Another example of a toothless WTO

As long-time readers of this column know, we have utter disdain for the World Trade Organization and its review of international competitive practices, such as the cases of Airbus and Boeing subsidies.

Here is another example of why we have disdain. As noted in this example, the WTO found China to be in violation of WTO rules on raw materials export rules but China did not remove the restrictions.

We’ve previously noted that the WTO found Brazil and Canada to be in violation of export support for Embraer and Bombardier airplanes–and nothing happened.

We’ve previously noted that the WTO has no power to enforce its own decisions and that the trade rules allow the winning country to impose tariffs on industries not involved in the original dispute. Thus, with respect to the Airbus and Boeing cases, the US could impose tariffs on French wine and the European Union could impose tariffs on Washington State wine or apples–or any other industries.

We find this completely ridiculous.

While the US has asked the WTO authority to impose tariffs with respect to the Airbus case, we would be shocked if it followed through (assuming, of course, the WTO authorized action) and tax Airbus imports into the US. The EU would retaliate by placing tariffs on Boeing. Nobody would win.

5 Comments on “Another example of a toothless WTO

  1. The element of WTO hot air is considerable, regards clout it has none, impartial, it primarily is.

    The benefit is that it does to the greater community is that it endorses the bleeding obvious & what most of us in the industry have known for years at some considerable cost.

  2. Most commentators on this blog, including the author, are looking at the WTO far too superficially and with wrong expectations.
    Its lack of power is due to the fact that the founding countries and member countries dont want it to have real power.
    The US has historically resisted anything that it perceives as loss of sovereignty, so dont complain, vote for different people.

    Having said that, the WTO has done a lot to facilitate trade around the world and has been a great benefit. China joining the WTO some years ago has prevented excesses worse than what you are complaining about, and has regulated trade to be more fair than it would otherwise be. Russia is joining, and Brazil has joined not so long ago and that in the end benefits all.

    This dispute would have escalated to something far worse if there had not been a WTO. It serves to blow of steam and regulate conflict… which often prevents war… As we know, unregulated conflict ends up being far worse.

    Understand it for what its worth.

  3. From one Flying Dutchman to another, well said my friend!
    It is like the UN, which prevented and saved all kinds of conflicts from getting
    worse, while doing much good work behind the scene, like the World Health
    Organization and many others, activities not known to many of us.

  4. This is indeed very well said. The WTO is the direct UN equivalent for international trade, its power are limited by the contributing nations.

    In this particular case everybody is both conforted and condemned which is great. Now time to move on. 😉

  5. The China rare earth decission is imho wrong anyway.
    Rare earth are in limited supply and expensive ( economic, ecologic ) to harvest.

    But it is not a resource limited to China.
    The US ( and most other places ) have enough resources to mine them on their home turf.

    Thus China is not making access to rare earth limited.. They are making access to _their_ rare earth limited. ( understandably, The US would play the same game in reverse with
    some faint arguments like “dual use” and China is part of the axis of evil ;- )

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