Latest news, Perspectives, United States, WTO crisis and reform

Perspectives: Europe needs to brace for durable divergence on trade policy with US

Proposals to raise tariffs all-round by presidential candidate Donald Trump, the release of a book by his former trade representative Robert Lighthizer, and a speech of the current holder of that position at the G20 Trade Ministers meeting show the extent of trade and WTO-scepticism in the United States. The trend is here to stay and leaders in Europe now need to face this reality.

Among the many differences between European and United States politics is the existence of a summer break. There was little evidence of American politicians taking any holiday this year. Campaigning for the 2024 presidential election has in effect already started, and trade once again features highly in the political battlefield.

Unsurprisingly, the current favourite for the Republican Party nomination, previous president Donald Trump, is at the forefront of this trade policy battle. Trump suggested he would introduce a 10% tariff on all goods entering the US during an interview for Fox Business, revealing his continued instinct for headline-grabbing policies liable to anger trading partners.

Earlier this summer came the publication of No Trade is Free by former US Trade Representative Robert Lighthizer. The book is an account of his time in office and of what he sees as the mistakes US trade policy in previous years. Lighthizer’s calls for a fundamental change in international trade rules can be seen as a possible marker for what policy may be pursued in during a second Trump term.

Lighthizer is generous towards his successor. He calls Katherine Tai “estimable”. This is a sign that their trade policy shares many characteristics.

None of this is a promising backdrop for the 13th WTO ministerial conference to be held Abu Dhabi next February. Before that, the EU and US are supposed to reach an agreement on a ‘Global Arrangement on Sustainable Steel and Aluminium.’

As Europe returns to work, its leaders need to give more thought to the challenge of maintaining a global trading system with the US as a participant.

Consistent views across Trump and Biden administration on the WTO

On the surface, the views of Tai and Lighthizer towards the WTO are wide apart.

For example, in her recent speech at the G20 ministerial meeting in India, USTR Tai said: “We are aiming for members to have a successful ministerial conference”.

Lighthizer in his book is consistently negative towards the organisation. “From the beginning, it was obvious that the WTO system placed US companies and workers at a significant disadvantage in global markets,” he writes.

While the tone of the two is very different, the substance is more consistent. Among Tai’s goals for the WTO is “equipping the membership to address unfair practices and global market distortions”. This reference to China is made more explicit when she adds : “We cannot accept the idea that those Members that are economic and manufacturing powerhouses based on any reasonable criteria, should be able to claim flexibilities intended for less advantaged members.”

Tai also calls for “a fundamental rethink of the dispute settlement system” – which is something the US has been advocating since at least 2016. Tai says that the US has brought more than 30 ideas to the ongoing informal WTO discussions about this issue and invites others to do similarly. That she does not elaborate on the 30 ideas and proposes no possible compromise does not suggest any imminent conclusion to the conversation in Geneva.

Other current US goals include greater efficacy of the WTO’s negotiating arm, promoting transparency, and improving enforcement. These may be less controversial, but are also consistent across the Trump and Biden administrations.

Lighthizer’s call for fundamental overhaul of world trade rules

All democratically elected governments are influenced by the prevailing views of strong opposition parties, few more so than a US where Congress has formal powers over trade policy.

Robert Lighthizer as US Trade Representative paid particular attention to this. He was rewarded for this care with a very strong vote in favour of the US-Mexico-Canada FTA that replaced NAFTA during his term in the Trump era.

In return, many Congressmen regard him highly on trade issues. Lighthizer’s to-do list for the WTO will thus have some influence on US policy. This is notwithstanding that it would at first sight completely upend the global trading system as we know it – and it is therefore unlikely to be negotiable internationally.

At the WTO, Lighthizer calls for restricting ‘special and differential treatment’ to least-developed countries and changing the dispute settlement system.  But that is just the start.

In his view countries should not be allowed to set their own tariffs as a rule. Instead “there should be “a baseline for all tariffs”, and bilateral free trade agreements to reduce these for particular countries should be banned, except between neighbours.

Lighthizer also wants compensatory tariffs or other unilateral measures to counter what he terms ‘cheating’, sunset provisions for all WTO agreements, and a mechanism that assures “long-term balanced trade”, to avoid persistent trade surpluses or deficits.

A US administration seeking re-election probably cannot afford to ignore such views entirely. Indeed, as suggested in this recent Borderlex comment, the US may already be shaping WTO reality -particularly on unilateral actions.

‘US first’ consensus blocks agreement with allies

Underpinning US trade policy since 2016 has been the notion that the country has been uniquely failed by the global system. Notwithstanding recent studies showing that it is the EU falling behind in economic terms, it is the US that feels the suffering. The Trumpian discourse says it must take action such as through tariffs or a “worker-centric” trade policy.

While Lighthizer saves particular scorn for China, he is also sharply critical of many other countries. At times his book is an exhausting onslaught of complaints about other countries.

Perhaps the most significant omission in his book is any sense that rules should apply universally, to the US as well as to other countries. For example Lighthizer blames the failure of the bilateral EU-US TTIP trade agreement talks in 2016 on the EU wanting “to maintain its own ability to have standards on products that would help promote European manufacturing” – while not seeing the incongruity with similarly unilateral US actions.

There seems to be little scope for far-reaching agreements on trade while US policy is so obsessed by its own apparent victimhood, and its belief that it holds the right not to follow any established rules in response to the supposed damage it suffers.

The policy of the EU towards US trade policy since 2016 has been to play for time, in the hope of changing US attitudes. That may still be the best approach.  But leaders in Brussels and in other European countries need to acknowledge the risk that the situation may in fact worsen, and they must be ready for this.


 David Henig runs the column ‘Perspectives’ on the politics of global trade for Borderlex. He is also a UK director at the think tank ECIPE.

Leave a Comment

Your email address will not be published. Required fields are marked *


This site uses Akismet to reduce spam. Learn how your comment data is processed.