Bruce Hirsh is principal at Tailwind Global Strategies. He previously served in senior positions at the office of the U.S. trade representative and the Senate Finance Committee.
A signature element of the China trade policy from United States President Joe Biden’s administration has been to replace his predecessor’s go-it-alone approach with an effort to coordinate with allies. And toward that end, the Biden team has chipped away at bilateral trade irritants that might get in the way of allied cooperation.
Despite this progress, however, U.S. allies in both Europe and Asia have been reluctant to participate in action against China, even as they deepen cooperation on export controls and other national security initiatives. Instead, to address the China challenge, partners like the European Union and Japan continue to voice strong support for multilateralism and other approaches based on the World Trade Organization (WTO).
Ironically, for the U.S., the road to bringing these allies on board with action outside the WTO will likely need to go through the WTO.
The U.S. was the driving force behind the creation and expansion of the rules-based trading system for decades, a system embodied by the WTO and its predecessor, the General Agreement on Tariffs and Trade. However, its leadership at the organization abruptly ended when former President Donald Trump took office, illustrated most jarringly by his casual disregard for WTO procedures in unilaterally applying duties on trading partners.
With respect to China, Trump’s approach was grounded in the belief that WTO rules and dispute settlement procedures were inadequate to deal with Beijing’s state capitalism, and that they were being exploited to rein in U.S. responses to the country’s practices. In the words of then Trade Representative Robert Lighthizer, China was using WTO dispute settlement “as both a sword and a shield.”
Initial allied patience with these new U.S. tactics evaporated, however, when Trump’s unilateral tariffs were also directed at them — first on steel and aluminum, then later threatened on other products including automobiles. For its allies, this suggested that Washington was simply abandoning multilateralism wholesale rather than seeking a fresh China strategy. And Trump’s duties triggered trade wars with Beijing, as well as Brussels and others imposing tit-for-tat duties on U.S. exports.
As a result, a large portion of U.S.-China trade is now subject to steep tariffs, without changing the country’s predatory targeting of key sectors like steel and semiconductors through subsidies, forced technology transfer and intellectual property theft.
Since taking office, Biden has wisely placed his hopes on collective action instead. Therefore, he has sought to repair trade ties with the EU and Japan, renegotiating steel and aluminum arrangements and reaching an agreement on the intractable Airbus-Boeing dispute. But while Washington’s allies have welcomed these steps, they’re taking a wait-and-see approach to U.S. actions at the WTO itself.
Trump’s most notable action at the WTO involved hobbling its dispute settlement system that enforces WTO rules, by blocking appointments to its Appellate Body. In doing so, he acted on long-standing bipartisan U.S. concerns that the body was overreaching its authority and making law. And though Trump’s actions triggered a conversation at the organization on needed changes, it didn’t include serious U.S. engagement on specific solutions to restore the system.
Given its allies’ continued belief in the indispensable importance of the organization, the White House will now have to demonstrate its recommitment to the WTO, including the restoration of its dispute settlement process — at least for non-China matters. And it will need to clearly explain the circumstances in which coordinated action outside the WTO is also necessary.
The Biden administration’s initially cautious approach to this issue has left U.S. trading partners wary of White House intentions — hopeful that a page is turning on constructive U.S. engagement at the WTO, but still in search of hard evidence.
In this regard, this past June’s ministerial meeting in Geneva provided grounds for optimism as the organization, with active U.S. participation, achieved its most meaningful results in nearly a decade — not least among them, a commitment to restore the dispute settlement system by 2024.
Bringing these discussions to a successful conclusion would significantly ease allied concerns over whether Biden has foresworn Trump’s unilateralism and is committed to the WTO’s success. Of course, the U.S. shouldn’t just make a deal for a deal’s sake, but the opportunity now exists to reset the system to avoid future problems and fix past errors.
Setting allied minds at ease over U.S. support for the WTO would finally set the stage for meaningful efforts to convince Washington’s partners of the need to take coordinated trade action — outside the WTO, if need be — to address Chinese trade practices.
With assurances that such action would be the exception rather than the rule, Washington could make the case that it’s acting in defense of the rules-based international order — not trying to undermine it. And so long as China’s government-directed economic policies act outside of the market-oriented rules-based system and target key global sectors for dominance, acting in concert to counteract its economic impact will reduce domestic pressure to abandon the whole WTO-based system.
Simply easing allied concerns over U.S. intentions at the WTO may not initially be enough to overcome reluctance to take coordinated trade measures. But as with Europe’s slow pivot away from China — and its rather faster one from Russia — both time and the present realities of our world are likely to make their mark.
U.S. policy that reaffirms its support for the rules-based international economic order, and clearly delineates the space for coordinated action to defend it, could help accelerate this. And failure to try could very well cost the U.S. the benefit of the strongest tool it has in its global affairs arsenal — its alliances.
