, support the improvement of the multilateral trading system, push forward liberalization and facilitation of global trade and investment, build a new type of international relations centered on win-win cooperation, and build a community with a shared future for mankind”.
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But Trump isn’t the only one who thinks the WTO needs some tweaking—even if the other parties are only seeking reforms because of Trump’s tariffs.
The European Union earlier in June said it was also planning to push for some operational changes at the WTO, and it’s doing so in cooperation with China as it seeks to prevent protectionism from hijacking global trade to the detriment of world markets.
This may continue to be snowball into a major victory for China, especially with the EU now knocking at Beijing’s door. If this is all about leverage, Washington stands to lose quite a lot.
By Tom Kool for Safehaven.com
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