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Bill McCarthy
By Bill McCarthy July 15, 2020

China remains in World Trade Organization, despite Trump’s vow for removal

The legal structure of the World Trade Organization has prevented President Donald Trump from fulfilling his promise to kick China out of the trade body, but his administration has taken aim at the organization in other ways. 

On the campaign trail in 2016, Trump pledged to reverse "China's entry into the World Trade Organization," which he called one of the "worst legacies of the Clinton years."

Under a 2000 agreement backed by President Bill Clinton, China joined the WTO in December 2001 and remains part of the organization, which sets and implements trade rules for its 164 member countries. 

But the Trump administration can't send China packing on its own. Never in the history of the WTO, or in the history of the General Agreement on Tariffs and Trade before it, has a country been thrown out of the organization, said Raj Bhala, distinguished professor at the University of Kansas School of Law and a senior adviser at Dentons, a global law firm.

There's nothing in the 1995 agreement establishing the WTO that authorizes one member country to expel another, nor is there anything in the accession contract that China signed in 2001 that allows China's removal, Bhala said.

"He has not fulfilled the promise, and it's not a promise he should've made, because there isn't a rule that would have allowed him to fulfill it," he said.

With China's removal off the table, the Trump administration has instead chipped away at the WTO itself by crippling the appellate body that handles trade disputes between member countries, and also by threatening to pull the U.S. out of the trade body entirely.

"Trump has made zero progress in kicking China out of the WTO, but he has edged closer to taking the U.S. out of that body," said Gary Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics.

Trump's work-around response

In normal times, an appellate body consisting of seven judges handles any appeals of decisions by dispute-resolution panels that handle trade disputes between member countries. Judges can serve up to two four-year terms, and three are needed to hear and decide cases.

The appellate body is like the "Supreme Court of world trade," Bhala said.

But as we noted when we last updated this promise, the U.S. under the Trump administration has been blocking the reappointment of judges. Two of the remaining three judges saw their terms expire in December 2019. As of June 23, only one remains.

"Trump has effectively shut down the appellate body by refusing to approve new members when the terms of old members expire," Hufbauer said. "Dispute panels are still convened, but without an appellate body, the losing party can choose to block an adverse decision."

Testifying before Congress on June 17, Robert Lighthizer, the U.S. trade representative, said that if the appellate body "never goes back into effect, I think that would be fine."

A number of member countries have since signed on to a temporary mechanism for resolving their disputes. The Multi-Party Interim Appeal Arbitration Arrangement, or MPIA, now covers 46 countries, including the European Union and China, Bhala said. Any member can sign on.

WTO countries that have subscribed to the MPIA can now have their appeals decided by three out of a pool of 10 arbitrators, Bhala said. But those arbitrators cannot rule on appeals involving disputes against the U.S., because the U.S. has not signed on to the MPIA, he said.

The Trump administration has also threatened to withdraw the U.S. from the WTO, a move that experts told us would require a massive legislative overhaul that would be possible only with widespread support among leaders in Congress and the U.S. business community. Sen. Josh Hawley of Missouri, an ally of Trump, introduced a resolution to that end in May.

But that wouldn't do anything about China's standing in the organization.

"That would almost be understating the metaphor of cutting off one's nose to spite one's face," Bhala said. "It would be like leaving a club where you like all the other members."

Other options for removing China?

There are other ways the U.S. could try to boot China from the WTO, but they would require "indirect" actions that are unlikely to succeed, Bhala said.

One method would involve the WTO's 164 member countries, which usually act by consensus, to pass a resolution ousting China. But getting countries on board would be tough. "Even if 163 members of the WTO agreed to that … China would still say no," Bhala said. 

Another option, described in an August 2018 piece in the Wall Street Journal, focuses on an article in the General Agreement on Tariffs and Trade, the precursor to the WTO. 

The article allows cases to be filed if a country believes the benefits it expects to get from the WTO are "being nullified or impaired" by the behavior of another country, even if that behavior doesn't specifically violate the agreement that established the WTO.

The U.S. could try to force China to voluntarily withdraw by lodging this kind of complaint over its economic system, Bhala said. "But that is really, really unlikely," he said.

