US, WTO and Asia

With our new series of events on The New Global Trade Order, it has been fascinating to see shifts even further away from the established global system by the United States under Donald Trump. One of Trump’s first actions as President was to withdraw the US from the freshly negotiated Trans-Pacific Partnership agreement (TPP) – a mega-trade agreement between a number of countries on either side of the Pacific. Bloomberg recently reported that Trump has stated that the US may ignore WTO rulings if they go against national interests.

With broad indications from members of ‘Team Trump’ indicating that the WTO is not compatible with the “America First” policy, it appears that the new administration sees robust WTO claims from other major trading nations and blocs, i.e. China and the EU, as constraints on the US. This may lead to the US attempting to reshape global trade policy in the way it did in the 20^th Century. It is with some irony therefore that the US originally did this via establishment of the WTO from the earlier GATT regime, but also through Washington based institutions such as the World Bank and IMF. It is difficult to imagine the US withdrawing support for WTO trade dispute settlements being anything other than a major disruption to the current world trade order, leaving the WTO with a much diminished role in favour of bilateral or regional agreements.

This sentiment steadily becoming US trade policy reality will trigger key questions in Asia on the shape of international trade agreements. We have heard many individuals in Asia share their concerns about the potential trade war between the US and China, which would significantly impact major trading countries who rely heavily on trade links with both – countries for whom having to pick one or the other will cause a major dent in revenues from trade. This development also raises the question of whether Asian trade arrangements will lead to further legal frameworks for their own dispute settlement mechanisms.

We will be discussing more about the global role of the WTO moving forwards at a forthcoming briefing for our corporate members with Julian Braithwaite, the UK’s Ambassador to the WTO.