U.S. President threatened to pull the U.S. out of the World Trade Organisation (WTO) if it fails to treat the U.S. fairly.
He also blamed it for allowing too many countries to claim the status of a developing country.
What is the story behind?
In a memo to the U.S. Trade Representative last month, Mr. Trump pointed out that nearly 2/3rd of the 164 WTO members classified themselves as developing countries.
He also raised the issue of even many rich economies claiming to be “growing” rather than “grown” economies.
He targeted India and China in particular for “taking advantage” of the U.S. by classifying themselves as “developing countries” at the WTO.
What does the “developing countries” status mean?
This status allows countries to seek partial exemptions from the WTO’s rules for free and fair trade between countries.
It allows countries like China and India, with their special tag, to impose higher tariffs on imports from other countries.
It also offers more subsidies to local producers in order to protect their domestic interests.
Developed countries find this to be unfair on their producers who are put at a relative disadvantage.
But countries like China have argued that their developing country status is justified given their low per capita income.
What is the real intent behind the attack?
The “developing country” status, which offers substantial benefits to countries that want to protect their domestic interests, has indeed skewed global trade over the years in favour of certain countries.
Mr. Trump’s attacks on the WTO would be welcome if they were truly about creating a global trading arena with lower tariffs and fewer barriers to trade.
But he may be raking up the issue not to further the cause of global free trade, but simply as a convenient pretext to justify further trade barriers against China and other countries.
By pointing fingers at other countries that follow protectionist policies, he will find it justified to impose retaliatory tariffs against them.
This will help him bolster his “America First” approach and allow him to successfully hold on to his support base in America’s manufacturing belt that has been affected by foreign competition.
Even if countries like China and India offer to lower their tariffs, Mr. Trump would not take them up on their offer.
That is because it would require reciprocation in the way of lowering U.S. tariffs, which would work against the interests of local American producers.
