The WTO is under threat from the Trump administration

FOR Roberto Azevêdo, its director-general, the WTO is a “hostage of its own success”. For President Donald Trump it is “a disaster”. Mr Trump would not be alone in balking at Mr Azevêdo’s formulation, meant to manage down expectations for the WTO’s two-yearly ministerial meeting in Argentina later this month (see article). The WTO has not achieved a big breakthrough in its mission of trade liberalisation for more than two decades. Its last big round of trade talks, the Doha Development Agenda, became the Jarndyce v Jarndyce of trade diplomacy; in 2015 it was quietly put out of its misery.

If only a disappointing record were the biggest problem for the WTO. America has had fraught relations with it for years; under Mr Trump, frustration has turned to aggression. America feels that China, the world’s biggest exporter, has used the WTO to provide legal cover for a policy of mercantilism. Rather than help the WTO find solutions, the administration has preferred to undermine it, through a mixture of policy unilateralism, rhetorical criticism and bureaucratic sabotage. That approach is wrong. The WTO is easy to criticise and take for granted. But it is vital for the world economy—and for America.

You’ll miss me when I’m gone

So far, Mr Trump has not carried out the most drastic of the trade threats he made so loudly on the campaign trail: across the board, 45% tariffs on imports from China, plus withdrawal from the WTO and North American Free-Trade Agreement (NAFTA). But he still sees trade as a zero-sum game that America has been losing, in which imports are bad, exports are good and a bilateral trade balance is the scoresheet. Because of its heft, the thinking goes, America will always win in bilateral trade deals where it can bully the country on the other side of the table. If only it could exploit its advantages, it argues, it would force open foreign markets or use trade as a bargaining chip to pursue its wider interests—securing Chinese help, say, to rein in North Korea’s nuclear ambitions.

And so Mr Trump’s officials have, directly and by neglect, taken aim at the multilateral trading system. They have openly criticised the WTO. They have sidestepped it, resorting to dusty American laws to investigate unilaterally imports of such products as steel and aluminium goods, solar cells and washing-machines. The investigations into steel and aluminium were instigated under a law from 1962 that had not been used since 2001. Whereas the use of the WTO quarantines disputes, by turning them into dry, technocratic affairs, “self-initiated” actions politicise even routine complaints.

A third form of attack is more insidious. America has failed to appoint its own permanent representative to the WTO. And, citing arcane procedural concerns, it has kept open vacancies for judges on the WTO’s appeals court. The court already has a backlog of cases. If the gaps are not filled, the system for settling disputes is at risk of collapse. If countries then take retaliation into their own hands, the WTO itself may follow.

It is unclear if the administration really wants that. It is supporting the European Union in a case brought at the WTO by China, which wants “market-economy” status. This would make it harder to impose stiff anti-dumping duties on Chinese exports. America seems to recognise the WTO’s continued usefulness here. Perhaps, then, America hopes the pressure will spur reform of the body. Yet that line looks optimistic, since America has not spelled out what it wants to change.

Instead, the administration seems to want the best of all worlds; using the WTO when it suits it, while putting its energy into bilateral strong-arm tactics. Yet that would not be good for America, either. The tariffs it keeps threatening would raise prices for its own consumers. Exports that rely on imported components would become less competitive: the American car industry says tariffs on parts from Mexico would increase its costs by $16bn-27bn a year. Partners would be likelier to retaliate directly rather than seek redress through the WTO.

If the WTO were shunned by the world’s biggest economy it might not collapse, but it would wither. That would indeed be a disaster. The WTO is rooted in the vision of a liberal world order America has led since the second world war. It links nearly all the world’s countries in an agreed rules-based framework. Some Americans argue that it has failed in its most ambitious venture: binding the state-dominated Chinese economy, admitted in 2001, into a fair trading system. China’s market reforms have indeed disappointed. But viewed another way, the WTO has smoothed the disruption caused by the reintegration into the world of what is now its second-largest economy. It remains the best way of trying to make China play by the rules. In a trade war, no country would win.