On March 12, 2019, Robert Lighthizer, U.S. Trade Representative (USTR), testified before the Senate Finance Committee regarding the World Trade Organization (WTO) and President Donald Trump’s desire for a more effective international trading system. In his prepared remarks, Ambassador Lighthizer stated that the United States remains active at all levels of the WTO but has concerns about it. “In many ways, the WTO is not working as expected,” he stated, noting that the negotiating process has “largely broken down” and there has been no new significant multilateral market access agreement in 24 years. He indicated that, “[d]espite all the dramatic changes that have taken place in the last quarter century – the rise of China, the evolution of the Internet, and countless other developments – the WTO is still largely operating under the same old playbook from the early 1990s. It is now out of date.”
Lighthizer also argued that much work needs to be done in terms of lowering tariffs, “primarily in countries that consider themselves developing,” adding that “[n]umerous WTO members continue to have very high ‘bound’ tariff rates that allow them to maintain tariffs significantly above the bound rates that apply to the United States.” He stated that it is no longer reasonable to expect the United States to continue with such disparities in these rates simply because they were agreed to “many years ago,” but that rules on tariffs need to “keep pace with the realities of the global economy.” Lighthizer added that many WTO members are not living up to their obligations, and he specifically criticized members that declare themselves to be “developing countries” for purposes of obtaining special and differential treatment under WTO rules and retain such designations for years (i.e., China, India, Turkey and South Korea).
From the USTR’s testimony, it would appear that the Trump administration is most concerned with the WTO’s dispute settlement process (DSP), which “is being used to create new obligations to which the United States never agreed.” He argued that the DSP was never intended to make new rules but was designed only to resolve specific disputes. Instead, the WTO’s Appellate Body, he said, has repeatedly created new obligations, failed to follow basic rules of operation, and greatly undermined the negotiating process. In concluding his testimony, Lighthizer listed the work the United States has undertaken to negotiate new rules and to raise critical issues, “not to hurt the WTO – but to ensure that it remains relevant to a rapidly changing world.”
Senate Finance Chairman Chuck Grassley (R-Iowa) raised in his opening statement longstanding concerns over the WTO’s Appellate Body, noting that the United States has “refused to consent to new Appellate Body appointments under the Obama administration, and the Trump administration has maintained the same position.” If reform is not forthcoming, he noted, the Appellate Body could lose a minimum quorum needed to function. While the USTR intends to assist President Trump in updating and reforming the WTO, he noted that he will do so “with the understanding that erecting new market barriers with tariffs and quotas cannot be a long-term solution.” Ranking Minority Member Ron Wyden (D-Ore.) also issued an opening statement in which he stated that it is “long past time to fix what’s wrong” with the WTO, arguing that the process must begin with China.