But the “reforms” proposed by Trump and the other protectionists are negative sum: everyone is likely to lose, including the workers in the advanced countries whom Trump and his like supposedly speak for.
— Joseph StiglitzFootnote 1In January 2017, US President Donald Trump delivered his inaugural address and announced a new social and economic construct. Based on the idea that America should come first — “America First” — this vision of the United States is aimed at bringing back the American glory of old.Footnote 2 In accordance with the terms used by the president, every decision should be taken having the best interests of American workers and families at heart:
From this moment on, it’s going to be America First. Every decision on trade, on taxes, on immigration, on foreign affairs, will be made to benefit American workers and American families. We must protect our borders from the ravages of other countries making our products, stealing our companies, and destroying our jobs. Protection will lead to great prosperity and strength.Footnote 3
This address left no room for any ambiguity: other countries were to blame for the precarious situation in the United States, and by protecting its borders — territorial as well as economic — great prosperity and strength would return.
In the economic field, this doctrine of “America First” has led to a major restructuring inspired by isolationist and nationalist economic theories. According to Stéphane Paquin, “la traduction de cette doctrine en matière de commerce international est porteuse de désordre.”Footnote 4 Essentially, this translates into a rejection of multilateralism, the adoption of measures aimed at maintaining or stimulating domestic industry, and the tightening of economic policies both domestically and with respect to foreign trading partners. In this context, the “America First” doctrine is a return to a tightening of economic borders in the United States. Nevertheless, the Trump administration remains aware of the benefits of free trade. As such, the United States is not trying to completely close its borders. Rather, America is seeking to adapt free trade agreements and international trade rules to its advantage, by forcing its trading partners to accept its terms, imposed by threats and constraints. Secretary of Commerce Wilbur Ross eloquently remarked in 2016, shortly after the presidential election took place, on how the Trump administration viewed the United States in the international trade sphere at the time and how it perceived it going forward: “We are the world’s biggest importer. We need to treat the other countries as good suppliers. Not as determining the whole show.”Footnote 5
In this context, “America First” has modified the usual approach and appears to be breaking with the customary way in which the United States has been conducting its international economic relations since the Second World War as well as breaking the very foundations of the world trading system, which were heavily influenced by American economic ideology.Footnote 6 This could well mark a veritable turning point in the history of international trade law.
America First: Anchoring the Return of Economic Borders to the United States
Starting from the perspective that international trade is a power game in which there is necessarily a winner and a loser, the Trump administration is multiplying various isolationist and nationalist measures.
international trade according to the trump administration: a zero-sum game
The economic theory of a positive-sum game forms the foundation of the multilateral trading system as we know it. Following this theory, which is rooted in the idea that development has no limits, each country entering the game of international trade can derive its share of profits without affecting that of other countries.Footnote 7 From this point of view, for example, trade concessions granted have the effect of increasing the volume of trade for all nations. As such, mutual and reciprocal benefits ensue.Footnote 8 This idea was already present in the preamble of the 1947 General Agreement on Tariffs and Trade (GATT), when the contracting parties affirmed that they recognized
[t]hat their relations in the field of trade and economic endeavour should be conducted with a view to raising standards of living, ensuring full employment and a large and steadily growing volume of real income and effective demand, developing the full use of the resources of the world and expanding the production and exchange of goods.Footnote 9
The preamble of the Marrakesh Agreement Establishing the World Trade Organization restated this idea in 1994, by modifying its text to reference “the full use of world resources” in order to add the idea of optimal use of resources in accordance with the principle of sustainable development.Footnote 10 This vision of a global economy can be clearly seen in the language found in the 2017 World Trade Organization’s (WTO) World Trade Report: “The world economy only grows when productivity rises; and productivity only rises when the world economy generates more and better output more efficiently.”Footnote 11 Although clearly imperfect and still leaving much room for improvement,Footnote 12 the multilateral system of the GATT and the WTO have greatly contributed to world economic prosperity,Footnote 13 insofar as the model of the current multilateral system increases trade volumes for all those who become signatories.Footnote 14
President Trump opposes this widely accepted view of a multilateral trading system,Footnote 15 considering it a zero-sum game. From this point of view, if a country were to obtain an advantage, this gain would necessarily be accompanied by a corresponding loss for another country. Some authors use the imagery of portions of a pie to illustrate the effects of the zero-sum game, where states each have a slice of the pie. As a result, as one nation obtains a growing share, the others find themselves with a shrinking portion.Footnote 16 The large majority of economists, however, reject this idea:
[U]nlike the Trump administration, the majority of economists do not view trade as a zero-sum game with one winner and one loser in every bilateral trade relationship; rather, a large body of literature supports the opposite view that both sides in a bilateral trade relationship can benefit and that on a multilateral level, under the right conditions, trade can be beneficial to many nations without harming others.Footnote 17
The fact remains that, according to President Trump, the United States is, more often than not, the losing party in international trade:
