The World Trade Organisation to which most of the world belongs and to which the US has belonged since its inception and China since 2001, has as its most important principle that “countries cannot normally discriminate between their trading partners”.
It means that if tariffs are low, as they are in the United States, that low rate has to be applied to imports from all member countries, not to all but one. Exceptions are permitted only “under strict conditions”.
The General Agreement on Tariffs and Trade administered by the WTO offers a tiny out relating to national security, on which Trump appears to be relying. Article XXI states that the agreement
shall not prevent any contracting party from taking any action which it considers necessary for the protection of its essential security interests
Subsections clarify that a member country can invoke this section (i) relating to fissionable nuclear materials; (ii) relating to the traffic in arms, ammunition, and implements of war; and (iii) in times of war or other emergency in international relations.
It’s not obvious that that there is any such emergency. Trump is threatening tariffs on automobiles and auto parts from Japan, Germany and elsewhere in the name of national security and it’s difficult to see any justification there, as well.
In April this year the WTO dispute settlement panel issued a landmark ruling in a dispute between Russia and the Ukraine asserting that the panel, rather than the country imposing tariffs, had the power to determine whether or not there was an emergency.
The era of a rules-based trade is ending. The US has gone from underwriting the rules for the past 70 years to becoming their biggest threat.
The European Union and Canada are trying to get around the destruction of the body that enforces the rules by setting up their own multilateral investment court which will use the WTO rules and retired appellate body judges. Other nations might join in.
The United States and China — the world’s two largest economies — are engaged in a trade war that appears to be spiraling out of control, doing immense damage to the economies of each, and to worldwide GDP.
A worst-case outcome is an all-out global trade war that would undoubtedly lead to global recession. That did not seem a plausible scenario two years ago, but it is now.
Source: <http://theconversation.com/are-trumps-tariffs-legal-under-the-wto-it-seems-not-and-they-are-overturning-70-years-of-global-leadership-121425>
