[The Editors' Verdict]WTO Disregard Strategy to Continue in the Biden Era

Roundtable on Japanese Government's Export Regulations, Professor Jeong In-kyo, Inha University. / Photo by Kim Hyun-min kimhyun81@

According to a recent survey conducted by the Korea Chamber of Commerce and Industry targeting 300 companies regarding changes in the business environment such as exports after the inauguration of the next U.S. administration under Joe Biden, 65.3% of the respondents answered that "there will be no significant changes." While the vast majority of companies expect a departure from the unilateral trade policies characteristic of former U.S. President Donald Trump, they also anticipate that U.S.-China conflicts and domestic-first policies will continue. With Katherine Tai, the senior specialist of the U.S. House Ways and Means Committee, nominated as the U.S. Trade Representative (USTR), the external trade environment originating from the U.S. is likely to become more challenging, as she has consistently emphasized aggressive trade policies.

Although the Biden administration has been cautious about trade policy and has mentioned fundamental positions such as rule-based international trade, calls to strengthen the leadership of the World Trade Organization (WTO) have increased significantly. Think tanks in Washington D.C. such as Brookings and the Peterson Institute for International Economics (PIIE), as well as domestic and international trade forums, express expectations that the U.S. under President Biden will enhance the status of the WTO. While it is natural to strengthen the international trade system weakened by the COVID-19 pandemic, the question remains whether the U.S. will actually do so.

According to the WTO reform plan announced by USTR Representative Robert Lighthizer on August 20, the U.S. demands resetting the tariff rate schedules agreed upon by each member country in the Uruguay Round (UR), revising special and differential treatment (S&D) for developing countries, redefining the role of the appellate body, and allowing free trade agreements (FTAs) between neighboring countries. This is akin to demanding the creation of a new trade system rather than reforming the WTO.

This situation is the exact opposite of 1944 when the Bretton Woods system was proposed as the Allied victory in World War II was solidifying, and the U.S. pledged to provide international public goods free of charge. The U.S. can no longer be expected to open its markets to allow developing countries to participate in the multilateral trade system by fostering the development of the General Agreement on Tariffs and Trade (GATT).

Lighthizer is unlikely to be the only one holding such views about the WTO. This message likely summarizes the demands of the U.S. political establishment and aligns with the traditionally protectionist stance of the Democratic Party. Regardless of party affiliation, it is difficult to find a member of Congress who advocates for saving the WTO.

The U.S. House Ways and Means Committee frequently summons the USTR representative or trade policy officials to discuss current trade policy issues or convey the committee’s stance, based on the trade policy authority granted to Congress under Article 1 of the U.S. Constitution. The role of the committee’s senior specialist is inevitably significant. Katherine Tai, the current nominee for senior specialist, is expected to lead U.S. trade policy going forward, and it seems unlikely that her stance on the WTO will change.

President-elect Biden’s campaign promise of "Made in America by Americans" suggests a stronger domestic procurement policy than that of the Trump administration. He announced that offshore companies would face a punitive tax of 30.8%, while reshoring companies returning to the U.S. would receive tax incentives. As seen in the invocation of the national security provision (Section 232) on steel and aluminum, these measures were designed targeting China but were applied equally to all countries exporting to the U.S. As the Korea Chamber of Commerce and Industry’s survey results indicate, it will be difficult for the export environment to improve.

The U.S. will implement trade measures to strengthen reshoring and domestic procurement. The measures enacted during President Trump’s four years in office are likely to violate WTO rules. Due to U.S. opposition, WTO appellate body members have not been replenished. Because the appellate body is non-functional, disputes brought to the WTO do not reach conclusions. This is why the U.S. enacts domestic-first measures without regard for WTO rules. Considering this situation, it is highly likely that the Biden administration will continue to ignore the WTO.

Jung In-kyo, Professor, Department of International Trade, Inha University

This content was produced with the assistance of AI translation services.