The Trump administration is already attacking the WTO's dispute settlement system by blocking the appointment of new appellate judges. But a U.S.-China deal that sets up a parallel system for the world's two largest economies would take things a step further.
Jennifer Hillman, a former WTO judge who teaches at Georgetown University, said while trade pacts often include dispute mechanisms the brewing U.S.-China pact would be unique if it didn't have a role for third-party arbitrators. It also could see much of the WTO case load go away with the U.S. and China historically two of the biggest users of the dispute system. "When it is the two biggest countries that have brought the majority of cases at the WTO, it is a big blow to the system," Hillman said.
Administration officials argue that Trump has a more pragmatic approach to trade than previous presidents, one that views previous U.S. commitments such as to the WTO and its rules through the lens of self-interest. The WTO has failed to restrain China's rise, they argue, and its dispute system is too slow, which is why they want a nimbler enforcement mechanism in a deal with China.
But escaping the grasp of the WTO may still be difficult.
The U.S. and China have major cases pending at the WTO, said Chad Bown of the Peterson Institute for International Economics. Moreover, the U.S. has shown that it's willing to use the WTO when it aligns with its interests, such as in the long-running Boeing-Airbus dispute, which triggered Trump's threat this month to impose tariffs on $11 billion in imports from the EU.
Moreover, other WTO members are likely to have their own complaints with a U.S.-China deal and to use the WTO to challenge it, said Jim Bacchus, a former chief judge of the WTO's appellate body. "The United States and China are not the only two countries in the global trading system," he said.
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