Overall, kicking China out of the WTO is a near impossibility, but Trump has worked to stymie the organization in other ways. We rate this Promise Broken.

Our Sources

The World Trade Organization, "The General Agreement on Tariffs and Trade (GATT 1947)," accessed June 24, 2020

The World Trade Organization, "Members and Observers," accessed June 24, 2020

The World Trade Organization, "Membership, alliances and bureaucracy," accessed June 24, 2020

The World Trade Organization, "Appellate Body Members," June 24, 2020

The World Trade Organization, "Dispute Settlement Body," June 24, 2020

The New York Times, "Trump Trade Official Defends China Deal and Criticizes the W.T.O.," June 17, 2020

The New York Times, "Trump Administration to Push for 'Reset' of Global Tariffs," June 16, 2020

Milken Institute Review, "The WTO is Dead ... Long Live the WTO," May 4, 2020

European Commission, "Interim appeal arrangement for WTO disputes becomes effective," April 2020

Reuters, "EU, China and 15 others agree temporary fix to WTO crisis," Jan. 24, 2020

Reuters, "China pulls WTO suit over claim to be a market economy," June 17, 2019

The New York Times, "Trump Cripples W.T.O. as Trade War Rages," Dec. 8, 2019

The Wall Street Journal, "For U.S. to Stay in WTO, China May Have to Leave," Aug. 22, 2018

The World Trade Organization, "Accession of the People's Republic of China," Nov. 11, 2001

The World Trade Organization, "Agreement Establishing the World Trade Organization," Jan 1, 1995

PolitiFact, "Trump makes progress in efforts to unravel World Trade Organization," Jan. 2, 2019

Email interview with Gary Hufbauer, nonresident senior fellow at the Peterson Institute for International Economics, June 19, 2020

Phone interview with Raj Bhala, distinguished professor at the University of Kansas School of Law and a senior adviser at Dentons, June 23, 2020

Manuela Tobias
By Manuela Tobias January 2, 2019

Trump makes progress in efforts to unravel World Trade Organization

Unable to complete his campaign promise to kick China out of the World Trade Organization, President Donald Trump has moved to unravel the trade body.

On the campaign trail, Trump promised to reverse the decades-long U.S. approach to trade.

"That means reversing two of the worst legacies of the Clinton years… First, the North American Free Trade Agreement, or NAFTA. Second, China's entry into the World Trade Organization."

But given the legal structure of the WTO, one country can't kick another out of the trade organization.

So here's how the Trump administration has worked around that.

Blocking judges

The WTO sets and implements trade rules for the 164 member countries. When one member country files a complaint against another, the disputes panel deals with it. The panel makes a ruling, and countries can appeal that decision to the appellate court. That body of judges comes to a final and binding decision.

The panel is supposed to have seven judges, three of whom are needed on each case. But the body is down to the minimum of three, two of whom are set leave in December 2019.

Trump has blocked every discussion related to reappointment, according to Jennifer Hillman, a former member of the appellate body and a law professor at Georgetown University.

If any of the three judges needs to recuse himself for legal reasons on a case, the panel ceases to function, according to Phil Levy, senior fellow on the global economy at The Chicago Council on Global Affairs.

That could have significant consequences, Hillman explained, because rulings are no longer binding.

"Every dispute runs the risk of a mini trade war because the winning side will say, I'm not going to wait forever, so I'm going to go ahead and retaliate, at which point the losing side says, I will retaliate against your retaliation," Hillman said.

National security

The steel and aluminum tariffs Trump imposed on Mexico, Canada and the European Union in March have also put the WTO in a bind. Trump claimed the imports were a threat to national security. But the trade body only considers as a national security threat the trade of nuclear materials or arms, or a measure taken during a time of war or other similar emergency.

Affected countries filed a complaint, but the administration countered that national security is self-judging.

Trump's tariffs "put the WTO in a position where it has to say, the United States is right, national security is up to the country -- in which case it falls apart," Levy said. That's because anyone would then be able to impose tariffs or quotas and attribute them to the umbrella term of national security.

