The global hegemon is running amok. It wants to capture markets by injecting fresh blood into the age-old “open door” policy that began in the late 19th century. That policy ensured a wild chase for markets starting with Cuba, the Philippines and then China in early 20th century. By 1945, the United States, the most powerful nation, had begun flexing its muscle on every front, including trade.
Effectively, it established the framework and rules for global trade. Whether it is GATT (General Agreement on Tariffs and Trade that came into effect on 1 January 1948) or the World Trade Organization (WTO) that replaced GATT from 1 January 1995, it controlled almost everything. And without its approval, no decision can come into effect. Indeed, an open secret is that not even a blade of grass can grow at the WTO without the clearance from Uncle Sam.
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Yet, the sole superpower, being led by Donald Trump now, says the WTO is rigged and manipulated against its trade interests. Its dispute settlement verdicts issued by panels and the Appellate Body (AB) could undermine the “America First” goal of the new administration. “The Trump Administration will aggressively defend American sovereignty over matters of trade policy,” as per the President’s Trade Policy Agenda issued on 1 March. It says the “overarching purpose of our trade policy—the guiding principle behind all our actions in this key area—will be to expand trade in a way that is freer and fairer for all Americans.”
“Every action we take with respect to trade will be designed to increase our economic growth, promote job creation in the United States, promote reciprocity with our trading partners, strengthen our manufacturing base and our ability to defend ourselves, and expand our agricultural and services industry exports,” it has argued. The four major goals to achieve its objectives in global trade, according to the document submitted to the Congress are “(1) defend U.S. national sovereignty over trade policy; (2) strictly enforce US Trade laws; (3) use all possible sources of leverage to encourage other countries to open their markets to US exports of goods and services, and provide adequate and effective protection and enforcement of US intellectual property rights; and (4) negotiate new and better trade deals (bilaterally) with countries in key market around the world.” It goes on to say that “the Trump Administration will act aggressively as needed” suggesting trade remedies such as anti-dumping and countervailing measures will be implemented as per American interests.
Despite creating open and favourable rules and a framework for globalization, the US remained a major loser because all other countries resorted to unfair trade practices and denied market access to American goods and services, the report says somewhat viscerally. The spike in the US trade deficit, which touched $648 billion in manufactured goods last year and the loss of 5 million jobs during the last 16 years, the US says, vindicate its stand that multilateral, regional, and even bilateral trade agreements with Korea and others have only brought deindustrialization and destruction. “Plainly, the time has come for a major review of how we approach trade agreements,” it has argued, emphasizing that “going forward, we will tend to focus on bilateral negotiations.”
In short, the US is suggesting that its ever-increasing trade deficits are at the heart of the problem. Such deficits, it says, are stemming from rule-breaking by the counterpart country and facilitated by the WTO. Washington is maintaining that it is deceived and cheated by its trade partners, particularly China, which did not implement the rules while the US assiduously implemented them.
Nothing could be further from the truth than that claim by President Trump. A simple glance at the number of disputes it has won and lost proves that what Washington is saying about being conned or cheated would be tantamount to “fake news”. So far, the US has launched more than 100 trade disputes against other WTO members while facing more than 125 disputes against its allegedly unfair trade practices.
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Every month, the US is upbraided for not implementing rulings in a half-a-dozen cases for over 10 years. Moreover, US’s measures in a range of trade-distorting cases were condemned by the appellate body. The US gets the distinction for not adopting the WTO’s rulings and thereby, causing a “systemic” tsunami with “chilling” effects.
About the US’s track record in trade disputes concerning its anti-dumping, subsidies and countervailing measures, and safeguard actions, the less said the better as the US’s anti-dumping actions are based on unfair/dubious zeroing methodology. According to this practice, which is condemned time and again in every dispute by the AB, since the India bed linen dispute against the EU in 2001, negative dumping margins arising from higher export price as compared with normal value are either excluded from the calculation of the weighted average, or included with a value of zero, by the US’ anti-dumping investigating authorities.
The US has failed to implement rules it had crafted during the Uruguay Round. Besides, the US is the major subsidizer of agriculture and even hi-tech exports. Successive US’ administrations have charged, whenever they lost trade disputes, that the WTO rulings exceeded their remit. It is easy for the US to claim that every deal it did till now is a dud. But Washington managed to foist unilateral deals in different avatars, Trump’s being uglier than those struck by his predecessors.