WTO: A Achievement of Civilisation or Mere Temporary Experiment

On June 6, the European Union and Canada initiated dispute complaints, under the World Trade Organization’s (WTO) Dispute Settlement Understanding (DSU), with the US concerning tariffs imposed by Washington on steel and aluminum imports. US President Donald Trump imposed a 25% import tariff on steel and a 10% tariff on aluminum on the grounds that these imports threaten to impair national security.
According to the International Trade Organization (ITO), US steel imports are four times that of exports and rising. Three-quarters of these imports are from just eight countries, although it imports from 100 countries.
WTO has faced existential crises before. It has found its ability to thrash out consensus being questioned— as exemplified in the stalemate on the Doha Round negotiations crucial for developing countries—or weakened, through mushrooming plurilateral deals and the establishment of Inter-State Dispute Settlement regimes. The current attempt by the US to chip away at the basic structure of international trade by removing all components of predictability and paralysing the system by blocking crucial appointments is unprecedented.
Won’t give an inch
The broad categories of actions are: US imposing ‘safeguard’ duties of 30% on imported solar cells and duties of 20-50% on imported large residential washers under Section 201 of DSU; US tariffs on imported steel and aluminum under Section 232; an action against China following a Section 301investigation of China’s trade practices that ‘discriminates’ against US intellectual property; and aSection 232 investigation into auto and auto part imports that impacts the US auto industry.
Of these, the second category attracts attention because it affects the US’s allies as well as its trade partners. The rarely used law, Section 232 of the Trade Expansion Act of 1962, which allows imposing tariffs citing national security primarily because the ‘safeguards’ rules that countries have traditionally whipped up to impose temporary tariffs on imports, are harder to use because of prior WTO panel rulings.
A situation emerged where the affected countries sought consultations, arguing that the tariffs are safeguard measures that come under the globally drawn Safeguards Agreements. Meanwhile, the US insists that these are not safeguard measures but ones that concern national security.
In response to steel and aluminum taxes, the affected countries have announced their intention to exercise their “rights under Article 8.2 of the Safeguards Agreement”, suspending concessions on US imports.
Beijing has unveiled rebalancing tariffs of 128 products, targeting about $3 billion of US imports. India will impose additional duties of 5-50% on 20 tariff lines, totalling $165.56 million June 21onwards.
And the EU, among other measures, will impose a 25% additional tariffs from June 20 on more than 180 tariff lines, with theoretical additional duties of $700 million.
Japan, Russia and Turkey have similar ‘rebalancing’ plans submitted to the WTO’s Goods Council. China has warned that the US action severely damages the stability of the multilateral trading system.
“This institution does not deserve to die through asphyxiation,” Ricardo Ramírez-Hernández, two-term judge on the WTO’s appellate body, said in his farewell speech. The US has been blocking appointments to the spot left vacant by Ramirez and others, to the appellate body, the highest court for trade disputes between its 164-member countries, for over 17 months now.
The current situation has grave implications for WTO. Countries will run with one leg tied to the White House, which will become the epicentre for bilateral negotiations to resolve disputes that should have been resolved at WTO. Trade experts believe that the EU will not be able to hold on to its tough declarations.
The New York Times, citing diplomatic officials, said that there is a possibility of the EU buying huge quantities of US LNG, or support the US in changing the rules of WTO’s dispute settlement system to assuage the Trump administration. This displays the raw might of both private and public actors to ride over consensus-based international rules, where smaller countries don’t stand a chance.
Regardless of how dispute panels rule on the metals tariff issue, the outcome will engender problematic responses. If it goes for the affected countries, then the US may withdraw from WTO or ignore the ruling. And if it goes in favour of the US, then it sets aprecedent for more trade-restrictive nationalistic policies threatening multilateralism.
This may also push countries to take the Article 25 route of expeditious arbitration within WTO as an alternative means of dispute settlement, or the plurilaterals’ route. Both would spell the recalibration of a predictable and rules-based trading system.
As WTO deputy director-general Karl Brauner said at Ramirez’s farewell, it remains to be seen if WTO was an achievement of civilisation, or only a temporary experiment.