How to Make the Trade War Even Worse

https://www.nytimes.com/2018/12/17/opinion/trade-war-china-wto.html

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You may think the Trump administration’s appetite for trade wars couldn’t get much bigger. You’d be wrong. Last week, the United States trade representative, Robert Lighthizer, blocked the nomination of new judges to the World Trade Organization’s appellate body, a move that could make it impossible for the United States to enforce whatever wins it scores against China.

Mr. Lighthizer, who is America’s main negotiator in its current round of trade talks with China, is a longtime lawyer for the steel industry, which for years has complained that the W.T.O. makes it too difficult for the United States to impose trade remedies for unfair practices. The seven-member appellate body hears appeals in disputes between W.T.O. members. But rather than fix the problems, Mr. Lighthizer appears to prefer blowing up the entire system.

At a meeting of the W.T.O.’s General Council in mid-December, the European Union and 11 nations, including China, Canada, Mexico and South Korea, proposed changes to the body’s dispute settlement system in response to American complaints. They hoped the amendments would convince the United States to allow vacancies on the appellate panel to be filled.

Instead, the United States rejected all the changes while refusing to put forward proposals of its own, and it has blocked the reappointments of appellate judges. The W.T.O. has historically operated through consensus, with any single country able to veto proposed changes. So the court is down to its bare minimum of three out of seven members to form a quorum. When two of those members’ terms expire next year, the court will no longer be able to rule on any appeal.

That creates the risk of turning every W.T.O. dispute into a mini-trade war. Rather than waiting for the impasse over the judges to be resolved, countries will take trade disputes into their own hands, engaging in retaliation and counter-retaliation that could escalate indefinitely. It also signals a desire by the Trump administration to return to an unsustainable might-makes-right system.

This threat to the dispute settlement system comes just when the United States needs it most. Without it, America will have no mechanism to hold China accountable for its persistent theft of intellectual property, its rampant use of subsidies or its cybersecurity breaches. And the United States will have no forum in which to defend the interests of American businesses when China insists on transfers of critical technology as the price for approvals for joint venture licenses or other permits to do business in China.

The United States is on the verge of major victories at the W.T.O. for American farmers in challenges to Chinese agriculture subsidies and to discriminatory restraints on American exports of wheat, corn and rice. All China needs to do to prevent those rulings from becoming binding obligations is to appeal them to the soon-to-be nonexistent appellate panel, potentially setting off another trade war.

No one wins trade wars. They increase prices, hurt economies, and can easily snowball into recessions, as they did during the early 1930s. The price of American steel is up by about 40 percent this year, thanks to rising demand and President Trump’s tariffs on imported steel. While that may be good for steel makers, it’s hugely damaging for everyone using steel. And tariffs that other countries have imposed in retaliation have shut American farmers out of markets around the world, most notably China, whose imports of United States soybeans fell 91 percent in 2018 from the year before.

This belligerence toward the W.T.O. comes even though the United States has won more W.T.O. cases than any other country. America relies on the W.T.O. to protect the ability of American farmers, workers and intellectual property owners to export their goods and services without fear of being discriminated against simply because they are American.

The intransigence of Mr. Lighthizer and other trade hard-liners in the Trump administration must be challenged. Members of Congress and their constituents — farmers, workers and corporations — need to fight for a system of trading rules and a mechanism to enforce them that benefits everyone. Leaders here and abroad should press the United States and China to bring their trade war into the W.T.O. And if all else fails, the members of the W.T.O. should band together to appoint appellate judges over the United States’ unilateral objection.

Trade and trade disputes should take place under predictable and clear rules that can be fairly enforced. The world has such a system with the W.T.O., and we should not allow it to be destroyed. History shows that the alternative is resolution of trade wars through much more destructive means.

Jennifer Hillman is a professor at Georgetown Law Center, a former member of the World Trade Organization’s appellate body and a former ambassador and general counsel in the Office of the United States Trade Representative.

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