The Trump administration escalated pressure on the World Trade Organisation, giving the international group a 90-day ultimatum to alter a provision that the US argues has long allowed China to game global trading rules.
President Donald Trump said the US would “use all available means” to secure changes to a provision at the WTO that allows countries to decide whether they qualify as “developing countries”. Countries that claim that label — which includes nearly two-thirds of the organisation’s 164 members — qualify for certain preferential treatment, like longer time horizons to carry out trade agreements.
The Trump administration argues that dozens of countries abuse those rules and has singled out China, the world’s second-largest economy and the largest global exporter for about a decade, saying it should not be classified as a developing nation. Administration officials have bristled that China claims easier treatment at the global trade body, while pumping out low-priced manufactured goods that have displaced American jobs and moving to dominate the high-tech industries of the future, like autonomous vehicles and robotics.
“The US has never accepted China’s claim to developing country status, and virtually every current economic indicator belies China’s claim,” the proclamation read.
Trump called the WTO broken and said it was allowing other countries to take advantage of the US. “The WTO is BROKEN when the world’s RICHEST countries claim to be developing countries to avoid WTO rules and get special treatment,” he said. “NO more!!! Today I directed the US Trade Representative to take action so that countries stop CHEATING the system at the expense of the USA!”
Ramping up the trade war decibel
The administration said that if the US trade representative concluded that substantial progress had not been made toward overhauling the organisation’s rules in 90 days, it would no longer treat countries that it did not consider to be developing nations as such. The US also threatened to withhold support for a country’s membership in the Organisation for Economic Cooperation and Development, a group of the world’s 36 most advanced countries, if the trade representative did not agree that it was a developing nation.
It is not immediately clear what the practical effect of those changes would be — for example, whether the Trump administration would block current negotiations at the WTO where countries like China claim developing country status.
The organisation has produced little consensus among all of its members in recent years, but it is pushing to resolve a trade deal that would curb global overfishing by the end of the year. Dozens of countries have claimed developing country status in those talks, which would give them more time to enforce potentially costly new rules if any are agreed upon.
The Trump administration submitted a proposal to the WTO this year to exempt countries from developing country status if they are members of the OECD or if they are among the Group of 20’s most advanced economies. The proposal would also strip the developing country title from nations that the World Bank considers to be high-income countries, or make up at least 0.5 per cent of global merchandise trade.
But some trade officials in Geneva have criticised that proposal as arbitrary and potentially disruptive to an organisation that is based on consensus and voluntary action from countries.
“It has been a concern that predates the Trump administration,” Chad P. Bown, a senior fellow at the Peterson Institute for International Economics. “What’s new is the Trump administration is not interested in diplomatic niceties.”
The new announcement is part of a broader offensive on the WTO by the Trump administration, which argues that the group has failed to check China’s unfair economic behaviour and is in desperate need of change.
Not just aimed at China
The Trump administration has also nearly shut down the organisation’s ability to settle trade disputes among its members. It has blocked appointments to a body that hears appeals to such disputes, arguing that the organisation has overstepped its mandate and created a situation of judicial overreach that the US never signed up for.
In December, the body will have too few members to hear cases, leaving countries without a formal system to complete dispute settlements.
In taking on the developing country provision, the Trump administration could also be picking a global fight that would extend beyond China. In the announcement, the administration said that seven of the 10 wealthiest economies on a per capita basis as do several members of the OECD.
“The status quo cannot continue,” the proclamation said. “The WTO is in desperate need of reform, without which the WTO will be unable to address the needs of workers and businesses or the challenges posed by the modern global economy.”