For many decades, we’ve enriched foreign industry at the expense of American industry; … We’ve made other countries rich while the wealth, strength, and confidence of our country has disappeared over the horizon. One by one, the factories shuttered and left our shores, with not even a thought about the millions upon millions of American workers left behind. … The wealth of our middle class has been ripped from their homes and then redistributed across the entire world.Footnote 18
It is surprising that the president of the world’s leading economic power considers his country injured by the current global system. Indeed, the United Sates generates a quarter of the world’s gross domestic product (GDP); had an unemployment rate of 3.5 percent in 2019;Footnote 19 experienced an increase in the average income of the poorest 40 percent of citizens since 2010; and also saw an increase in the GDP per capita, having the fifth best result among countries in the Organisation for Economic Co-operation and Development (OECD) in 2019.Footnote 20 Problems do exist in the United States, but these seem to be more the result of microeconomic and social policies. For example, of the thirty-six OECD member countries, the United States ranks fourth in terms of income inequality, with a Gini coefficient of 0.39 in 2017.Footnote 21 It also ranks last on the poverty scale and ranks third in terms of per capita spending on health care.Footnote 22
In this context, Trump has managed to convince many Americans of the inequities in international trade. In order to achieve this, he has used an apparently solid and quantifiable argument — namely, the deficit in the trade balance; countries with a positive trade balance with the United States are assumed the winners in exchanges and, according to the zero-sum game theory, the United States necessarily is the losing party. Indeed, President Trump has insisted since his election — and even well before thenFootnote 23 — on the idea that the American trade deficit is proof of the negative impact of free trade. He also mandated the secretary of commerce, Wilbur Ross, to identify the countries with which the United States has a significant trade deficit in goods:
By the authority vested in me as President by the Constitution and the laws of the United States of America, and in order to ensure the informed exercise of the authority over international trade granted to me by law, it is hereby ordered as follows:
Section 1. Policy.
…
The United States must address the challenges to economic growth and employment that may arise from large and chronic trade deficits and the unfair and discriminatory trade practices of some of our trading partners.Footnote 24
The results appear eloquent at first glance: according to the Bureau of Economic Analysis, the US trade deficit in goods and services in 2018 was US $621 billion.Footnote 25 However, despite a negative trade balance with several trading partners, the argument appears to be fallacious, or incomplete, for at least two reasons.Footnote 26
First, the conclusions used by the Trump administration are limited to fragmented data since they only take into account trade in goods. In many cases, however, the balance of trade in the United States is rather positive when trade in services is taken into account, as it is a significant part of American industry.Footnote 27 In fact, as far as Canada is concerned, the United States posted an overall surplus of US $8.1 billion in 2016 when services are included, even though the balance is in deficit with regard to goods. In addition, if we exclude energy imports, the United States has no merchandise trade deficit with Canada.Footnote 28 With respect to China, even though the overall US trade balance remains in deficit, the trade balance in services remains positive and large.Footnote 29 Second, the Trump administration’s vision does not take into account global value chains that transcend borders, especially when a free trade agreement promotes this integration. In total, 330 million Americans maintain a lifestyle that fosters an industry of low-cost manufacturing and the importation of an impressive number of products. It is therefore understandable that many products consumed in the United States are in fact imported. This necessarily contributes to increasing the trade deficit balance. What the Trump administration is careful not to say, however, is that imported products often contain US inputs. For example, 17.5 percent of imports from Canada and 40 percent of Mexican imports into the United States contain American content.Footnote 30 Therefore, although this is not reflected in the US balance of trade figures, even imported products contribute, to some extent, to the economic prosperity of the United States.
The balance-of-trade argument reiterated by the Trump administration is convincing a portion of the American population that the way international trade was conducted before his arrival was not to their advantage. In fact, American opinion on the opportunities presented by trade under the Trump administration is the most positive it has been in twenty-five years.Footnote 31 The Trump administration therefore has a free hand, at least until the next election, to carry out a major reorientation of economic policies so that, in the context of a zero-sum game, the United States will gain even more from its participation in the multilateral trading system. This reorientation implies a return to economic nationalism and isolationism.
the return of economic nationalism and isolationism
According to the theory that perceives international trade as a zero-sum game, and in order to restore the balance of trade, the United States has decided under the Trump administration to win on all fronts: “[The] United States will henceforth win in its trade relationship with its trade partners.”Footnote 32 The doctrine of “America First” is therefore based on two main pillars: (1) economic nationalism, which naturally leads to (2) economic isolationism.Footnote 33
Economic Nationalism
According to the president’s former strategic advisor, Steve Bannon, the Trump administration considers economic nationalism to be one of its key priorities.Footnote 34 As a corollary of mercantilism, economic nationalism aims to increase the power of the state and correct the manipulations operated by the market.Footnote 35 To achieve this, its proponents advocate for (1) a diverse self-sufficient national industry capable of waging war on a global scale as well as (2) coherence between social justice and economic efficiency.Footnote 36 The objective of economic self-sufficiency involves the use of protectionist acts in order to counter foreign competition and stimulate industrial processing, which is characteristic of economic conservatism as opposed to economic liberalism.Footnote 37 In reality, economic nationalism often translates today into a tightening of trade policies and a constant opposition to economic multilateralism.
