The WTO And Trump's Tariffs
LULU GARCIA-NAVARRO, HOST:
Unanimous concern and disappointment - some of America's closest allies vented their anger this weekend over President Trump's tariffs on imported steel and aluminum. The six finance ministers of the G7 organization - among them Canada, France, and the U.K. - are calling out its seventh member, the United States. White House economic adviser Larry Kudlow this morning downplayed the friction, calling it a family quarrel. There is one organization, though, tasked with dealing with international trade disputes, the World Trade Organization. And Canada and the EU have already filed challenges to the tariffs with the WTO. Jennifer Hillman is a former member of the World Trade Organization's appellate body, and she joins me now. Welcome to the program.
JENNIFER HILLMAN: Thank you very much.
GARCIA-NAVARRO: OK. So just briefly, why are these countries coming to the WTO?
HILLMAN: Because they believe what the United States has done violates its WTO obligations. The United States promised, as part of a series of tariff negotiations, to limit its tariffs on steel to 0 percent duties and to limit its tariffs on aluminum to somewhere between 0 and 6 percent on average. And secondly, they're complaining because one of the other rules of the WTO is that you cannot discriminate as among WTO members. And, here, the United States is applying the steel and aluminum tariffs to some countries but not to Korea, not to Brazil, not to Australia, not to Argentina. So the other complaint is, at its core, that there's been discrimination against the EU, Canada Mexico and the other countries that are subjected to the tariffs.
GARCIA-NAVARRO: Could this dispute turn into something more serious, depending on what the WTO rules?
HILLMAN: Well, if it ruled, it would hear this complaint and figure out whether they agree or don't agree with the European Union or Canada or any of the challenges. And I think the chances that the WTO will decide against the United States are very, very strong. I mean, it's a very clear case of a violation. What will get tricky for the WTO is, what are they going to do about the defense that the United States intends to raise?
GARCIA-NAVARRO: So that defense is national security, apparently?
HILLMAN: It's national security. Exactly. And so what the United States is going to say is that there is a provision in the WTO that says, yes, you can break your tariff commitments. You can discriminate if you fall under the terms of this security exception. And that's really the problem for the United States - is that it's not clear that these steel or aluminum tariffs fit within any of those boxes.
GARCIA-NAVARRO: All right. So the WTO is going to have to arbitrate this. But whatever they rule, will it have teeth? I mean, what will the WTO do?
HILLMAN: So, again, what happens at the end of a WTO case is that countries are asked to come into compliance. If you do not, then there are sort of two other options. One is that the countries - the European Union, Canada, et cetera - could ask the United States to compensate them for the amount of trade that's been lost or disrupted as a result of the tariffs. The last option is that the EU, Canada and others can add on retaliation duties against the United States.
GARCIA-NAVARRO: What do you think the likelihood of a trade war breaking out is?
HILLMAN: I fear that it's higher than I would ever have imagined and would like to see. I think the Trump administration has miscalculated the willingness of Europe, Canada, Mexico and many other countries to react to these steel and aluminum tariffs. I fear that what they thought is that everybody would agree. And obviously, what's happened is most of the countries have said no. No, you don't have a right to put on these tariffs in the first place, so I'm not going to agree to limit my trade just to get out from underneath your illegal tariffs.
GARCIA-NAVARRO: The WTO is really an institution that was built around trying to prevent trade wars happening. And just remind us why that is. Why are trade wars damaging?
HILLMAN: That's exactly right. Its whole purpose is to set up a set of binding rules that everybody will agree to because what happens is when one country says, I'm going to raise my tariffs on you, other countries then get into the act and say, well, I now need to raise tariffs to protect my market because all of the steel or the aluminum that didn't end up in the United States is now ending up in my market and hurting my suppliers. So everyone starts raising tariffs on each other. And at that point, you end up where we were in the late '20s and early 1930s, which is the entire trading system crashing and the economies of the world crashing. And you get into a long and deep recession.
GARCIA-NAVARRO: Jennifer Hillman is a professor at Georgetown University Law School and a former member of the WTO's appellate body. Thank you very much.
HILLMAN: Thank you.
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