The embattled World Trade Organization's Appellate Body was effectively gutted last week after two of its members reached their term limits. The board no longer has enough members to function after a consistent campaign by the Whitehouse to block the selection of any new members. Election of a new board member requires the approval of all countries in the WTO.
The WTO is an international body that regulates trade between nations. All of its members are meant to receive equal treatment; however, President Donald Trump feels that the agenda of the WTO gets in the way of his "America First" way of doing business. The U.S. has actually won the majority of the cases it has brought before the WTO Appellate Body for a long time, but Trump still feels they treat America unfairly: "We never won with the W.T.O., or essentially never won. And now we're winning a lot. We're winning a lot because they know if we're not treated fairly, we're leaving."
That attitude has spread into America's policies, as well. The tariffs the Administration put on metal from allies like Canada, Europe, and Japan and the high levels of tariffs placed on Chinese goods are stretching global trade rules as it is; some even argue that the Whitehouse has broken those rules. Many countries placed retaliatory tariffs on American goods in response, not waiting to hear a judgement from the floundering WTO.
The Trump Administration has also stretched the rules in its negotiations with China. One of the Administration's top priorities has been a guaranteed minimum purchase of agricultural products by China. China has argued that guaranteeing that sort of purchase breaks global trade rules put in place by the WTO, but the phase-one agreement reached Friday does include a minimum purchase.
The WTO has long had trouble finding consensus between its disparate country members. Critics of the system say the WTO holds too much control, especially via the Appellate Body's ability to make internationally binding decisions. The board's judicial activism has been seen by many U.S. officials, including in the Obama Administration, as overstepping the organization's authority by creating new rules.
Much of the criticism surrounding the WTO has been related to its treatment of China. Many members feel the WTO isn't equipped to deal with a government like China's which doesn't allow free trade. The organization has allowed China to claim a special status for developing countries because it is now the second largest economy in the world.
The Trump Administration has also condemned what it feels is unfair treatment in the ongoing trade war with China. The Administration argues that the body has done little to curb China's subsidies on its own products, cracking down on the U.S. attempt to block cheap products at the border instead.
America is not the only country that feels the WTO's treatment of China has been unbalanced, but they disagree with the actions taken by the Trump Administration. The other WTO member countries feel they should work to improve the system rather than abandoning it. Smaller and poorer countries are the greatest risk of maltreatment if global trade rules are weakened. These countries could find themselves at the mercy of the U.S. Other countries, like those in the E.U., that rely heavily on trade for the health of their economies also have a lot to lose. As European Trade Commissioner Phil Hogan puts it, if these rules fail, "we'd have the law of the jungle."