When President Trump announced that he had signed the decree withdrawing the United States from the Trans-Pacific Partnership, he specifically mentioned his intention to favour bilateralism.Footnote 38 Implementing “America First” requires a dominant position during negotiations. What could be better than for the world’s largest power to avoid having to negotiate with several states that might unite against it? The WTO, in which every country has a voice and every decision is taken by consensus, is therefore at odds with “Donald Trump’s America.” We can consequently better understand the reasons for which the American administration relentlessly attacks the WTO and why it can be considered to have suffered the most from the Trump administration’s reluctance towards economic multilateralism. Indeed, after the successes — although mixed — of the WTO ministerial conferences held in Bali and Nairobi in 2013 and 2015, the Americans prevented any real progress in multilateral trade negotiations in Buenos Aires in 2017.Footnote 39 Above all, their refusal to appoint new members to the Appellate Body resulted in the latter becoming non-functional on 12 December 2019. If states do not agree on an alternative mode of appeal, the entire Dispute Settlement Body will be affected since new appeals cannot go forward, leaving the panels’ decisions in limbo and unenforceable.
The Group of 7 (G7) and Group of 20 (G20) summits usually present an opportunity for countries to strengthen economic multilateralism and maintain links with their trading partners. However, the United States has tended to stand apart in recent meetings. Indeed, the United States refused to include a reference to the promotion of free trade and the fight against protectionism in the joint press release at the G20 finance ministers meeting in March 2017 and at the preparatory conference for the G7 summit in Taormina, Italy, in 2017.Footnote 40 President Trump even adopted a refractory attitude when, at the end of the G7 summit in Charlevoix, Canada, in May 2018, he withdrew from the joint statement, pronouncing words against Canadian Prime Minister Justin Trudeau that departed from all diplomatic usage.Footnote 41
The United States has also tightened its trade policies with a view towards economic nationalism. First, it announced that it was now going to adhere to two principles: buy American and hire American.Footnote 42 Following the president’s inaugural speech, American companies quickly realized that their government was going to give them additional benefits and protections.Footnote 43 Several of them thus initiated complaints relating to dumping and compensatory measures against foreign companies. These affected more than twenty-three products from twenty-nine different countries, including Bombardier’s C-Series aircraft, solar panels, steel, aluminum, olives, and washing machines. The number of complaints increased by around 67 percent between 2016 and 2017.Footnote 44 In 90 percent of cases,Footnote 45 the first step — the US Department of Commerce’s assessment of the existence of a practice constitutive of dumping or subsidization — proved to be in favour of the plaintiffs: American companies.Footnote 46 Although customs surcharges can only be imposed if the second step is successful — that is, if the US International Trade Commission concludes that there is injury and that there is a causal link — it is well known that the damage is already done as soon as a company is targeted by this type of complaint.Footnote 47
Second, the United States attacked the practices of one of its main trading partners, China.Footnote 48 This was evident in several ways. Among other things, the United States wished to challenge the tradition at the WTO where each country declares its own level of development, permitting these countries to reap certain benefits associated with having the status of a developing country, such as non-reciprocity in trade negotiations and longer time limits within which to implement their obligations. Obviously, this was aimed at China, which still considers itself a developing country despite its advantageous positioning in terms of international trade.Footnote 49 In addition, on 13 December 2019, the United States announced the conclusion of the first phase of a trade agreement with China.Footnote 50 While the name of this agreement (the Economic and Trade Agreement) suggests a proper free trade agreement, it is nothing of the sort. Indeed, the fundamental principles of free trade are not included in this agreement, and customs duties, like other restrictions on trade, are not eliminated between the parties. Rather, the agreement requires China to import at least 200 billion more American products within two years.Footnote 51 This is indeed a measure taken to reduce the US trade deficit in goods, even though the US trade balance with China for services is positive.Footnote 52 Above all, the agreement contains a large number of clauses requiring the Chinese to modify their commercial practices, for example, with regard to intellectual property, technology transfer, and competitive currency devaluation.Footnote 53
Admittedly, Chinese business practices are a subject of concern for several governmentsFootnote 54 and are effectively questionable from the point of view of international economic law. However, it must be emphasized that President Trump did not favour the path of multilateralism, nor did he favour dispute settlement to resolve this common problem. Rather, he resorted to a trade war,Footnote 55 forcing China to modify its ways; this having been done, of course, in the greater interest of American companies. During the official announcement of this agreement, the president made no secret of the fact that he had intended to put the interests of Americans first during the negotiations: “At long last, Americans have a government that puts them first at the negotiating table.”Footnote 56 However, while it is entirely natural for a government to defend the interests of its nationals, it should not be forgotten that trade negotiations usually respond to an imperative of reciprocity and mutual benefit.Footnote 57 Aside from the hope of seeing the tariff surcharges imposed by the Trump administration lifted,Footnote 58 China gained little from this deal.