Ruling against the United States, on the other hand, gives Trump the pretext to take the United States out of the WTO. That would still require an act of Congress. But without compliance from the American chief executive, the international trade body would probably lose its sway over other members, Levy said.

Robert Scott, director of trade and manufacturing policy research at the free trade-wary Economic Policy Institute, said the WTO lacks real authority to impose sanctions anyway, but agreed that U.S. withdrawal would nonetheless "open a huge can of worms."

Trump cannot kick China out of the WTO, given the legal restrictions. He is, however, working to effectively stymie the trade body. We rate his promise Compromise.

Our Sources

Phone interview with Phil Levy, senior fellow on the global economy at the Chicago Council on Global Affairs, Dec. 12, 2018

Phone interview with Jennifer Hillman, professor of practice at the Georgetown Law Center, Dec. 12, 2018

Phone interview with Robert Scott, director of trade and manufacturing policy research at the Economic Policy Institute, Dec. 13, 2018

Email interview with Jacob Kirkegaard, senior fellow at the Peterson Institute For International Economics, Dec. 11, 2018

WTO, About, accessed Dec. 12, 2018

WTO, Appellate Body Members, accessed Dec. 12, 2018

WTO, ARTICLE XXI, accessed Dec. 12, 2018

The Guardian, Trump's WTO threats matter – especially to a post-Brexit Britain, Sept. 2, 2018

New York Times, Trump's National Security Claim for Tariffs Sets Off Crisis at W.T.O., Aug. 12, 2018

Bloomberg, Trade as National Security Issue? Here's What the U.S. Law Says, May 24, 2018

By Jana Heigl April 26, 2017

Trump threatens to ignore WTO in 'aggressive' America-first approach

President Donald Trump promised as a candidate that he would reverse China's membership in the World Trade Organization, which had been approved by the international group during the Clinton administration.

His promise is part of an attempt to penalize China for undercutting American manufacturers.

Already, his administration has sent a big signal that it could take unilateral action to protect American workers in an annual trade policy report.

In March 2017, the White House introduced an outline of the new trade approach to Congress, which included a sharp shift from existing trade policy. The White House vowed to ignore the World Trade Organization if necessary to advance American interests and promote trade of American goods.

The report did not specifically mention reversing China's membership in WTO. One explanation might be that it's not legally possible.

Before we get into what the report says, here's some important background: China sought membership in the group of nations that developed rules for international trade. The country needed approval from two-thirds of WTO members, so China worked to develop trade deals with all of them, including the United States.

President Bill Clinton made a successful push in 2000 for Congress to grant China normal trade rights, dropping several tariffs and trade barriers for the emerging global power. Before then, those rights had to be revisited each year.

In 2001, the 142 WTO member nations — including the United States — voted unanimously to accept China, with some special conditions attached.

Jeff Schott, a senior fellow at the Peterson Institute for International Peace, said Trump cannot actually reverse China's entry into the WTO. Trump can, however, withdraw from the WTO himself and thereby deny China the access to U.S. markets it obtained by joining the WTO.

The White House hasn't gone that far, but they have already taken some steps to disregard the group.

In particular, the Office of the U.S. Trade Representative report said, "It is time for a more aggressive approach. The Trump Administration will use all possible leverage to encourage other countries to give U.S. producers fair, reciprocal access to their markets."

The report cited data that shows that U.S. industrial production grew by almost 71 percent from 1984 to 2000, but only grew by less than 9 percent between 2000, the last full year before China joined the WTO, and 2016.

"These figures indicate that while the current global trading system has been great for China, since the turn of the century it has not generated the same results for the United States," the report said.

This new approach would give the United States the possibility to impose tariffs on countries that they think have unfair trade practices without the consent of the other members in the WTO.

Chinese foreign ministry spokesman Geng Shuang responded to the administration's announcement by saying that China's own support for the WTO would not change.

Trump has not pursued steps to reverse China's membership in the WTO, because he can't make such a decision unilaterally. But the administration's trade policy does indicate that the United States is prepared to ignore the WTO to advance its own trade goals unilaterally.

We rate this promise In The Works.

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