President Trump has long made clear his dislike of the World Trade Organization (WTO), saying that the “World Trade Organisation is a disaster” on the campaign trail, and last week, it was reported that Trump wanted to turn his campaign suggestion to exit the WTO into a reality.
Now, Axios has obtained a leaked draft of a bill that is designed to do just that, called the “United States Fair and Reciprocal Tariff Act.”
What the WTO is—and what Trump thinks of it
The World Trade Organization, or WTO, was established in 1995 as a means to ensure the smooth functioning of international trade. It was intended to be a forum for international trade negotiation, the resolution of trade disputes, and the distribution of support for developing countries.
It currently has 164 member countries, which represent 98% of the global GDP and 95% of all global trade.
Trump was openly critical of the organization on the campaign trail before his election, and has reportedly claimed that foreign countries use the WTO to “screw the United States.” He also reportedly advisors that he doesn’t know “why we’re in it.”
What the bill says
The “United States Fair and Reciprocal Tariff Act” essentially bestows Trump (or any future president) with the power to determine any current or future tariff rates with countries—outside of the jurisdiction of the WTO.
As Axios explains, it circumvents two of the fundamental principles of the WTO: that of the “Most Favored Nation” and “bound tariff rates.” The first blocks countries from setting different tariff rates for different countries to avoid favoritism. The second creates a tariff ceiling for all WTO countries—to which all of the countries have previously agreed.
What it means
Not only does the bill create a way to operate outside the rules of the WTO, renegotiating and applying tariffs unilaterally, but also it puts this power in the hands of the president. The bill explicitly calls for the President of the United States to “have a wide array of tools to open the markets of U.S. trading partners and encourage participation in negotiations to liberalize trade…and adjust tariff rates.”
The bill only calls for the president to “consult with” the Senate Finance Committee and the House Ways and Means Committee and post a notice of the planned tariffs in the Federal Register 30 days before it is due to take effect.
A source told Axios that the bill “would be the equivalent of walking away from the WTO and our commitments there without us actually notifying our withdrawal.”
What happens next
Before people start to bemoan the end of global trade as we know it, it bears noting that the bill isn’t a done deal. White House spokeswoman Lindsay Walters indicated to Axios that the bill isn’t “actual legislation that the administration was preparing to rollout,” noting that “principals have not even met to review any text of legislation on reciprocal trade.”
What’s more, lawmakers familiar with the bill do not seem keen on it, and ultimately any bill would need to be approved by Congress. Legislative Affairs Director Marc Short earlier this year said that the bill was “dead on arrival” and would not receive support from Capitol Hill. A source echoed this sentiment, telling Axios that “Congress would never give this authority to the president,” and called the bill “insane.”