Why there's no referee for the trade war

Summary

Summary of "Why There's No Referee for the Trade War"

The Indicator from Planet Money delves into the complexities of the global trade war, focusing on the absence of a neutral mediator—the World Trade Organization (WTO)—in adjudicating disputes. Hosted by Wayland Wong and Adrienne Ma, the episode, released on March 19, 2025, explores the historical context, the deterioration of the US-WTO relationship, and the implications for international trade dynamics.

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1. The Role and Evolution of the World Trade Organization (WTO)

Background and Formation

• Wayland Wong (00:35): Introduces the WTO as the primary mediator in global trade disputes, noting that Canada and China have lodged complaints against the US within this framework.
• Adrienne Ma (02:53): Traces the WTO's origins to post-World War II efforts by major powers like the US and the UK to establish unified trade rules, culminating in the WTO's creation in 1995 as a "big club of countries" adhering to standardized trade regulations.

Operational Mechanism

• Jennifer Hillman, Georgetown Law Professor (03:29): Explains that the WTO operates through detailed agreements, which she keeps meticulously annotated. When disputes arise, they're first addressed by expert panels.
• Wayland Wong (04:07): Details the dispute resolution process: initial rulings by panels, followed by appeals to the Appellate Body, where the final decisions are rendered.

Functionality and Effectiveness

• Jennifer Hillman (04:51): Emphasizes the Appellate Body's authority, stating, "The Appellate Body essentially has the last word," compelling countries to comply with rulings by adjusting tariffs or lifting import bans.
• Adrienne Ma (05:05): Provides an example where the US adhered to WTO rulings by altering its tax rates for aerospace manufacturing following disputes with the EU over Boeing and Airbus subsidies.

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2. The United States' Growing Discontent with the WTO

Initial Support and Subsequent Shift

• Quinn Slobodian, Professor of International History at Boston University (05:23): Highlights that the US was instrumental in founding the WTO but increasingly found itself at odds with the organization's mechanisms, especially as global economic dynamics shifted.

Issues with China’s WTO Membership

• Quinn Slobodian (05:35): Points out that China's entry into the WTO in 2001 introduced complexities, as China leveraged its status as a developing nation to secure exemptions, such as subsidizing its fishing industry.
• Adrienne Ma (06:19): Notes that US policymakers believed China was "exploiting the rules of the WTO," claiming exceptions it no longer deserved due to its economic growth.

Criticism of the WTO's Dispute Settlement System

• Quinn Slobodian (06:31): States that the US felt the need to "tweak" WTO rules to prevent countries like China from "playing both sides."
• Jennifer Hillman (07:15): Describes the US’s withdrawal from active participation in the WTO's dispute resolution, likening it to moving the goalposts: "We're not going to send any referees."

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3. Paralysis of the WTO's Appellate Body

Blocking Appointments

• Adrienne Ma (06:48): Explains that US frustrations peaked during the Obama administration, leading to the blockage of new appellate panel appointments.

Consequences of the Blockade

• Wayland Wong (07:35): Summarizes the effect: "The WTO remains stuck."
• Adrienne Ma (07:47): Confirms that the blockade persisted into the Biden administration, rendering the Appellate Body non-functional since late 2019.

Current State of Trade Disputes

• Jennifer Hillman (08:19): Illustrates the ongoing deadlock where appeals "appends forever," effectively stalling any resolution.
• Wayland Wong (08:25) & Adrienne Ma (08:31): Use metaphors to convey the frustration and futility of the appeals process without the Appellate Body.

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4. Shift Towards Regional Trade Agreements

Emergence of Alternatives

• Wayland Wong (08:54): Highlights the formation of regional trade agreements as nations seek alternatives amidst the WTO's paralysis.
  • Examples:
    • RCEP (Regional Comprehensive Economic Partnership): Involving 15 countries, including China, Japan, and South Korea, effective since 2022.
    • EU's New Trade Deal (09:17): A significant agreement with four Southern countries finalized after lengthy negotiations, coinciding strategically with the US election cycle.

Quinn Slobodian’s Perspective

• Quinn Slobodian (09:17): Observes that the US's erratic trade policies under Trump accelerated the move towards deeper regional integrations, as countries seek stability beyond US unpredictability.
• Future Outlook (09:36): Quinn envisions a landscape dominated by regional agreements rather than a centralized global system led by the US, reminiscent of pre-WTO international relations.

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5. The Enduring Value of the WTO

Continued Relevance Despite Challenges

• Quinn Slobodian (09:52): Asserts that the WTO still holds significance as a platform for addressing broader issues like climate change, labor standards, and inequality.
• Jennifer Hillman (10:08): Points out that the WTO remains a vital resource for transparency and information, using the example of tracking products during bird flu outbreaks.