Economic Isolationism
A policy following the principles of economic nationalism can only lead to a kind of economic isolationism since the goal is to be as independent as possible.Footnote 59 Characterized by limited intervention in the foreign affairs of other states and in international life, isolationism implies a foreign policy limiting international commitments.Footnote 60 From the viewpoint of general public international law, this necessarily means a reluctance to conclude binding treaties. At the economic level, isolationism aims to maintain national autonomy by defending national economic interests and by maintaining economic self-sufficiency,Footnote 61 in addition to promoting regionalism and opposing free trade.Footnote 62 In today’s context, recourse to isolationist measures is not impossible; however, it has nevertheless become less likely due to the multiplication of international commitments by states in the economic field.Footnote 63
In addition, today’s global economy, firmly anchored in an era of free trade and globalization, leaves limited room for isolationist measures. Consequently, these measures seem to have remained the business of populist governments, eager to satisfy an electoral base sensitive to the arguments of national protection rather than being aware of the realities of the world economy.Footnote 64 Indeed, economies have now internationalized to such an extent that the integration of value chains no longer permits a country like the United States to be self-sufficient in terms of labour, know-how, and industrial capacity. Moreover, production lines have been designed to take advantage of the lower prices of foreign producers. A striking example is the North American aluminum industry. Since the Second World War, the Canadian and American aluminum industries have been gradually integrated, with Canada specializing in the production of primary aluminum and the United States specializing in its transformation. The American aluminum industry is no longer able to meet American demand; its factories simply cannot compete with Canadian ones, which benefit from low energy costs, thanks to hydroelectricity, and Chinese ones, which are heavily subsidized by the state.Footnote 65
On 23 January 2017, President Trump made his first foreign affairs decision, which was resolutely an isolationist act. By signing a presidential decree, Trump withdrew the United States from the Trans-Pacific Partnership. This agreement, which established the largest free trade area in the world and was concluded and signed on 4 February 2016, was initiated by President Barack Obama and brought together twelve countries from America, Asia, and Oceania. As Trump stated,
I hereby direct you to withdraw the United States as a signatory to the Trans-Pacific Partnership (TPP), to permanently withdraw the United States from TPP negotiations, and to begin pursuing, wherever possible, bilateral trade negotiations to promote American industry, protect American workers, and raise American wages.Footnote 66
Thus, reiterating the importance of trade with other states, President Trump announced his intention to favour first and foremost the conclusion of bilateral free trade agreements. The move set the tone for a series of other isolationist-style economic measures.
The North American Free Trade Agreement (NAFTA),Footnote 67 which came into force in 1994 and established a free trade area between Canada, the United States, and Mexico, quickly became the target of the president, who described it as the “worst trade deal ever made”Footnote 68 and a “disaster for the United States.”Footnote 69 Based on his rhetoric of a zero-sum game and a trade imbalance, President Trump demanded that the deal be reviewed, and he punctuated the rounds of negotiations with repeated threats to withdraw the United States from NAFTA altogether.Footnote 70 This possibility destabilized markets, instilling fear among producers and necessarily having an impact on negotiations. Although the new agreement (the Canada-United States-Mexico Agreement [CUSMA]) is less beneficial to Canada and Mexico than the old NAFTA, its conclusion has led to the end of instability and unpredictability, abating the unease in industrial and business circles.Footnote 71 During the negotiations, the Trump administration also tried various tricks to divide Canada and Mexico,Footnote 72 in addition to threatening to conclude a bilateral agreement with Mexico alone when Canada refused to include a sunset clause in the agreement.Footnote 73 The final agreement contained very unusual clauses, which seem more to satisfy the isolationist objectives of the Trump administration than to open up international trade between the three countries.Footnote 74
Indeed, throughout the negotiations, the United States attempted not to negotiate mutual benefits on a reciprocal basis but, rather, to obtain larger concessions in its favour. For example, in the area of public procurement, the Trump administration wished to maintain preferential programs like “Buy America” and demanded greater access for American companies, while excluding access by Canadian and Mexican companies to sub-state markets (states as well as municipalities).Footnote 75 Considering this American stance and seeing no value in negotiating with the United States without state and local procurement, Canada withdrew from the CUSMA’s Chapter 13, leaving the WTO’s Agreement on Government Procurement to govern public procurement with the United States (the Comprehensive and Progressive Trans-Pacific Partnership already covers public procurement between Canada and Mexico).Footnote 76 In the automotive sector, the US administration initially requested 85 percent regional content (under NAFTA, it had been 62.5 percent), and a minimum of 50 percent US content.Footnote 77 The parties finally agreed to a 75 percent regional value content and a labour value content requirement, with no minimum US content.Footnote 78 In the end, the negotiated agreement contained trade restrictive clauses, such as one restricting Canada’s, and only Canada’s, ability to export certain dairy substances abroad,Footnote 79 and a clause requiring Mexico to raise the minimum wage in the automotive industry.Footnote 80 These clauses have clear objectives: to allow the United States to remain competitive in the targeted areas and to prevent its partners from enjoying a competitive edge.
