Amid chaos at WTO, environmental goods offer Trump an opportunity
But amid the darkening skies, the United States has the opportunity to reaffirm its commitment to the multilateral global trading system at the World Trade Organization in ways that would help domestic manufacturers.
The administration will need to decide in the near future on whether to levy tariffs or other import restrictions on solar products, washing machines and, pending the outcome of a soon-to-be-released U.S. Commerce Department report, potentially on imported steel and aluminum. The Office of the U.S. Trade Representative also has launched an investigation of Chinese intellectual property and technology-transfer practices that could result in unilateral action by the United States. Meanwhile, renegotiation of the North American Free Trade Agreement has been slowed by unrealistic demands from the United States.
These are all ominous signs for free traders.
The global news isn’t much better. The WTO serves two basic functions: to resolve trade disputes between member nations, and as a venue to negotiate trade rules and promote liberalization. By unshackling the flow of commerce across borders and providing a venue to resolve disputes, the rules-based trading system has served America and the rest of the world’s interests well.
But like our domestic trade agenda, the global trade agenda now faces serious challenges. The Trump administration is blocking new appointments to the WTO’s appellate body, believing Geneva’s deck to be stacked against the United States. Last October, Trump told Fox Business Channel’s Lou Dobbs that “we lose the lawsuits, almost all of the lawsuits in the WTO.” The president reasoned it was “because we have fewer judges than other countries … In other words, the panels are set up so that we don’t have majorities. It was set up for the benefit of taking advantage of the United States.”
This isn’t true; the United States wins disputes at the WTO at a higher percentage than virtually any other country in the world. But the administration is holding firm. As of December, the appellate body’s seven members had been reduced to four, posing a serious threat to the entire dispute-settlement apparatus going forward.
One way for the United States to show a good faith commitment to the future of the WTO is to pursue trade liberalization within the body aggressively. Ever since the collapse of the Doha round of talks, the WTO’s trade liberalization function has been largely stalled. While the president has been highly critical of the WTO, the administration recently made a slight, if underreported, shift in tone. In his remarks at the WTO’s ministerial conference in Buenos Aires in December, U.S. Trade Representative Robert Lighthizer opened the door to near-term liberalization talks and asserted that the body has become too focused on dispute resolution.
This is a marvelous idea, and there is a notable, if counterintuitive, way the Trump administration could jump-start liberalization talks. Lighthizer could re-engage on the Environmental Goods Agreement announced at the World Economic Forum in Davos in 2014. The agreement covers environmentally friendly goods like wind turbines and solar panels. Negotiating parties to the EGA include about 90 percent of global exports in green goods, according to the USTR.
Obviously, environmental goals have thus far been even lower on the Trump administration’s list of priorities than free trade. But aggressively pursuing the EGA would serve a dual purpose. While the United States levies relatively low tariffs on environmentally friendly goods imported into the country, American manufacturers of such products face high tariffs on their exports. The administration has been adamant about increasing exports of domestic products; cutting tariffs across the globe would be an enormous boon to American producers. That eliminating tariffs on these goods would make them cheaper and more accessible, thus helping the environment, is a fairly attractive secondary benefit.
The president recently announced that he’s going to the World Economic Forum later this month. While many speculate that he will use his remarks in Davos to be a “skunk at the party,” there are good political reasons — in addition to the very strong policy ones — for the president to reaffirm the United States’ desire to see EGA talks resume.
Image credit: topimages