Professor Petros C. Mavroidis on Tariffs and the WTO

Petros C. Mavroidis, Edwin B. Parker Professor of Foreign & Comparative Law, is an expert in global trade who served as a member of the World Trade Organization (WTO) legal affairs division from 1992 to 1995 and has been a legal adviser to the WTO since 1996. He is the author, most recently, of Industrial Policy, National Security, and the Perilous Plight of the WTO. Mavroidis says the unilateral, “reciprocal” tariffs on United States trading partners announced by President Donald Trump have upended the global trading system and called into question the relevance of the 30-year-old WTO. Both the 1947 General Agreement on Tariffs and Trade (GATT) and the WTO, its enforcing organization, are in peril, he says.

“The U.S. is one of the three big players in trade, along with China and the European Union. If one of the three big players says, essentially, ‘I don’t pay too much heed to what the WTO has to say,’ you can imagine the WTO is shaken,” Mavroidis says. “So, I think the WTO is going through an existential crisis. And the question is: What to do about it?”

What is the role of the WTO in the current global trade uncertainty? 

From a legal perspective, the WTO continues to be legally relevant, as far as the U.S. is concerned, because the U.S. is a member. However, these unilateral tariffs are per se illegal under WTO rules because they are unilateral. I don’t disagree with President Trump when he says, "I need to have economic security." This should be protected for everyone. What I disagree with him on is that he goes about it unilaterally. This is a case that should be discussed and negotiated multilaterally. This is what the WTO is designed to facilitate. If the U.S. does not take the initiative to deepen and widen multilateralism, who will? There are two candidates: Europe, which cannot always manage to speak with one voice, and China. Do we want China to take the initiative to rewrite the international contract?  

Consistent with his practice of the past two months, President Trump says all of these tariffs are necessary to protect U.S. national security. To what extent that perspective is right or is wrong is for a WTO panel to decide—if the affected parties submit a dispute to the WTO. Some countries have announced they would take the U.S. unilateral tariffs to a WTO dispute—and some have reacted unilaterally in turn. China will, it seems, persist with its claim before the WTO. But the rest might feel happier, now that the U.S. pushed the “pause” button, and avoid litigation.

How has the national security justification for tariffs or trade restrictions been viewed by WTO panels in the past?

Whenever the U.S. has invoked national security to justify its policies in the first Trump term and during the Biden years, it lost the argument at the WTO. What the U.S. has done, though, is “appeal into the void.” The WTO has two-instance adjudication: dispute settlement panels and an appellate body. The appeals court is no more, because the first Trump administration refused to fill the panel’s seats, and the Biden administration did not change this policy. So, if you’re Canada and you take the U.S. to the WTO court, and you win, then the U.S. appeals. There is no appeals court to adjudicate it, so your victory is Pyrrhic. The case remains in limbo.  

How is the claim of national security as a rationale for trade restrictions viewed by the WTO? 

The General Agreement on Tariffs and Trade was signed in 1947 by some of the winners of World War II who were like-minded market economies. The Soviet Union did not negotiate the GATT. The Iron Curtain had been in place, and the Soviets decided not to participate in the negotiation. No one needed to think about national security in the GATT very much because those who signed the GATT were all allies. The GATT is a trade and security agreement. They included an unsophisticated national security clause in the GATT, which is now totally outdated.

When the WTO was established in 1994, the Iron Curtain had been lifted. The GATT trading partners thought, like Francis Fukuyama, that history had ended, and liberal democracy and market economies would prevail everywhere forever. The prevailing view was that we were entering a unipolar world where the “Washington Consensus” would be dominant. So we did not renegotiate the national security clause. We should have, because in the ’80s and ’90s, we started opening the door to the WTO to unlike-minded players—big ones, like China, Russia, and Arab countries—that didn’t have much in common with U.S. or Western economic life. 

For the same reason, we did not discuss economic security. We refused to accept that national security should encompass economic security as well. The WTO has a very wanting legal framework in this respect. 

When Trump imposed tariffs in 2018, a number of WTO members initiated disputes before the WTO. The U.S. trade representative, in response, invoked national security. Now here, unfortunately, the WTO judges did not seize the opportunity to create a realistic national security framework, and instead narrowed justified invocation of national security down to cases of war or warlike behavior. I’m not saying the U.S. should have won or lost its disputes. But there is a problem with the way WTO “courts” have understood national security and considered economic security not germane—alien—to the world trading system.  

Given that background, how might the WTO maintain its role as a multilateral trade-dispute arbiter?