Potential Niche Roles

• Adrienne Ma (10:26): Suggests that even without active US participation, countries may still utilize the WTO for specific discussions and information sharing, maintaining some level of functionality.

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6. Conclusion: Navigating a New Trade Landscape

The episode underscores the substantial shift in global trade governance resulting from the US's disengagement with the WTO. As the traditional mediator falters, nations are increasingly turning to regional agreements to secure their economic interests. Despite its diminished capacity in dispute resolution, the WTO retains moderate relevance as a source of transparency and a forum for addressing non-trade-specific global challenges. The evolution of international trade mechanisms reflects broader geopolitical shifts, highlighting a move away from a US-centric global order towards more fragmented, regionally aligned economic partnerships.

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Notable Quotes:

• Jennifer Hillman (04:51): "The Appellate Body essentially has the last word."
• Quinn Slobodian (05:35): "China was exploiting the rules of the WTO, claiming exceptions they should no longer be permitted to."
• Jennifer Hillman (07:35): "We wouldn't have joined the game had we known those were the rules."
• Quinn Slobodian (09:17): "It's really accelerating forms of integration beyond the United States."
• Jennifer Hillman (10:26): "At a bare minimum, the WTO provides tremendous amounts of transparency."

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This comprehensive examination by The Indicator from Planet Money elucidates the complexities and ramifications of the US's estrangement from the WTO, offering listeners a nuanced understanding of the shifting paradigms in global trade relations.

Transcript

[NPR Announcer]

Npr.

[Wayland Wong]

This is the Indicator from Planet Money. I'm Wayland Wong.

[Adrienne Ma]

And I'm Adrienne Ma. You know, in the midst of the Trump administration's trade war, you might be wondering, is there some sort of neutral third party here? You know, some authority figure that can step in and stop this carnival ride of imposing tariffs than suspending those tariffs and threatening more tariffs and retaliating with tariffs?

[Wayland Wong]

The global economy does actually have a kind of mediator for these disputes. The World Trade Organization and Canada and China have filed complaints against the US with the wto.

[Adrienne Ma]

There's just one problem though. The WTO essentially is a lame duck, and it's the US that has been blocking it from playing referee on these trade disputes. And this hamstringing of the WTO did not start with Trump. It actually goes back to the Obama.

[Wayland Wong]

Years today on the show, what made the US Turn against the wto, an organization it helped create? And how are other countries redefining their relationships in a system where the US No Longer wants to cooperate?

[NPR Announcer]

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[Adrienne Ma]

After World War II, powerful countries like the US and the United Kingdom got together to set up the new ground rules for the global economy. These talks led to arrangements on tariffs and international trade. And over the years, countries went back to the negotiating table to work out more of these rules.

[Wayland Wong]

These post war arrangements culminated in the creation of the World trade organization in 1995. It's basically a big club of countries that agree to trade with each other using the same set of rules. Jennifer, Jennifer Hillman knows these rules really well. She's a professor at the Georgetown Law center and an expert in international trade.

[Jennifer Hillman]

I could show you my. Oh, here it is.

[Adrienne Ma]

Jennifer showed us her copy of the WTO agreements. It's a thick document that she's flagged with a bunch of colored sticky tabs.

[Jennifer Hillman]

I have one of the original books as it was issued in 1995 when the original sort of WTO came about. It has lots of tabs all over it.

[Wayland Wong]

So have these tabs been in there since the 90s or have you updated them?

[Jennifer Hillman]

Yes, they have. Yes, they have.

[Adrienne Ma]

When governments get into disputes over these rules, they go to the wto. And here's how that process works. First, the case gets heard by a panel of experts.

[Wayland Wong]

They make a ruling, and then the governments can appeal that decision to a different panel of experts. This group is known as the Appellate Body and Jennifer served on it from 2007 through early 2012.

[Jennifer Hillman]

You basically have to be ready to drop everything the minute you are put onto an appeal, fly to Geneva, and then the work is quite, quite intense.

[Wayland Wong]

Intense, like 70 to 80 hour weeks. The panel has around just a couple of months to make a decision. And this ruling, by the way, is final.

[Jennifer Hillman]

The Appellate Body in essence has the last word. And if at the end of the day the Appellate Body says there was a violation, then what it does is recommend that the country bring its measure into compliance. In other words, fix the problem.

[Wayland Wong]

Fixing the problem might mean reducing tariffs on specific products or lifting a ban on certain kinds of imports. And for a while, the system of settling disputes worked. Jennifer says countries would generally follow the WTO rulings.

[Adrienne Ma]

Even the US and the US did lose at the wto. Like several years ago, the state of Washington had to end a preferential tax rate for aerospace manufacturing. This came out of a long running dispute between the US and the EU over subsidies to companies like Boeing and Airbus.

