The Indicator from Planet Money

Episode•March 19, 2025•9 min

Why there's no referee for the trade war

Thirty years ago, the U.S. helped create the World Trade Organization, a group of countries linked by a common set of free trade agreements. But then the U.S., starting with the Obama administration, turned against the WTO. This leaves a void where there should be a referee to settle trade disputes between countries. On today's show, how American grievances paralyzed the WTO's dispute settlement system and what happens when the U.S. no longer wants to play by the rules it once agreed to. Related listening: A polite message from Canada to the U.S. (Apple (https://podcasts.apple.com/us/podcast/the-indicator-from-planet-money/id1320118593?i=1000696043668) / Spotify (https://open.spotify.com/episode/3LgAFdWmEm6m8ZWcIf7pXU?si=677a34b429e74149)) Trump's contradictory trade policies (Apple (https://podcasts.apple.com/us/podcast/the-indicator-from-planet-money/id1320118593?i=1000680745847) / Spotify (https://open.spotify.com/episode/0IRiQlyAMU8f3MZ3Jo3Mwx?si=Va_JmxCqReiBiNCLTD-baQ)) Worst. Tariffs. Ever. (Update) (Apple (https://podcasts.apple.com/us/podcast/planet-money/id290783428?i=1000679949437) / Spotify (https://open.spotify.com/episode/4t1IjtnrdOBAkifFEq0kbW?si=93719b3cb3dc4d72)) For sponsor-free episodes of The Indicator from Planet Money, subscribe to Planet Money+ via Apple Podcasts or at plus.npr.org (http://plus.npr.org/). Fact-checking by Tyler Jones. Music by Drop Electric (https://dropelectric.bandcamp.com/). Find us: TikTok (https://www.tiktok.com/@planetmoney), Instagram (https://www.instagram.com/planetmoney/), Facebook (https://www.facebook.com/planetmoney), Newsletter (https://www.npr.org/newsletter/money). To manage podcast ad preferences, review the links below: See pcm.adswizz.com (https://pcm.adswizz.com) for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences. Learn more about sponsor message choices: podcastchoices.com/adchoices (https://podcastchoices.com/adchoices) NPR Privacy Policy (https://www.npr.org/about-npr/179878450/privacy-policy)

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Transcript

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Npr.

0:12

This is the indicator from Planet Money. I'm Waylon Wong.

0:15

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?

0:35

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.

0:46

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

1:01

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?

1:18

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, 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.

1:35

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 Hillman knows these rules really well. She's a professor at the Georgetown Law center and an expert in international trade.

1:55

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

1:57

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.

2:05

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.

2:17

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

2:20

Yes, they have. Yes, they have.

2:23

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.

2:32

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.

2:44

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.

2:54

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.

3:03

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.

3:16

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. Even the us and the US did

3:32

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 Corporation.

3:48

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.

4:00

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.

4:16

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.

4:44

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.

4:56

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.

5:13

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.

5:40

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

5:48

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.

6:00

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.

6:12

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.

6:25

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.

6:44

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

6:50

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

6:55

Very often. Very often that is.

6:58

It's a lot more cathartic than appealing to the void.

7:00

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

7:07

So we've 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

7:19

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 American countries signed a deal. They had been negotia for 25 years. Quinn says it is not a coincidence they wrapped up this deal right after the US Election.

7:42

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.

8:01

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.

8:17

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 bird flu.

8:33

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.

8:50

And other countries might still go to the WTO for these discussions, even if the US does not.

9:02

This episode was produced by Julia Richie and Lily Kiro with engineering by Jimmy Keeley, and was fact checked by Tyler Jones. Kicking Cannon is our editor, and the Indicator is a production of NPR.

Why there's no referee for the trade war

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