Geneva: The America First trade strategy based on “might is right" seems to be unravelling. Increasingly, the US trade war with China is becoming a “classic policy quagmire," almost akin to the Vietnam War. Washington seems committed to a policy that is not working, but the US “can’t bring itself to admit failure and its losses," wrote Paul Krugman, Nobel Laureate in economics, in an opinion piece in the New York Times on 3 August.
China, the “900 pound gorilla", according to US Senate Finance Committee chairman Chuck Grassley, has to be conquered. But, an escalation of the trade war with China is causing more damage to the American economy, particularly its farmers. An early truce between the two largest economic powers seems unlikely, given the eye-for-eye punitive trade measures slapped by each other.
The US has also simultaneously resorted to minor trade wars with its traditional allies, including the European Union, the trans-Atlantic partner, and Japan among others. Washington claims that it has secured noticeable gains by converting the NAFTA (North America Free Trade Agreement) into the USMCA (US, Mexico, Canada) trade deal. But, the actual gains from USMCA are few and far between.
The bellicose threats of a trade war with the EU are on the wane. President Donald Trump early this week claimed that the EU has agreed to buy beef from American cattle producers. But Brussels has not clearly indicated the quantum of beef purchases from American producers.
On the multilateral trading front, particularly at the World Trade Organization, the US’ victories are limited. Washington has almost succeeded in paralyzing the most important adjudicating arm for resolving global trade disputes, the appellate body. From 11 December, the body might become totally dysfunctional when it will be reduced to one member from the requisite strength of seven.
But, the US was unable to achieve any success so far in changing the legislative aspects of the WTO, particularly the denial of special and differential treatment (S&DT) in current and future trade agreements. Washington has not succeeded yet in demolishing consensus-based decision-making at the WTO, not in imposing punitive measures, including naming and shaming provisions, on countries for not complying with transparency and notification measures.
In short, when the chickens come home to roost following the costly trade wars launched by the Trump administration since March 2017, one man will have much to answer for. Mainly on whether muscular, coercive trade policies that he had advocated back in the early 1980s against Japan remain still relevant for the 21st century. That man is Ambassador Robert Lighthizer, US Trade Representative.
Being the chief architect of President Trump’s trade policies, Ambassador Lighthizer has a long record of pursuing coercive trade policies. When Japan was the world’s leader of automobiles and other industries in the 1980s, Ambassador Lighthizer, as a deputy USTR in the Regan administration, succeeded in forcing Japan to reduce its exports of vehicles under the export restraint regime. “More subdued than the President he serves, he [Ambassador Lighthizer] espouses, beneath a thin veneer of gratuitous pro-trade euphemisms, a deeply felt belief in the virtues of protectionism and mercantilism that seems to animate all his actions on behalf of the Trump administration," writes James Bacchus, a founding member of the WTO’s appellate body from the US, in an article titled “Might Unmakes Right: The American Assault on the Rule of Law in World Trade".
Ambassador Lighthizer is a trenchant critic of China’s trade policies. He says China’s trade policies are based on industrial subsidies, mandatory transfer of technologies, and rampant violation of intellectual property laws. Known as a China-hawk in the ongoing US-China trade talks in comparison with his colleague Steven Mnuchin, the US Treasury Secretary, Ambassador Lighthizer wants to retain the unilateral right to impose retaliatory measures on China, if it is found to be not complying with the proposed US-China trade accord.
Yet, he does not want China to avail the same right in case Washington fails to adhere to its side of the bargain. “Yet he advocates both protectionism and mercantilism for his own country in the guise of the Trumpian version of a misguided, short-sighted and inward looking industrial policy," says Bacchus.
Ambassador Lighthizer is a stringent critic of the WTO’s Appellate Body, whose rulings are binding on WTO members. He had argued that it was a “mistake" for the US to agree to a binding system that infringed on US sovereignty. Yet, ironically, he was one of the two candidates nominated by the US for joining the appellate body in 2003. But WTO members did not select Ambassador Lighthizer. Perhaps, he is now settling scores with WTO members by killing the body.