PARIS U.S. President-elect Donald Trump will have little choice but to adopt a softer line on trade than the one he has flagged during his campaign, although flare-ups with some partners are likely, former WTO chief Pascal Lamy said.
With financial markets wondering whether Britain will opt for a hard or soft Brexit, Lamy said that there was a similar scenario for trade under a Trump presidency.
“If I look at Trump and trade, the big question is whether soft Trump or hard Trump. I think there are elements on both sides,” Lamy, who headed the World Trade Organisation from 2005 to 2013, told Reuters in an interview.
“Overall if I had to bet I would bet more on soft Trump,” he added, noting that stock market gains since Trump’s election suggested investors were making a similar calculation.
Lamy, now an honorary president of the pro-EU Delors Institute, said in an interview that a Republican-dominated Congress would help ensure the Trump administration would not do anything bad for U.S. companies.
“And what he said he would do during the campaign would definitely hurt business” given U.S. firms’ reliance on global supply chains, he said.
During the raucous campaign, Trump fueled concerns among many of the United States’ trading partners with promises to roll back the North American Free Trade Agreement (NAFTA) and hike tariffs on Chinese goods.
Lamy said that in reality there was little room for maneuver on U.S. tariffs as they were already at the upper limits of ceilings allowed by WTO rules, as is the case for many developed countries.
While Washington could take the “nuclear option” of leaving the WTO, Lamy said that was unlikely because the United States’ trade partners would then be free to slap any tariff they pleased on U.S. exports.
Under the soft Trump scenario, Washington was more likely to use measures like the anti-dumping duties that are allowed under WTO rules, Lamy said.
“My expectation with soft Trump is for more trade defense, at least for the moment, testing the limits of WTO rules and then we’ll see whether there is litigation and disputes in the WTO in one year or two years from now,” he said.
As for NAFTA, Lamy said that the 1994 free-trade agreement was probably ripe for a review anyway and that some tweaking may be in order.
While there was no prospect for short-term progress on already stalled free-trade talks between the United States and the European Union, the issue would inevitably come back in the long term, albeit perhaps in a different form, Lamy said.
(Reporting by Leigh Thomas; Editing by Andrew Callus and Hugh Lawson)