The 2018 American and Chinese Trade Wars Risk Undermining the World Trading System and Constitutional Democracies

Abstract

The American and Chinese trade wars of 2018 risk undermining not only the law of the World Trade Organization (WTO, section I). As tariffs tax and restrict domestic citizens and redistribute their income, illegal import tariffs (e.g. as imposed by US President Trump) - and the collective undermining of the WTO Appellate Body and dispute settlement system - also run counter to the democratic mandates given by parliaments when they approved the 1994 WTO Agreement and incorporated it into domestic legal systems, as illustrated by trade laws and policies in the USA (section II) and in the European Union (EU, section III). Multilevel governance of global public goods (PGs) - like the WTO trading system, which has helped to lift billions of people out of poverty by promoting unprecedented economic welfare, transnational rule of law and compulsory third-party dispute settlements - cannot remain effective if citizens and democratic institutions fail to hold their governments democratically and legally accountable for violating ‘PGs treaties’ (section IV). This contribution uses the example of the USA and the EU for arguing that constitutional democracies - including Asian democracies like India, Korea and Japan - must adopt more specific trade legislation protecting the WTO legal system. Multilevel governance of transnational PGs requires empowering citizens, parliaments and courts of justice to limit populist abuses of trade policy powers to tax and restrict citizens in manifestly illegal ways reducing general consumer welfare, non-discriminatory competition and rule of law.