In the same spirit of maintaining a certain industrial autonomy, the Trump administration launched investigations in April 2017 relating to the protection of national security under section 232 of the Trade Expansion Act, which is a law dating back to 1962.Footnote 81 The first investigation covered imports of aluminum and steel products. According to a report provided in January 2018 by the Department of Commerce (Bureau of Industry and Security), imports of steel and aluminum were considered to pose a threat to US national security. This conclusion stemmed from the fact that, due to foreign competition, the American industries in this sector would have plummeted and would no longer have been able to supply the capacity of aluminum and steel necessary for the production of products essential to American security.Footnote 82 Surcharges of 10 percent for aluminum and 25 percent for steel were then applied by the United States to products from a considerable number of countries around the world.Footnote 83 By Trump’s own admission, these tariffs had the objective of putting pressure on exporting countries to enter into bilateral trade agreements.Footnote 84
On 23 May 2018, the Trump administration also launched a national security investigation into imports of foreign cars. While the Department of Commerce’s report concluded that such imports did pose a threat to national security,Footnote 85 President Trump has not issued decisions on surcharges at this point.Footnote 86 The fact remains, however, that the renegotiation of NAFTA was greatly affected by the possibility of the United States imposing additional duties on the auto industry. In any event, this second investigation clearly demonstrates the will of the Trump administration to protect national industries. Above all, it is an unprecedentedly extended use of section 232, which was a priori adopted in the context of the Cold War. Indeed, only twenty-six investigations were carried out between 1962 and 2016.Footnote 87 Of these, only nine concluded that there was a threat to national security.Footnote 88 In all six cases that involved petroleum products, the president decided to impose measures. However, in the end, for different reasons, only two countries were targeted by national security measures under section 232: Iran, following the taking of American hostages in 1979, and Libya, under Muammar Gaddafi in 1982.Footnote 89
Finally, in order to ensure the maintenance of industrial autonomy, Donald Trump promised tax cuts to American companies. According to his economic platform, tax cuts of up to 35 percent were announced, with the aim of making American companies more competitive and attracting foreign companies to the United States.Footnote 90 The Tax Cuts and Jobs Act,Footnote 91 which partly fulfilled this electoral promise, changed the American tax landscape by creating a single tax of 21 percent for businesses. This decision, taken in the context of “America First,” has been criticized by many because it could increase the American debt load, not to mention its effect on global value chains and the harmful consequences for American consumers who will see the price of their products increase.Footnote 92
These measures are examples of economic isolationist policies put in place since President Trump took office. They have a clear objective: to reduce American dependence on foreign imports and global economic integration. Obviously, to ensure industrial prosperity, a state must have a pool of unskilled workers. However, in addition to its protectionist policies, the Trump administration erected yet another type of border likely to aggravate the system further: restrictive anti-immigration policies:Footnote 93
Addressing workforce shortages is essential if reshoring is to pick up momentum. As the nature of the situation remains unchanged from 2017, the path forward remains the same: manufacturers should undertake private–public partnerships to build talent pipelines and invest in up-skilling and re-training. Diversity and inclusion efforts, which could increase the pool of candidates willing to consider jobs in manufacturing, should be a focus as well. Advocating for increased immigration of workers able to fill crucial skills gaps will help address shortages in the near to medium term. But on this front, too, the current administration’s policies are not helping.Footnote 94
Admittedly, anti-immigration policies reinforce Trump’s populist rhetoric of “America First” — namely, that the United States is first and foremost for Americans. It is foreseeable, however, that the United States risks losing essential labour in the name of its economic project.
Ultimately, the Trump administration has taken many steps to achieve “America First.” These measures often raise questions of legality under the rules of international trade law. This is evidenced by Canada’s complaint to the WTO’s Dispute Settlement Body regarding the United States’ policies and practices with respect to dumping and subsidiesFootnote 95 as well as the nine complaints brought by members affected by customs surcharges on steel and aluminum.Footnote 96 The free trade agreements concluded by the Trump administration also appear to be in violation of WTO rules in that some impose restrictions on trade,Footnote 97 while others hijack international tradeFootnote 98 or fail to essentially eliminate tariffs and other restrictions,Footnote 99 which is contrary to what is outlined in Article XXIV of the GATT 1994.
A Turning Point in the Recent History of International Economic Relations
While international law, in general, aims primarily to protect sovereignty and territorial integrity, the very purpose of international economic law is to remove borders and to avoid economic isolationism and nationalism. In existence since the 1940s, this multilateral trading system was largely the product of American activism. Consequently, the return to economic isolationism and nationalism by the Trump administration — the United States being the main creators of this system — has necessarily had an impact on the international economic order as we have known it since the Second World War. One may wonder whether this change is evolutionary or regressive.
