The US is breaking the WTO

Pic.: The Global Times

The U.S. declared an end to the 30-year-old World Trade Organization (WTO) system as it began mutual tariffs and item tariffs on trading partners around the world, ‘Maeil Business Newspaper’ Korea's No. 1 Economic Media writes.

Following the Uruguay Round and Doha Round, the Donald Trump administration defined it as the "Trump Round," signaling a revolution in the global trade order and a resurgence in the United States. "We are trying to reform the global trade order that has been unfavorable to the United States, including the Bretton Woods system introduced during World War II and the Uruguay Round that led to the establishment of the WTO," US Trade Representative Jamieson Greer said in an article in the New York Times.

The WTO system, which began in 1995, became virtually nominal during Trump's first term, and this time, it has gone through the process of collapse. With each country's removal of trade barriers through tariffs from Trump, not only multilateral trade but also bilateral free trade agreements (FTAs) have been neutralized.

The previous system rejected tariffs as a legitimate tool of public policy, meaning that the United States sacrificed tariff protection for critical manufacturing and other sectors. Over the past three decades, the United States slashed barriers to our market to allow vast inflows of foreign goods, services, labor and capital. At the same time, other countries kept their markets closed to our goods and deployed a suite of policies — such as subsidies, wage suppression, lax labor and environmental standards, regulatory distortions and currency manipulation — to artificially boost exports to the United States. This approach made the United States and a handful of other economies the consumers of last resort for countries pursuing beggar-thy-neighbor economic policies.

We are now witnessing the Trump Round. On April 2, President Trump announced tariffs to address the national emergency posed by the trade deficit. The intense bilateral negotiations that followed were held in diverse locations across the world: Washington, Geneva, Jeju Island, Paris, London, Stockholm and, of course, Turnberry. Our trading partners had never before shown such interest in opening their markets to the United States, aligning on matters of economic and national security, and rebalancing trade in a more sustainable direction. In a few short months, the United States secured more foreign market access than it had in years of fruitless W.T.O negotiations.

Reversing decades of harmful policy that weakened our manufacturing capacity and work force will take time and coordinated effort across the public and private sectors. But keeping the status quo would only accelerate the dangerous trajectory of deindustrialization. We require a generational project to re-industrialize America, and time is short.

In announcing the U.S.-European Union deal last week, President von der Leyen echoed the call to refashion global trade to adapt to economic and political realities. She explained to reporters that the trans-Atlantic economic relationship needed “rebalancing” to ensure that it could be “more sustainable.”

The new economic order, solidified at Turnberry, is emerging in real time.

The results are astounding. Every year for 40 years, the Office of the U.S. Trade Representative has produced a detailed report called the National Trade Estimate chronicling various barriers faced by U.S. companies, including high tariffs, requirements to produce goods in the countries where the companies want to do business, and restrictions on agricultural products contrary to scientific consensus. In the past, the only significant way the United States could remove these barriers (if at all) was by giving away the tariffs defending our manufacturing sector. President Trump has flipped the script on this: Now, we are systematically eliminating these barriers abroad while ensuring sufficient tariff protection at home.

Importantly, these commitments are actionable, and the United States will enforce them. Rather than the drawn-out dispute settlement process favored by the old guard of trade bureaucrats, the new U.S. approach is to closely monitor implementation of the deals and swiftly reimpose a higher tariff rate for noncompliance if needed. President Trump uniquely recognizes that the privilege of selling into the world’s most lucrative consumer market is a mighty carrot. And a tariff is a formidable stick.

At the World Trade Organization, enacting changes to trade rules requires total consensus among nations. In fact, the last attempt at serious reform, known as the Doha Round, failed because protectionist nations refused to take down their trade barriers to the United States. Moreover, our adversaries relish blocking reform. They prefer a status quo that feeds an exploding U.S. trade deficit, sapping this nation of the industrial might that made it, and keeps it, a superpower.

But the rules of international trade cannot be a suicide pact. By imposing tariffs to rebalance the trade deficit and negotiating significant reforms that form the basis of a new international system, the United States has shown bold leadership to address what policymakers long considered intractable problems.

This is not the time to debate how many angels can dance on the head of a pin. This is an emergency. We know what the problem is and we know how to address it. There is no time to waste.

President Trump has already shown that he can implement tariffs and other economic tools to reshape supply chains and reinvigorate manufacturing. When he deployed sweeping tariffs in his first term, not only did the sky not fall as pundits predicted, but inflation actually went down. And now that he is imposing tariffs even more broadly, inflation remains in check. A long-term problem won’t be fixed overnight, and the process may not always be smooth, but the situation demands strong and resolute action to strengthen the U.S. industrial base.

It took over 50 years from that first meeting at Bretton Woods until the creation of the W.T.O. It has been 30 years since. Fewer than 130 days from the beginning of the Trump Round, the Turnberry system is by no means complete, but its construction is well underway, Jamieson Greer writes.

Meanwhile, Commerce Secretary Howard Rutnick told Fox News on the same day, "We will not impose tariffs while we are building factories in the United States. But if we don't build a factory in the United States, we'll impose 100% tariffs," he said. As the standards for semiconductor item tariffs become clearer, Samsung Electronics and SK Hynix, which are currently making large-scale semiconductor investments in Texas and Indiana, are more likely to be excluded from the tariffs.

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