Policymakers and businesses are increasingly wary about the risks of economic interdependence. Securing supply chains, avoiding over-dependence on too few (or “unfriendly”) suppliers, and ensuring continued access to goods in critical sectors have become top-of-mind, as have strategies to accelerate the transition to net zero carbon emissions.

 

In this increasingly complex landscape, the world needs a system to tackle challenges of the global commons, diffuse trade conflicts, and tap into new growth opportunities. Only a revitalized World Trade Organization (WTO) can serve this purpose. Contrary to misguided views of the WTO as an irrelevant outfit or a strait jacket that obstructs the pursuit of legitimate national goals, the WTO matters. Now, more than ever.

 

…Of course, reforming the WTO will not be easy, but it can be done. The global trading system has confronted challenges before, and governments have found ways to reinvent it. We owe this in no small measure to the trading system’s flexibility.

 

WTO reform must be guided by the basic principles that have propelled the global trading system forward for over seven decades – confidence building through transparency; non-discrimination; fairness; trade cost reduction; and pragmatism. Pragmatism allows for exceptions, waivers and other tools to manage adjustment within the system and achieve coherence between trade and other policy goals.

 

WTO rules are not set by a supranational body. Governments agree to them in what are naturally difficult negotiating processes. Precisely because officials understand the benefits and challenges associated with increased trade cooperation, escape valves are built into the system to allow sovereign nations to pursue legitimate national security or other objectives while reducing spillover effects on third countries. Put differently, while it provides flexibility, the system aims to prevent protectionism spiralling out of control, making sure that transitional measures do not drive permanent wedges into global trade integration.

 

WTO reform is likely to be a slow burn, rather than a big bang. Bits and pieces of this reform are already crystallizing in small group conversations or broad-based committee discussions. But more is required. Negotiations need focused, high-level acceleration to ensure that the WTO can be better equipped to serve its members in a more complex and rapidly changing trade policy environment.

Excerpts from PPI’s Trade Fact of the Week: U.S. underwear tariffs are unfair to women

 

THE NUMBERS: Average U.S. tariff rates, 2022 –

 

Women’s underwear 15.5%

 

All underwear 14.7%

 

Men’s underwear 11.5%

 

Steel 5.7%

 

All goods 3.0%

 

WHAT THEY MEAN:

 

…the U.S. tariff system taxes women’s underwear at higher rates than men’s. To dip briefly into Customs-and-trade-policy jargon, underwear tariffs are published in Chapter 61 of the Harmonized Tariff Schedule (“Knitted or Crocheted”)…and in Chapter 62 (“Other than Knitted or Crocheted”). Together these sections spread out over 17 pages and include 68 separate tariff “lines,” from line “61071100,” for men’s cotton underpants and briefs, to line “62129000,” a catchall for unclassifiable and possibly exotic things. The rates in these 68 lines range from 0.9% to 23.5%, diverging mainly along lines of class and gender. Among the products with clearly comparable female and male items, (a) aristocratic silks are lightly taxed, at 2.1% for women’s panties and 0.9% for male boxers and briefs; (b) the analogous working-class polyesters are heavily taxed, at 14.9% for men and 16.0% for women; and (c) middle-class cottons are, well, in the middle, at 7.6% for women and 7.4% for men. The highest rates fall on women’s products in heading 6212 with no obvious masculine counterpart: brassieres in a range from 4.8% (silk) to 16.9% (cotton or polyester), girdles 20%, and corsets 23.5%.

 

….Is the anti-female tilt of underwear tariffs typical of the American tariff system, or a weird anomaly? Overall, the “class” bias, in which silks and cashmeres are taxed lightly while cottons are taxed heavily and polyester and acrylics most of all, is the norm for U.S. consumer goods tariffs. The “gender” bias, in which women’s underwear attracts higher tariffs than analogous men’s goods, seems less systematic though still the rule. Asked to study these questions in 2018, ITC economists concluded the following:

 

“… [T]ariffs act as a flat consumption tax. Since a flat consumption tax is a regressive tax on income, tariffs fall disproportionately on the poor. Across genders, we find large differences in tariff burden. Focusing on apparel products, which were responsible for about 75% of the total tariff burden on U.S. households, we find that the majority, 66%, of the tariff burden was from women’s apparel products. In 2015, the tariff burden for U.S. households on women’s apparel was $2.77 billion more than on men’s clothing. … . This gender gap has grown about 11% in real terms between 2006 and 2016. We find that two facts are responsible for this gender gap: women spend more on apparel than men and women’s apparel faces higher tariffs than men’s.”