international economic law: a system dedicated to opening borders created at the behest of the united states
Public international law has historically had the aim of protecting borders, ensuring respect for territorial integrity, preserving independence, and ensuring the survival of sovereign states. This conception of contemporary international law dates back to the treaties of Westphalia, in which the bases of relations between states were defined.Footnote 100 In this conception, the state became the primary subject of international relations, and its borders, which delimit its sovereign space, must be respected.Footnote 101 Certainly, the protection of a state’s sovereignty is not the sole function of international law,Footnote 102 but, through its dialogic dimension, no one can exclude the protection of a state’s sovereignty and its borders, which is, moreover, included among the principles of the United Nations and its members.Footnote 103
International trade law is a branch of public international law. However, although it is also based on the idea of state sovereignty and equality,Footnote 104 international trade law is not about protection but, rather, about expansion.Footnote 105 It aims to open borders — to break them down — so that goods and services can move with the least possible hindrance from one territory to another. Instead of protecting independence, it creates interdependencies. States therefore seek, through international trade law, to create a more open system and to liberalize trade.Footnote 106 Borders are no longer perceived as ensuring the political security of states but, instead, as obstacles to the economic cooperation of states, which must be removed.Footnote 107 Modern international trade law, which surfaced after the Second World War, was conceived as an opportunity to unify states around economic interdependence. With the goal of ending the years of war, unilateralism, discriminatory bilateralism, isolationism, and exorbitant tariffs and currency manipulation, the victors organized what would become known as the multilateral trading system. First born from the Havana Charter, it was the 1947 GATT that orchestrated multilateral trade relations until 1995, when the WTO was created.Footnote 108 This multilateral trading system, based on the idea that the more states are dependent on one another the less they will tend to wage war, was imagined from a few principles aimed at lowering, or even eliminating, customs duties and other barriers on trade on the basis of transparency and non-discrimination. It imposes liberal capitalism — that is to say, the market economy.Footnote 109
This dominant view of the world economy achieved success largely due to the political activism of the United States. Indeed, the Atlantic Charter, signed in 1941 between the United States and the United Kingdom, laid the foundation for this vision, in particular, by wishing to “further the enjoyment by all states, great or small, victor or vanquished, of access, on equal terms, to the trade and to the raw materials of the world which are needed for their economic prosperity” and to “bring about the fullest collaboration between all nations in the economic field with the object of securing, for all, improved labor standards, economic advancement, and social security.”Footnote 110 In 1942, discussions took place between the United States and Great Britain during which monetary and commercial questions were discussed. In this regard, it was understood, among other things, that cross-border trade should be encouraged.Footnote 111 The negotiations that followed were greatly influenced by the Americans. In November 1945, on the basis of their discussions with the United Kingdom, the United States published a document proposing to create an international trade organization and containing the basic principles of international trade law: non-discrimination, rules on subsidies, prohibition of quantitative restrictions (with some exceptions, including one for agricultural products), and so on.Footnote 112 It was also at their invitation that twenty-three states gathered, on the sidelines of the Havana Charter negotiations, to negotiate what would become the GATT of 1947.Footnote 113 Finally, it was the United States, despite the strong reluctance of developing countries and the European Communities, which in 1982 asked for and in 1986 succeeded in launching, a new round of negotiations (the Uruguay Round), which was intended to further open up international trade.Footnote 114 After almost eight years of negotiations, in which the Americans had significant influence, the WTO was created.Footnote 115 The United States had moreover specified the objectives that the Uruguay Round should pursue: “(1) more open, equitable, and reciprocal market access; (2) the reduction or elimination of barriers and other trade-distorting policies and practices; and (3) a more effective system of international trading disciplines and procedures.”Footnote 116
Today, 164 states or customs territories are members of the WTO, and twenty-three others have been admitted as observers pending acceptance of their membership by its members. Consequently, 98 percent of international trade is subject to WTO rules.Footnote 117 Also, any free trade agreement or other area of economic integration concluded by a member must respect the principles of the WTO and be subject to a review by its members. The multilateral trading system as we know it, therefore, is precisely as the Americans envisioned it to be. They were the initiators and the architects of this economic regime, even though there was not necessarily a consensus on it. According to John Gerard Ruggie, the multilateral nature of the international trading system is attributable to the United States, which pushed this economic vision and managed to impose it, thanks to its power.Footnote 118 This is the same system that President Trump protests and accuses of being the source of Americans ills.
However, the multilateral trading system has allowed the United States to maintain its dominant position in the world since 1940.Footnote 119 The US government itself recognizes this fact on the United States Trade Representative’s (USTR) website:
According to the Peterson Institute for International Economics, American real incomes are 9% higher than they would otherwise have been as a result of trade liberalizing efforts since the Second World War. In terms of the U.S. economy in 2013, that 9% represents $ 1.5 trillion in additional American income.Footnote 120
The US government also recognizes that the United States must continue to favour trade liberalization to the extent that it benefits Americans:
The potential economic gains from trade for America are far from exhausted. Roughly three quarters of world purchasing power and over 95% of world consumers are outside America’s borders. The Peterson Institute analysis also estimated that elimination of remaining global trade barriers would increase the benefit America already enjoys from trade by another 50%. Trade remains an engine of growth for America. The negotiation of further reductions in global barriers and effective enforcement of existing agreements are the tools to reap those additional benefits.Footnote 121
Yet the fact remains that the current system no longer appears viable to the Trump administration. Stéphane Paquin eloquently sums up the feelings of those who perceive the United States as a victim of the current trading system:
Ce compromis libéral a bien servi les intérêts des États-Unis, car ce système basé sur des échanges commerciaux ouverts a permis aux entreprises américaines et aux détenteurs de capitaux de se déployer dans le monde. Depuis, le système international a bien changé, mais les institutions d’après-guerre – et leur mode de financement – beaucoup moins. Les États-Unis assument toujours une part disproportionnée des coûts de fonctionnement du système international malgré la montée en puissance de l’Allemagne, du Japon, puis de la Chine.Footnote 122
Despite Trump’s inflammatory speech and statements, “America First,” which does indeed involve major changes, does not necessarily abandon the current system. On the contrary, it seems that Americans actually wish to maintain it and that they require it. However, the system must evolve, and faced with the extremely slow pace of multilateral trade negotiations, the current administration has resorted to a hard line. Inevitably, this causes major changes in the multilateral trading system.
international economic law in upheaval: evolution or regression?
