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16 February 2020

US weighs higher tariff ceilings in a bid for more sway over WTO

The Trump administration has long said that the US is treated unfairly by other nations because it’s bound by higher tariffs and its trading partners are unwilling to lower theirs

The potential move follows Trump’s signing of a partial agreement with China last month/Bloomberg

by Bloomberg

The US is weighing a plan to increase its long-standing ceiling on tariffs in a move meant to trigger a renegotiation of relationships with fellow World Trade Organisation (WTO) members and step up its assault on the global trading system.

President Donald Trump and senior aides have long complained about the fact that other countries can charge higher tariffs on certain products than the US does. They cite examples such as steeper European passenger-car duties and Indian motorcycle tariffs as evidence of the way they believe global trading rules are tilted against America.

But in what would be the boldest move yet to attack that perceived problem, US Trade Representative Robert Lighthizer is now mulling a plan to reset American tariff commitments at the WTO by threatening to increase the tariff ceilings—or bound rates—agreed to by previous administrations over decades of negotiations, according to people familiar with the discussions.

The potential move follows Trump’s signing of a partial agreement with China last month that is seen by critics as a major step away from the rules-based order policed by the WTO. The Trump administration has managed to paralyse the Geneva-based institution’s dispute system by blocking the appointment of judges to its appellate body.

The new discussions, though, are part of a broader effort underway inside the administration to look at other ways it could shake up the global system and address their view that its core—the WTO—is rotten.

In a statement, the US Trade Representative’s office said there aren’t any plans ‘at this time’ to increase the WTO tariff cap.

The administration’s strategy is to start with a proposal to renegotiate America’s WTO tariffs with the expectations that the WTO’s other 163 members would not collectively agree to new multilateral terms.

In Davos, Switzerland, last month Trump said he had discussed a very dramatic change with WTO Director-General Roberto Azevedo. “We’re talking about a whole new structure for the deal or we will have to do something,” said Trump.

A renegotiation could help the White House increase its pressure on various nations and trading blocs with whom the US does not have an existing free-trade agreement, like the European Union, the UK, India and Brazil. Washington is trying to restart stalled negotiations with the Brussels aimed at removing industrial tariffs and avoiding an escalation of tensions that led to threats of tariffs and retaliation.

RELATED STORIES: WTO Trump administration Robert Lighthizer





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