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Withdrawing from the WTO would punish the US, not China

Withdrawing from the WTO would punish the US, not China
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“Talk about protecting #China.” 

That’s what Sen. Josh HawleyJoshua (Josh) David HawleyInfrastructure, energy investments urgently needed to create U.S. jobs Justice Department charges Google with illegally maintaining search monopoly Conservatives seize on New York Post story to push Section 230 reform MORE (R-Mo.) tweeted after House Speaker Nancy PelosiNancy PelosiBrown says Biden's first moves as president should be COVID relief, voting rights Sunday shows - Spotlight shifts to positive tests among Pence aides Pelosi dismisses talk of White House compromise on stimulus: They 'keep moving the goal post' MORE (D-Calif.) quashed a vote on U.S. support for the World Trade Organization (WTO). The suspicion that the WTO has paved the way for China’s economic ascendancy – Hawley calls it “imperialism” – is popular among critics of the institution. But not a single critic has ever explained how a U.S. withdrawal from the WTO would reverse China’s gains. The reason is, they can’t.

We don’t have to guess about this. We can look at U.S.-China trade before 2001, the year Beijing joined the WTO. And we can see what’s been happening since the Trump administration largely took China trade into its own hands.

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Critics speculate that, if unconstrained by the WTO, U.S. tariffs on China would be higher, giving Washington greater leverage over Beijing. But this isn’t what we learned from the 1990s, a decade in which Congress voted each year to extend “normal trade relations” (NTR) to China. It did. Every time. Not even the Tiananmen Square massacre prompted Congress to doubt that NTR meant more, not less, influence over China, including on human rights.

The thinking, which merits repeating today, was that a wealthier China – not an impoverished one – would be more capable of complying with U.S. demands. This view has been at the center of U.S. foreign economic policy since the end of World War II. In the wake of 9/11, for example, President George W. Bush called for a WTO trade round, insisting that only prosperity leads to peace.

Today, U.S. “unilateralism” against China is giving rise to a very different politics. It’s not tied to specific foreign policy goals. Instead, it’s about lobbying for exclusions from tariffs that are crippling American firms.

Waves of Section 301 tariffs against China, in particular, have punished U.S. consumers, retailers and industries that depend on imported inputs, including countless exporters. Tariffs of 10 percent to 25 percent have hit hundreds of billions of dollars in imports from China, forcing U.S. firms to file for exclusions from tariffs that are at odds with the U.S.’s WTO commitments. 

The data are sobering. The first list of Section 301 tariffs against China triggered 10,814 exclusion requests, only 33 percent of which were approved. The second list resulted in 2,869 filings for tariff exemptions, fully 63 percent of which were denied. U.S. firms should be spending their time innovating new products, not filing for exclusions or worrying about what other inputs will be hit by future tariff lists.

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It’s hard to see what, if any, leverage these tariffs have given the U.S. over China. But it’s obvious that they have hurt U.S. consumers, retailers and exporters. And there’s no end in sight. The Trump administration keeps offering up tariffs to fix the problems that previous tariffs have created. 

The current “lobster war” with China is a case in point. It started when China slapped a big tariff on U.S. lobsters in retaliation for U.S. Section 301 tariffs, and President TrumpDonald John TrumpFox News president, top anchors advised to quarantine after coronavirus exposure: report Six notable moments from Trump and Biden's '60 Minutes' interviews Biden on attacks on mental fitness: Trump thought '9/11 attack was 7/11 attack' MORE has vowed even more tariffs if China doesn’t stop retaliating.

Think about that. The U.S. will retaliate for Chinese retaliation for U.S. retaliatory tariffs. If this is the future of U.S. trade politics, lawyers who file for exclusions will make out just fine, but everyone else will lose out. That’s not leverage. It’s the victory of inside politics over commerce.

If Hawley wants a debate about the WTO, he should start by offering up a theory of how a U.S. withdrawal would reverse China’s economic gains, and at what cost to the U.S. 

Marc L. Busch is the Karl F. Landegger Professor of International Business Diplomacy at the Walsh School of Foreign Service, Georgetown University, a nonresident Senior Fellow at the Atlantic Council and host of the podcast TradeCraft.