Trump makes progress in efforts to unravel World Trade Organization

Unable to complete his campaign promise to kick China out of the World Trade Organization, President Donald Trump has moved to unravel the trade body.

On the campaign trail, Trump promised to reverse the decades-long U.S. approach to trade.

"That means reversing two of the worst legacies of the Clinton years… First, the North American Free Trade Agreement, or NAFTA. Second, China's entry into the World Trade Organization."

But given the legal structure of the WTO, one country can't kick another out of the trade organization.

So here's how the Trump administration has worked around that.

The WTO sets and implements trade rules for the 164 member countries. When one member country files a complaint against another, the disputes panel deals with it. The panel makes a ruling, and countries can appeal that decision to the appellate court. That body of judges comes to a final and binding decision.

The panel is supposed to have seven judges, three of whom are needed on each case. But the body is down to the minimum of three, two of whom are set leave in December 2019.

Trump has blocked every discussion related to reappointment, according to Jennifer Hillman, a former member of the appellate body and a law professor at Georgetown University.

If any of the three judges needs to recuse himself for legal reasons on a case, the panel ceases to function, according to Phil Levy, senior fellow on the global economy at The Chicago Council on Global Affairs.

That could have significant consequences, Hillman explained, because rulings are no longer binding.

"Every dispute runs the risk of a mini trade war because the winning side will say, I'm not going to wait forever, so I'm going to go ahead and retaliate, at which point the losing side says, I will retaliate against your retaliation," Hillman said.

The steel and aluminum tariffs Trump imposed on Mexico, Canada and the European Union in March have also put the WTO in a bind. Trump claimed the imports were a threat to national security. But the trade body only considers as a national security threat the trade of nuclear materials or arms, or a measure taken during a time of war or other similar emergency.

Affected countries filed a complaint, but the administration countered that national security is self-judging.

Trump's tariffs "put the WTO in a position where it has to say, the United States is right, national security is up to the country -- in which case it falls apart," Levy said. That's because anyone would then be able to impose tariffs or quotas and attribute them to the umbrella term of national security.

Ruling against the United States, on the other hand, gives Trump the pretext to take the United States out of the WTO. That would still require an act of Congress. But without compliance from the American chief executive, the international trade body would probably lose its sway over other members, Levy said.

Robert Scott, director of trade and manufacturing policy research at the free trade-wary Economic Policy Institute, said the WTO lacks real authority to impose sanctions anyway, but agreed that U.S. withdrawal would nonetheless "open a huge can of worms."

Trump cannot kick China out of the WTO, given the legal restrictions. He is, however, working to effectively stymie the trade body. We rate his promise Compromise.