Following 11 September 2001, Robert Kolb noted the resurgence of “insolent unilateralism” on the part of the United States, presaging a setback for international law.Footnote 123 Since 2017, “America First” has defied the rules of international trade law. Although it cannot be foreseen at this stage whether these American measures are illegal,Footnote 124 they are upsetting recognized ways, raising new questions, and provoking debate. As such, one may wonder whether “America First” and all the measures that are adopted in its name presage a retreat for international trade law or whether, on the contrary, they present an opportunity to adjust an area of the law that has struggled to evolve for several decades. Despite the fact that certain measures adopted by the Trump administration have caused disastrous economicFootnote 125 and diplomaticFootnote 126 consequences, they have offered lawyers the opportunity to clarify certain still obscure provisions of international trade law. For example, since 1947, jurists have been waiting for the national security exception provided for in Article XXI of the GATT to be debated before a panel. A first opportunity came in 2019 in Russia – Traffic in Transit, where the panel discussed Russia’s argument that its actions were taken during an “emergency in international relations,” thereby invoking the exception contained in paragraph XXI(b)(iii). However, the defence to the complaints lodged by nine members regarding the imposition of customs surcharges on steel and aluminum would cover another paragraph of Article XXI of the GATT — namely, paragraph XXI(b)(ii) regarding measures “relating to traffic in other goods and materials carried on directly or indirectly for the purpose of supplying a military establishment” — making the subject irresistible to jurists.Footnote 127
In addition, the Trump administration has forced negotiators to discuss “taboo” subjects that have needed updating for many years. In so doing, the United States, whose trade deficit with China is considerable, has questioned the self-declaratory nature of the status of a developing country within the WTO. For the Trump administration, it had become completely unacceptable and inequitable that countries like China still claim to be developing countries and, in so doing, benefit from preferential treatment.Footnote 128 The debate is not new, and lawyers have raised the issue many times:
The identification of developing countries is of the utmost importance, since it triggers the application of derogating rules. … [T]he principle of managed self-election, which makes it possible to treat as a developing country, with some exceptions, any country which designates itself as such — notably for the purposes of the generalized system of preferences — clearly shows the limits of the analysis.Footnote 129
President Trump has also addressed the issue of competitive currency devaluations, an issue that the law seemed to have completely overlooked. Indeed, the International Monetary Fund (IMF) has never succeeded in interpreting the notion of competitive currency devaluation, whereas the WTO has diffuse and imprecise competence in monetary matters.Footnote 130 Consequently, states navigate these waters without a proper legal framework. The conclusion of the CUSMA between Canada, the United States, and Mexico has changed the game. Indeed, an entire chapter is devoted to the question: it defines “competitive devaluation”;Footnote 131 it recalls the obligation imposed by the Articles of Agreement of the International Monetary Fund to “avoid manipulating exchange rates or the international monetary system in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage”;Footnote 132 it provides for transparency obligations;Footnote 133 it creates a macroeconomic committee to oversee the implementation of the chapter;Footnote 134 and it refers to a dispute settlement mechanism to address certain cases of serious breaches of the agreement.Footnote 135
The economic agreement concluded with China in January 2020 also offered a major breakthrough for international trade law. Admittedly, this agreement is criticized for many reasons: not only was it concluded in an atmosphere of a trade war that was suffocating China, but it also did not respect the fundamental conditions of the economic integration agreements laid down by the WTO.Footnote 136 The fact remains, however, that the agreement requires China to update its laws in order to review many of its questionable business practices.Footnote 137 With regard to patents, geographical indications, counterfeiting, technology transfer, financial services, and competitive currency devaluation, the United States has succeeded in getting China to accept major changes in its processes.
From a more pessimistic point of view, it must be remembered that the Trump administration is multiplying unorthodox manoeuvres designed to ensure that the game of international trade is beneficial in every way for Americans. As a reminder, they are negotiating free trade agreements that circumvent international trade law and contain asymmetric concessions, imposing customs surcharges under pretexts barely masking their protectionist objectives, forcing countries to self-limit their exports in certain sectors, skyrocketing the number of national inquiries targeting foreign companies, and promising reductions to companies that manufacture in the United States while threatening those that relocate to Mexico.
