Leave it to the Swiss to find the only effective response to President Donald Trump’s trade policy. Swatch, their famous eponymous watch company, issued a special commemorative watch with the three and the nine reversed on the watch’s face to mark the fact that the Trump tariff on Swiss goods remains at an alpine 39 percent a full month after the American tariff tsunami hit. Sadly, on checking at the Swatch store at the Geneva airport on my way home from the World Trade Organization’s (WTO) World Trade Forum this last week, the watch was sold out at that location. When it is re-stocked, I will have to pay a 39 percent tariff to buy it back home in the States.
No other response to the Trump tariffs has been found as effective as this mute tongue-in-cheek Swiss one. The United Kingdom, co-inventor with the United States of the multilateral world economic order, rushed to be the first to ratify the new US unilateral order. There was no resistance from the European Union and Japan, and several others who joined in reaching bilateral agreements with the US, giving de facto or de jure (it is not sure which it is) recognition to the US prescriptions, called “reciprocal” by the US. For their part, Canada and Mexico need to find a way to preserve the North American free trade pact, and the long process to do so has now begun. The search for a new equilibrium between China and the US, the world’s two largest trading countries, is being managed on the US side by Treasury Secretary Scott Bessent. Plans to bail out America’s farmers are also again underway, as the solution to the bilateral trade relationship with that major agricultural importing country cannot easily be found fast enough and is uncertain.
In Geneva, in private conversations, what to do at the heart of the multilateral trading system, the WTO, is being actively debated. The situation is complicated by the fact that the intentions of the United States towards the institution it created are far from clear. The Biden administration left the US dues payment to the WTO to the very last moment of its time in office and did not get it done before the second Trump inauguration. This unintentional snub has since been further complicated. The new US administration, which conducts its business mostly by daily executive orders rather than acts of Congress, issued an executive order listing rescissions that, with a vituperative reference to the WTO, removed its funding and then didn’t.
Straws in the wind for the White House’s continuing relationship with the trade organization are the nomination of Joseph Barloon to be US ambassador to the WTO and the WTO's appointment of a US policy expert, Jennifer DJ Nordquist,[1] as WTO deputy director-general. Both are serious, clearly qualified, individuals. The US does not seem to have decided to opt out of participating in the trading system.
At and on the margins of the WTO Public Forum this past week I had the benefit of meeting with a broad range of seasoned expert trade academics, concerned business representatives, current and former WTO secretariat members, and a sizeable majority of the most active forward-leading ambassadors to the WTO. The latter have been engaged in considering how to improve the world trading system since well before the November 2024 US presidential election, and the opening months of Trump administration shook their world. The WTO’s record of accomplishment in concluding needed high quality trade agreements during its 30-year history has fallen short of what is needed. In addition, most recognize that the partially dismantled WTO dispute settlement system needs to be repaired. These conditions have persisted for years. The question of what exactly should be done to shore up the trading system has taken on much greater urgency.
Serious commentators have posited three broad options for the world trading system and the world economy going forward: an end to global economic cooperation, formation of three large trading blocs, or renewal through a new international order based on cooperation. This is not how planning for the future is being approached by the involved middle-sized trading nations, however. I would call these WTO members the “international progressives” (the term “progressives” has been co-opted in US domestic politics for other purposes). The international progressives are identifiable by their actions. They are proactive on international trade cooperation. Most of them have concluded digital agreements. They are all signatories of the Information Technology Agreement providing duty-free treatment for IT goods such as computers and semiconductors. They do not resist technological breakthroughs. Among their number are those who provided the thought leadership that resulted in the Trans-Pacific Partnership and the WTO itself.
The current group of such progressives includes Singapore, New Zealand, Australia, and Switzerland. They are often joined by Canada, Japan, Chile, Costa Rica, and several others. They can be found in the list of signatories of the 12-member Comprehensive and Progressive Trans-Pacific Partnership (CPTPP) and the very recently formed 14-member Future of Investment And Trade (FIT) Partnership (or FIT-P). In their company can be found on occasion the European Union, aligned with many of the international progressives’ objectives. In the negotiations in Geneva following the Ministerial Meeting in Buenos Aires in 2017, it was Australia, Singapore, and Japan that convened the group addressing the rules for the global digital economy. With the mid-sized economies in the vanguard, the largest trading economies—the United States, China, and the EU—found that it was in their interest to join as well. This pattern might readily recur as the world trading system is updated, with the international progressives in the lead, and heft added when the largest economies join in.
The fact is slowly sinking in that while the headline trade news daily is from Washington, the United States accounts for only 13 percent of world trade, and it abandoned leadership of the world trading system over a decade ago. The void it left has never been filled. It is just possible that the progressives will find a way to do so. China's role in the trading system is unclear. It is a primary beneficiary of the system but does not invest sufficiently in it (and is further disqualified by the self-centered nature of its policies). The European Union gave up leading when it lost the US as its senior partner. Instead, it spent most of its energy on its own bilateral relationships—a second best that it is glad to have now without the option of a stronger multilateral trading system that it should have contributed more to.
The multilateral trading system has not collapsed with the founding member opting for a different path. The world currently has and benefits from a multilateral trading system that most governments still subscribe to and act in accordance with its provisions in dealings with others. Their compliance is not simply the inertia of a body continuing in the direction and speed that it has long had. It is also from a tested belief that the current system serves their interests and can be improved.
There is yet to emerge an individual who is a multilateralist champion with sufficient vision to renew and reinvigorate the global trading system, made of the stuff that Franklin Roosevelt and Harry Truman were made of, or like those who founded the European project, Jean Monnet, Robert Schuman, and Paul-Henri Spaak, builders all. The WTO, as valuable as it is, and it is very valuable, never reached its full potential. There is now an opportunity to achieve progress.
It is an odd part of the modern history of international trade that US high-handedness, with its demands for unilateral concessions, is not new. Prior to the second Trump administration, the most recent US use of broad unilateral tariffs, the Nixon 10 percent ad valorem import surcharge in August 1971 and American demands for unilateral trade concessions, provoked the creation of the first multilateral round of trade negotiations, to address non-tariff trade barriers more comprehensively in the Tokyo Round. Through its use of unilateral trade measures under Section 301 of the Trade Act of 1974, in the 1980s, the US again provoked the rest of the world trading nations to found the Uruguay Round of multilateral trade negotiations, which yielded high quality trade agreements and the creation of the World Trade Organization.
The Trump presidency is nothing if not provocative. On that point there can be no disagreement. It is up to the international progressives, and those who join them, to decide what is to be done next.
The options are likely not chaos, or the formation of isolated trading blocs, as all trading nations inhabit one planet and we need each other; nor is there in prospect the founding of a new international economic order as Bretton Woods once did. The likely future is a combination of most nations persevering with pragmatism and grit under the existing trading system without much change and seeking those with the will and inspiration to show how to make things substantially better. That brighter path forward should not be lost because it was assumed not to exist.
Note
1. I was the US WTO DDG during the first Trump administration, and previously served as US deputy special representative for trade negotiations (USTR) during the Carter administration.
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