While the digital transformation has driven real gains in communications, transportation, science and beyond, it has also brought urgent challenges to the world of work and society, which democratic governments are only beginning to address.

 

Technology companies and other employers are increasingly supervising, surveilling and even disciplining workers with automated artificial intelligence (AI) and algorithmic management systems that can shortchange workers’ earnings, expose workers to unsafe workplace conditions, infringe on the right to form unions and exacerbate employment discrimination. Platform companies such as ride-hailing and delivery services have promoted a new, exploitative model of employment where so-called “gig” workers endure low earnings, uncertain work schedules and no benefits.

 

The digital transformation has enabled the corporate offshoring of whole new categories of jobs, including workers in call centers, information technology, back- office and even health care through telemedicine. It also facilitates the privatization of public data and data services, costing jobs and undermining the quality of publicly delivered services. Many of these jobs are being shipped to countries where workers are paid poverty wages and face severe repression for organizing trade unions.

 

Outside the workplace, digitalization poses other threats to workers, consumers and people. The large technology companies collect, share, commodify and sell tremendous amounts of personal data with little or no oversight. Digital apps and social media platforms have eroded personal privacy, undermined the mental health of adolescents, and provided a megaphone to hateful and anti-democratic forces that have corroded the social discourse.

On March 7, WITA will hold an online event to discuss whether bringing cases questioning the use of the national security exception was a prudent use of WTO jurisprudence even if they were permitted under the WTO’s Dispute Settlement Understanding. Register here.

 

Deliberation of trade security is crucial for maintaining multilateral coordination and enabling governments, businesses, and individuals to navigate global economic networks. World Trade Organization (WTO) members’ mounting invocations of security-based trade restrictiveness increasingly challenge an institution that requires persistent coordination and transparency to function. WTO members need space to discuss—and disagree with—the intersection of security and trade policies. While members make use of existing WTO institutions and procedures, the exceptionalism and secrecy of security hinder notification, and review of security-rooted trade practices. This article provides a descriptive analysis and prescriptions for WTO institutional techniques for addressing members’ security-related measures daily—that is, on a routine basis, via trade policy review and WTO notification processes. It shows that the trade community already possess the tools to manage the growing issue-area of trade and security.

 

I. INTRODUCTION

 

Foreign trade as an instrument of ‘national power’—a power to coerce other states—has long influenced trade relationships. The post–World War II multilateral trading system, however, requires governments to treat trade and security policies analytically separate, though such a separation has always been more theoretical than real. An implicit agreement among the trading community was not to make the post-war General Agreement on Tariffs and Trade (GATT) about the securitization of trade. Economic interdependence and restoration of the global economy required states to liberalize trade (as a rule) and act to protect their essential security interests (as an exception). To champion trade liberalization as (at least part of) insulation from future war, states carefully presented security concerns as trade interests. Security persisted but was not the language by which trade negotiators and delegations spoke. Still, security and trade interests remained interconnected despite the legal framework that set them up as antinomies.

 

Today, security and trade pull against one another, each demanding its own ‘exclusivity’. That pull challenges the multilateral trading system, now organized under the World Trade Organization (WTO). International trade policies are increasingly reflecting a national security mentality. Unpredictable dynamics in the global economy, such as the Russian invasion of Ukraine, foster insecurity. Technological innovations, warming temperatures, and pandemics have altered the prevailing wisdom that international rules foster economic growth. Leading economies are re-evaluating the gains of trade. China and the USA take a ‘combative approach’, aiming to secure their economic and geopolitical interests and weaken competitors in strategically essential sectors. Leaders increasingly caution about the ‘erosion of the multilateral trading system’ and fear that interdependence exposes them to networked coercion. Moreover, the scope for open, non-discriminatory trade will shrink if the larger economy members reorient their engagement around security interests—even more so if they invoke security exceptions without limitations. What is the role of the WTO in facing these persistent crises? Do members possess the institutional support needed to discuss security measures without clearly defined limits or those that do not directly correlate to an identifiable security threat?