Trump Prepares to Abandon WTO Rules

Axios has obtained a leaked draft of a Trump administration bill—ordered by the president himself—that would declare America’s abandonment of fundamental World Trade Organization rules, Jonathan Swan wrote for Axios.

Why it matters: The draft legislation is stunning. The bill essentially provides President Donald Trump a license to raise US tariffs at will, without congressional consent and international rules be damned.

The details: The bill, titled the "United States Fair and Reciprocal Tariff Act", would give Trump unilateral power to ignore the two most basic principles of the WTO and negotiate one-on-one with any country:

The "Most Favored Nation" principle that countries can't set different tariff rates for different countries outside of free trade agreements.

"Bound tariff rates" — the tariff ceilings that each WTO country has already agreed to in previous negotiations.

"It would be the equivalent of walking away from the WTO and our commitments there without us actually notifying our withdrawal," said a source familiar with the bill.

The bill is called "United States Fair and Reciprocal Tariff Act”, which would give Trump unilateral power to ignore the two most basic principles of the WTO and allow him a bigger hand to wage a trade war.

"The good news is congress would never give this authority to the president," the source added, describing the bill as "insane".

"It's not implementable at the border", given it would create potentially tens of thousands of new tariff rates on products. "And it would completely remove us from the set of global trade rules."

Behind the scenes: Trump was briefed on this draft in late May, according to sources familiar with the situation. Most officials involved in the bill's drafting—with the notable exception of hardline trade adviser Peter Navarro—think the bill is unrealistic or unworkable. USTR, Commerce and the White House are involved.

In a White House meeting to discuss the bill earlier this year, legislative affairs director Marc Short bluntly told Navarro the bill was "dead on arrival" and would receive zero support on Capitol Hill, according to sources familiar with the exchange.

Navarro replied to Short that he thought the bill would get plenty of support, particularly from Democrats, but Short told Navarro he didn't think Democrats were in much of a mood to hand over more authority to Trump.

Not a Done Deal

White House response: Spokeswoman Lindsay Walters said, "It is no secret that POTUS has had frustrations with the unfair imbalance of tariffs that put the US at a disadvantage. He has asked his team to develop ideas to remedy this situation and create incentives for countries to lower their tariffs. The current system gives the US no leverage and other countries no incentive."

But Walters signaled that no one should take this bill as anything like a done deal. "The only way this would be news is if this were actual legislation that the administration was preparing to rollout, but it’s not," she said. "Principals have not even met to review any text of legislation on reciprocal trade."

Between the lines: Note the specificity of Walters' quote above. Trump directly requested this legislation and was verbally briefed on it in May. But he hasn't met with the principals to review the text.

Be smart: Congress is already concerned with how Trump has been using his trade authority—just look at recent efforts by Republican Sens. Bob Corker and Pat Toomey and Democratic Sen. Michael Bennet to roll back the president's steel and aluminum tariffs.

The bottom line: As a smart trade watcher told me: "The Trump administration should be more worried about not having their current authority restricted rather than expanding authority as this bill would do."

Trump's Criticism

Earlier, Axios quoted a source as saying that Trump allegedly told his aides on several occasions that he wants the US to pull out of the WTO, branding US membership in the organization as harmful for the country.

Trump publically criticized the WTO during his election campaign in 2016, describing the organization as a "disaster".

In 2018, he slapped 25% and 10% tariffs on steel and aluminum coming from China, Canada and the European Union, blaming them for "unfair" trade with the US and the country's "bad" trade deficit.

Several countries have already imposed retaliatory tariffs against several categories of American goods, lodging relevant complaints with the WTO court.