In my book, I argue that the European Union could emerge as the inspirational middle power to reinforce the role of the WTO. But I’m mindful of the limitations. Inside the EU, there are different views as to how trade policy should be conducted. Suppose the EU takes the leadership role; with whom do they partner? Can we imagine an EU-led coalition with like-minded players—Canada, Australia, New Zealand, maybe Japan, Korea, Brazil, India? That would be the ideal scenario, to get everyone but the U.S. and China on board. But they must speak with one voice; they must coordinate. I think this is the only way forward for the WTO, but I’m not extremely optimistic about this happening. 

If the WTO loses its relevance, what are the ramifications?  

This is the $64,000 question. I’ve seen so many papers come out, mainly by political scientists, saying that we’re back in the Weimar world of protectionism, which doesn’t sound good. 

The world trading system was built by the U.S. And there is a good reason why they built it. The U.S. wins from certainty in international trade relations because the U.S. has competitive advantage in a number of sectors. So why would the U.S. go against what its forefathers built? I’m perplexed and very worried. I believe in the WTO, I believe in an international liberal system, because I cannot see how heterogeneous players—and now we have the emergence of a big heterogeneous player, China—can live together in a state of anarchy. And of course we do need China to help us address global challenges, like climate change. How can we tell China, “You’re out from the trade game, but you’re back in when we discuss climate”? How persuasive are we when we have these policies? This is why I’m a bit worried. 

You recently wrote that Trump’s concept of reciprocal tariffs “does not operate under a reasonable definition of reciprocity.” Can you explain? 

Trump speaks about instances where Europe or China have higher tariff levels than the U.S., but he does not speak of the cases where they have lower tariff levels. There are a number of areas where the EU has lower tariffs. If you want to impose reciprocity as he means reciprocity, then you have to include everything. 

But most important, reciprocity is not arithmetical equivalence. If I’m a big guy and you’re a small guy, and I impose a trade regime on the rest of the world, I will be prepared to accept that maybe you will not pay as much as me because my big gain is the trading order itself. You all participate in the game, and no one defects. 

The U.S. accepted these previously existing tariffs in the Uruguay Round of multilateral trade negotiations. Why? Because different countries paid in different ways. India and all developing countries accepted the agreement on intellectual property rights. This was a transfer of welfare from developing to developed nations. All of the world accepted the General Agreement on Trade in Services—that’s where the U.S. has a huge surplus. 

So the idea of reciprocity is broader than tariffs themselves?  

Reciprocity is understood in world trade as an agreement that commitments entered are more or less symmetric. Through commitments, equality of competitive conditions is established, full stop. It is not about absence of trade deficits. Let’s assume that we have an agreement, you and me, that is absolutely reciprocal today. One day later, you develop a comparative advantage somewhere, and suddenly, I’m flooded with your export. Reciprocity is established at a point in time, and we want to give each other the incentives to compete in a world where we establish equality of competitive conditions. In 1997, when the WTO made trade commitments in telephony, we had no idea that a few years later Apple would come into the market, and suddenly the world would be flooded with Apple phones because everybody prefers an iPhone over another phone. The agreement was reciprocal when the countries signed it, and technology changed the trade outcome. There are institutional safeguards to address trade deficits, of course, but this is a different story.   

Is the world in a trade war? 

It depends what we mean by trade war. Economists who have developed the trade uncertainty index match the incidence of the word “trade” with “uncertainty” in the media and online. That index is through the roof. You can see it in the stock market in the U.S.; you can see it in the surge of imports of cars as car companies anticipate tariffs. If by trade war we mean uncertainty, we’re definitely there. If by trade war we mean “you impose tariffs and I retaliate,” we’re also there. I fear no one will stay idle. Europe, China, and, most probably, Japan and Korea will react. They will not swallow tariffs. And then we can talk about a trade war the way the term is meant to be understood. Hopefully, by pressing the “pause” button this time, we might be entering a period of relative peace.

What other impacts could arise from unilateral tariffs like the ones recently announced? 

Trump said there will be short-term damage because of tariffs. You can’t accuse him of closing his eyes to reality here. But the most important damage in my view is not the trade damage—it’s the damage to the WTO institution. I am considered a critic of the WTO: I believe in multilateralism, but there are many things that the WTO did that I thought were wrong. But we don’t need to burn the village to save it. The WTO, with all its faults, is the last channel of multilateral communication. Climate change, for example, is a global concern where communication is necessary. I hope the people in Washington will understand the intrinsic value of the WTO: It’s a regulatory interface where we can sit down and discuss. We might agree, we might disagree, but we can promote solutions for the world community. Trade touches on everything. It touches on the environment, on public health, and on and on. The WTO is an irreplaceable institution. I hope they will realize that. 

This interview has been edited and condensed.