[Wayland Wong]

Quinn Slobodian is a professor of international history at Boston University. He points out that when it helped found the wto. The US Signed onto a system where it wouldn't always get its way.

[Quinn Slobodian]

It was a moment where America, the world's most powerful country, saw it somehow in its own interests, to cede part of their sovereignty to this international institution in a way that was actually binding on them.

[Adrienne Ma]

However, the US would eventually grow unhappy with the wto. Quinn says a big factor here is China, which joined the group in 2001 and became an economic powerhouse. And, yeah, China was part of the same economic club, but it was also claiming exemptions from free trade rules on the basis of it being a developing country. So, for example, China used this rationale to justify subsidizing its fishing industry.

[Wayland Wong]

This kind of behavior rankled policymakers in the US Starting with the Obama administration. Quinn said there was grumbling that China was too rich and too powerful to still be getting those exemptions.

[Quinn Slobodian]

They thought that China was exploiting the rules of the wto, that they were claiming exceptions that they should no longer be permitted to, and that the rules needed to be tweaked to make sure that they weren't playing both sides.

[Adrienne Ma]

Also, the US started to have other gripes with the dispute settlement system. It believed the appeals panel was relitigating evidence that had already been decided and going outside of its narrow mandate of interpreting WTO's laws. The US believed this approach was hurting American businesses. Jennifer says these frustrations came to a head during the Obama administration, and so the US blocked the reappointment of some members to the WTO appeals panel.

[Wayland Wong]

It's almost like you move the goalposts. So now we don't want to participate in the refereeing. Like we're not going to send any referees, correct?

[Jennifer Hillman]

That's exactly right. And the perception is the goalposts were moved because you're interpreting the rules in a way that we would never have agreed to. We wouldn't have joined the game had we known those were the rules.

[Adrienne Ma]

During the first Trump administration, the US started blocking all new appointments to the appellate body. In late 2019, the group stopped functioning because it didn't have enough members. So it's been paralyzed ever since.

[Wayland Wong]

This paralysis continued through the Biden administration. Although it had been in talks on reforming the WTO appeals panel, that work didn't get done before Biden left office. So the WTO remains stuck.

[Adrienne Ma]

That hasn't stopped Canada and China from filing fresh complaints about American tariffs. And Jennifer says they can get their cases heard by the first panel at the wto. Those rulings will almost certainly get appealed though, and then nothing will happen because there's no appellate body to hear the case.

[Jennifer Hillman]

So the appeal just appends forever. They refer to it as appealing into the void.

[Wayland Wong]

Do you ever feel like screaming into the void when you think about this?

[Jennifer Hillman]

Very often.

[Adrienne Ma]

Very often that is. It's a lot more cathartic than appealing to the void.

[Wayland Wong]

Must say, yeah, just get a couch cushion and just let it rip. Scream right into that thing. Yeah.

[Adrienne Ma]

So we have got a big and crucial void at the wto. Where does this leave other countries? Well, historian Quinn Silbodian says governments have been busy making trade deals without the.

[Wayland Wong]

U.S. for example, in 2022, an Asian Pacific trade deal called RCEP came into effect. This agreement links 15 countries, including China, Japan and South Korea. And in December, the European Union and four south countries sign a deal they have been negotiating for 25 years. Quinn says it is not a coincidence they wrapped up this deal right after the US Election.

[Quinn Slobodian]

Trump has been outdoing himself in in his second term, right, for the inability to sort of expect what new petulant outburst will lead to some new form of tariffs which will then be gone the next day, which may come back in a month. So it's really accelerating forms of integration beyond the United States.

[Adrienne Ma]

In fact, Quinn says he thinks the future of international cooperation looks like a bunch of regional agreements as opposed to global organizations with the US at their center. In other words, something more akin to the 90s era before the WTO came along.

[Wayland Wong]

Even so, Quinn says the WTO still has value as a place where countries can discuss issues around climate, labor and inequality. And Jennifer says the WTO remains a source of guidance for its members, including on urgent topics like word flu.

[Jennifer Hillman]

At a bare minimum, the WTO provides tremendous amounts of transparency if you want to look up whether you can and cannot trade in products you know that are coming from flocks that are near or outbreaks of bird flu. What is the latest science? Go to the WTO and other countries.

[Adrienne Ma]

Might still go to the WTO for these discussions, even if the US does not.

[Wayland Wong]

This episode was produced by Julia Richie and Lily Kira with engineering by Jimmy Keeley. It was fact checked by Tyler Jones. Kicking Cannon is our editor and the indicator is a production of npr.

[NPR Announcer]

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