WTO: Whither or Wither Redux

Photo: olrat/Adobe Stock
Although the World Trade Organization (WTO) has become less of a force in the world economy lately, there has been a growing discussion about it here in the United States. It centers around the intentions of the president-elect and focuses on two questions about the WTO: What will he do, and can he do it? It turns out there are no easy answers to either question, but let’s take them one at a time.
On the question of what he will do, the options have not changed very much since I last wrote about the organization:
- Ignore
- Withdraw
- Reform
- Support
Of the four, the latter two seem the least likely. President-elect Donald Trump is not a fan of multilateral organizations generally—he prefers to negotiate bilaterally because he thinks he has more leverage one-on-one—and there is no reason to believe he has any particular enthusiasm for the WTO. So, support is unlikely, and reform would be too much work for a small return.
That leaves the first two choices. Initially, I think the most likely course of action is simply to ignore the organization. It is not presently doing anything likely to irritate him or to get in the way of the United States’ ambitions, so it may be best to just leave it alone. I fear, however, that won’t last. The United States has lost two dispute resolution panel decisions at the WTO regarding the steel and aluminum tariffs and the Section 301 China tariffs Trump imposed and has appealed them “into the void,” meaning that no final action will occur since the Appellate Body is no longer functioning. More importantly, virtually every tariff threat Trump made during the election campaign and afterward would violate WTO rules, so if he actually carries out any of his threats, the United States will quickly find itself back in Geneva playing defense. And we will lose again—and again and again, depending on how many of his threats are implemented. That sequence of events, unfortunately, sets the stage for withdrawal from the WTO.
While Trump may chafe under the WTO rules, which restrict what actions countries can take, withdrawal would be a disaster both economically and politically. The last time the issue came up—in 2020—the Heritage Foundation, not a bastion of liberalism, argued against withdrawal and noted that U.S. membership had produced a 1.45 percent increase in welfare, and if all our trade agreements disintegrated, the global economy would be $2.7 trillion poorer. Politically, it would indicate a U.S. withdrawal from global economic leadership, which would largely leave the field open to China, and it would mean other countries would no longer have any obligations to us and could retaliate at will. Trump might welcome a descent into the law of the jungle because he believes the United States, being a large economy, can push the others around. Instead, he will discover that the others are better prepared this time and have realized they don’t need us nearly as much as we need them.
The second question—whether he can withdraw—is also complicated. On its face, the process is simple. WTO Article XV permits nations to withdraw, effective six months after they provide written notice. The complex question is whether doing so requires congressional approval.
The Uruguay Round Agreements Act (URAA) was passed by both houses of Congress and became law on December 8, 1994. The URAA’s text includes a provision explicitly approving the Uruguay Round Agreement and other provisions putting the obligations the United States assumed under the agreement into U.S. law. The agreement is a congressional-executive agreement, not a treaty, which means approval requires a majority in both the House and the Senate. Congress will no doubt argue that since it authorized U.S. participation in the WTO, it also must authorize withdrawal, although the URAA does not contain a provision explicitly saying that. The Trump administration might well argue to the contrary, but I think Congress has the better argument on that.
The law also, however, contains a novel provision that provides for a vote every five years on remaining in the WTO. The provision requires the Office of the U.S. Trade Representative to submit a report every five years on the costs and benefits of WTO participation, which Congress would use as a basis for determining whether continued membership was in the U.S. interest. There were votes in 2000 and 2005, and the resolution failed by large margins. In 2020, resolutions were introduced but were not acted on because they were deemed not to have been introduced within the required time limit.
Conveniently for WTO skeptics, the 5-year opportunity arrives again in 2025, so if Trump wants to withdraw, Congress could seize the opportunity to vote on it, and if the resolution were voted down again, it would be a definitive statement of congressional intent that the United States remains a member. On the other hand, if the president were to back the resolution, it would likely pass. At the moment, it does not appear many vertebrate Republicans are willing to stand up against their president, particularly on an issue many of them will view as esoteric. Withdrawal would be an enormous mistake, signifying the United States turning its back on the world at the very moment when we need more exports to grow the economy, but it would not be the first time the United States acted against its own economic interests.
William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.
