Just When You Thought Things Couldn’t Get Worse
May 11, 2020
I have been planning for several weeks now to write a column laying out my view on what a Democratic trade policy should look like, but every time I start, something strange happens that causes me to divert my attention to the disaster of the week. Last week, for example, it was the burst of energy going into finding new ways to punish China for its actions relating to Covid-19. This week my plans have been upended by a monumentally bad proposal from Senator Josh Hawley (R-MO) to abolish the World Trade Organization (WTO), or, initially, to pull the United States out of it.
Senator Hawley began this effort with an op-ed in the New York Times and then filed a resolution in the Senate to formally withdraw the United States. That action is significant because of the Dole Amendment, which was included in the legislation implementing the Uruguay Round in 1994. The amendment provided for a vote every five years on withdrawing the United States from the WTO if someone introduces a resolution calling for that. The amendment included “fast-track” procedures that effectively guaranteed a vote in the full House and Senate if the resolution authors demanded it.
That has not happened every time, but when it has happened, the results were conclusive. The House rejected it in 2000 363 to 56 and five years later in 2005 338 to 86. The Senate has never voted on it. (Fun fact: then-congressman and now-senator Bernie Sanders (I-VT) introduced one of the House resolutions.) Opponents appear to have given up after 2005, and there has not been a vote since then.
You will not be surprised to learn that I think both abolition and withdrawal are terrible ideas. First, his reference to the halcyon days of post-World War II “misremembers” history. The WTO is not a departure from the post-war system but is the culmination of what the Bretton Woods participants envisioned and embodied in the Treaty of Havana, which was then torpedoed by—who else—the U.S. Senate, where Hawley now sits. Killing off the organization is throwing the baby out with the bathwater. It would take us back not to the 50s and 60s but to the 30s, where nation-state sovereignty ruled and countries pursued beggar-thy-neighbor policies.
In arguing for a return to sovereignty, he reflects a view popular in the current administration that seems to think globalization is optional, and if we are determined, we can abandon it. Sadly for him, that ship sailed a long time ago. I have always been struck by a speech Bill Clinton gave while president, when he said globalization is not good; it's not bad; it's here, and we better get ready for it. It is driven by technological changes that dramatically lower communication and transportation costs, and those are not going away. The pandemic will alter the way we do business, in particular by shortening and regionalizing supply chains and increasing reliance on automation at the expense of workers, but the fundamentals of integration will remain. The United States is a mature, slow-growth economy. Ninety-five percent of the world's consumers are outside our borders. If we want to grow, we have to trade, and trying to return to the old model of “make it here and ship it there” is not going to work in our more complex world.
The senator also argued in his op-ed that “foreign agriculture won concession after concession, while American farmers struggled to get fair access to markets,” which he blamed on the WTO. However, according to Department of Agriculture, farm exports grew from $44 billion in 1994 to $143 billion in 2018, a threefold increase. The WTO shouldn’t get credit for all of that—it was the hard work of U.S. farmers establishing foreign markets—but the organization has clearly been an enabler for expanded trade and, at a minimum, should not be blamed for something that in fact did not happen. That is also true outside of agriculture. Even with the financial crisis of 2008-2009, global trade has expanded significantly in the 25 years since the WTO was established, and the WTO has enabled that as well.
Senator Hawley also neglects to consider the world he would be creating. If the organization continued but the United States was out, we would have no obligations to its members, but they would have no obligations to us. If we acted against them, as the president has, they could retaliate with impunity. If the senator thinks we face high tariffs now—which is, for most of our major markets, not true—wait until he sees what we get when other nations are no longer restrained in their dealings with us. If the entire organization were abolished, it would mean, as I said above, a return to the 1930s and the law of the jungle.
Withdrawal would also further the decline of American global leadership, which has been a frequent topic in my columns. If the United States withdraws from the WTO, the organization will not simply go away. Other nations will fill the vacuum caused by our abdication of leadership, and the most likely candidates are China and the European Union, who will both pursue policies in their interests rather than ours. Despite our (legitimate) issues with the organization, it is far better to be inside the tent than outside looking in.
In times of crisis, radical proposals are not unusual, and they often fade with the crisis. I hope this one will meet that fate. The multilateral system is not dead yet, and the United States—its biggest beneficiary—should not be the one to kill it.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
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