Without downplaying the impact of these measures on the targeted states or companies, they will only last for a time and should not have long-term consequences for the multilateral trading system. Of course, if other countries follow suit, the analysis could be different. This could definitely lead to a global challenge to the multilateral system. However, for the time being, the states affected seem to be denouncing, suffering, or contesting the American measures rather than adopting them in turn.Footnote 138 However, the continuous attack on the WTO since 2017 could have a lasting impact. Indeed, since his election, President Trump has systematically blocked the appointment of members of the Appellate Body.Footnote 139 The Trump administration has raised several legal arguments about the ineffectiveness of the Appellate Body and its role, but some argue instead that the United States views decisions of the Appellate Body as having been taken against American interests.Footnote 140 A passage from the USTR’s report speaks volumes:
On a more fundamental level, this [Appellate Body] overreaching also violates the basic principles of the United States Government. There is no legitimacy under our democratic, constitutional system for the nation to submit to a rule imposed by three individuals sitting in Geneva, with neither agreement by the United States nor approval by the United States Congress. The Appellate Body has consistently acted to increase its own authority while decreasing the authority of the United States and other WTO Members, which, unlike the individuals on the Appellate Body, are accountable to the citizens in their countries — citizens whose lives and livelihoods are affected by the WTO’s decisions.Footnote 141
An informal process was put in place at the WTO, and a draft decision responding to several concerns of the United States was presented by Ambassador David Walker (New Zealand), the facilitator of the informal process, to the General Council in December 2019.Footnote 142 The United States, however, rejected the proposal, saying it did not resolve its concerns about the systemic problems with the dispute settlement mechanism.Footnote 143 The United States remained isolated on this topic, while other members recognized the existence of issues and the value of improving the dispute settlement system, unanimously reiterating its fundamental importance.Footnote 144
The process for electing new members to the Appellate Body has not been launched since 2017. As a result, the WTO’s dispute settlement mechanism has been undermined since 12 December 2019, the Appellate Body not being able to hear new appeals.Footnote 145 Indeed, when a member decides to appeal a dispute, the proceedings are suspended indefinitely, without the panel report being able to be implemented. Some WTO members, however, have come to an agreement on a case-by-case basisFootnote 146 or entered into a “Multi-Party Interim Appeal Arbitration Arrangement” to resolve their dispute among themselves.Footnote 147 The WTO dispute settlement system has often been characterized as “the central pillar of the multilateral trading system.”Footnote 148 Its current challenges create uncertainty for both states and private actors since the settlement of trade disputes is once again subordinated to the willingness of states to implement panel decisions.Footnote 149
It will be recalled that during his election campaign, Donald Trump announced that he would be ready to withdraw the United States from the WTO, an organization he then dubbed a “disaster.” His reasons were twofold: first, non-compliance by certain states with the rules of world trade, particularly China, and, second, the fact that the tariff measures he wished to put in place for American companies subcontracting abroad violated the international commitments of the United States.Footnote 150 Although he has not yet withdrawn the United States from the WTO, the organization is today debilitated where it once was most effective. Thus, even if the attitude of the Trump administration has led to significant progress in international economic law, it is also responsible for major regression in international trade law.
Conclusion
The arrival of Donald Trump in the White House has created a shock wave in the multilateral trading system. A leader and supporter of free trade for more than half a century, the United States is now reviving certain ideas of the Monroe Doctrine and an isolationist tradition from the beginning of the twentieth century.Footnote 151 While Donald Trump’s first term as president of the United States has not yet ended, some observations can still be made. First, Trump’s economic doctrine has challenged the foundations of multilateral trade negotiations, such as reciprocity and multilateralism.Footnote 152 Using “America First” as a guideline, the Trump administration has brought back protectionist economic borders that were once believed to have disappeared. Second, the aggressive and uncompromising attitude of the Trump administration has placed some of the forgotten issues of international trade law at the forefront. This forces us to take a critical look at certain achievements that have not appeared in negotiations for years. This is the case with the issue of competitive currency devaluation and the self-declaratory nature of the status of developing countries. Third, although the United States employs methods that are for the most part legally objectionable, it does not appear to have instigated a widespread movement of disobedience. States have indeed sometimes skirted the law in reaction to American measures, which may have led to, among other things, a trade war with China,Footnote 153 but they have not, generally and systematically, abandoned the rule of law altogether. Fourth, the United States is tending to isolate itself from its natural allies and therefore risks losing its world leadership in international trade. For many, this advantageously positions China, which could benefit from the situation to increase its influence.Footnote 154 However, China does not seem ready to assume this role. As a result, the system suffers from a lack of direction, which explains, among other things, the current situation that Paquin describes as the “géopolitique du nouveau désordre commercial mondial.”Footnote 155
In fact, we are definitely in an era of change. The perception of this phenomenon by the various players in the multilateral trading system will determine the implications of the actions taken by the Trump administration. Is this the beginning of an in-depth redefinition of the rules of international trade? Or, rather, is it a parenthesis in the history of the current model? It seems that the shock caused by the freezing of appointments to the WTO Appellate Body is significant enough for many to contemplate the end of the world as it once was. Indeed, the prevailing environment of the 1990s, which led to a consensus on international trade rules in general, and on the idea of a binding dispute settlement mechanism in particular, belong to another era. The new decade has opened with a multilateral trading system that needs rethinking. From this perspective, the doctrine of “America First” certainly appears to be a turning point in international trade law.
