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Does Trump's WTO policy put farmers in crosshairs?

Trump administration withholds WTO appointments, limiting ability of appellate body.

by Bryce Baschuk

Donald Trump’s attack on the World Trade Organization has U.S. farmers worried that the president’s ‘America first’ foreign policy approach will hamstring efforts to defend their interests.

The U.S. is strangling the ability of the WTO, which oversees the rules for nearly $23 trillion in commerce every year, to resolve disputes among its 164 members. But when the WTO’s appellate body becomes incapacitated later this year, even the U.S. cases, of which there are at least two pending meant to protect American agriculture, would be derailed.

“The entire global trading system and the WTO dispute resolution process have been good for U.S. agriculture,” Ben Conner, the vice president of policy at the Washington-based U.S. Wheat Associates, said in an interview. If the two U.S. claims are appealed, they “could be among the first to get stuck in legal limbo without a functioning appellate body,” he said.

Agriculture has become a contentious political issue given Trump’s strong support in farm states, as global players such as China and the European Union use their huge consumption of American commodities as leverage in trade negotiations. The trade war has led the U.S. Department of Agriculture to predict that farm exports will fall by $3 billion in 2019 and caused the Trump administration to authorize a $12 billion aid package to help farmers affected by the dispute.

A spokeswoman for the U.S. Trade Representative declined to comment on the matter.

‘Slam Dunks’

The Trump administration is withholding appointments to the WTO’s appellate body to protest what it says are abuses by the dispute settlement authority. The seven-member panel has been reduced to three, which is the minimum number required to hear an appeal. The panel won’t have sufficient members to consider new rulings after Dec. 10.

The WTO is one of several fronts in Trump’s assault on a global trading system he argues is tilted against American interests. His administration is locked in negotiations with Beijing aimed at extracting concessions to reduce the U.S.’s massive trade deficit with China. He’s also threatened to put tariffs on imports of cars and parts that economists warn would disrupt an international auto industry that spent decades building global supply chains.

The Geneva-based WTO is expected to issue decisions this year on two U.S. dispute cases that allege Beijing deployed $100 billion worth of illegal farm subsidies and imposed unfair import quotas that harm U.S. corn, rice and wheat producers.

Both cases are “pretty much slam dunks” for the U.S., Jennifer Hillman, a former WTO judge who now teaches trade law at Georgetown University, said in an interview.

“We really have to fix the appellate body now,” she said. “Without an appellate body you may lose the ability to collect your winnings because there won’t be a binding way to force other countries to come into compliance.”

Falling Exports

A ruling against China in either case could force Beijing to reform its agricultural policies -- something that could help make America’s farmers become more competitive.

“If we win those cases, we would expect China to appeal,” said Floyd Gaibler, the director of trade policy for the Washington-based U.S. Grains Council. That would leave the status of those claims uncertain and “we are very concerned about this,” he said.

In 2017, China imported a total $24.2 billion in American agricultural products. Combined purchases slumped by a third to about $16 billion last year as China’s retaliatory tariffs on American farm goods reduced imports.

“Trump’s message to the farmers is to be patient and be patriotic -- but they are getting very concerned and anxious that they are not seeing an end to this,” Hillman said.

Farm-state lawmakers like Representative Kevin Brady from Texas are urging the Trump administration to fix the WTO’s dispute settlement problems rather than precipitate its paralysis.

“We want that appellate body dispute resolution approach, we want that to work,” Brady said during a recent speech in Washington. “And we need to make reforms to do that.”

To contact the reporter on this story: Bryce Baschuk in Geneva at bbaschuk2@bloomberg.net

To contact the editors responsible for this story: Ben Sills at bsills@bloomberg.net Richard Bravo

© 2019 Bloomberg L.P

TAGS: Farm Policy
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