Dividends and WTO’s appelate body the next casualty of Trump’s tariff war

President Trump has said he is a the tariff President and is pleased with himself. The President also says he prefers bilateral or trade treaties between 2 countries rather than more than 2 countries, think the Paris agreement on climate change. There are also two issues with trade deals – one access to each other countries and what happens if one side believes the other is cheating or bending the rules. One has to remember all countries around the world want economic development of one sort or the other, very few countries go about it exactly the same method. This is why a body ideally independent, will hear the facts and make a determination if one side gives more or less incentives than the other and when the industries now have access to the market is it fair?

The primary dispute mechanism in the world is called the World Trade Organization based in Geneva, Switzerland. Many countries submit disputes to the WTO as an independent body to determine which side is correct. The Trump administration has lost a few cases and now says the WTO is something more than it was supposed to be and has been blocking appointments to the top body which rules on trade disputes.

In an article by Philip Blenkinsop of Reuters, the process works as follows about 70% of initial WTO rulings are sent for review by a 3 person panel of the Appellate Body. The Trump administration has decided to block new people coming onto the Body and the normal 7 possible choices has been reduced to 3. The problem becomes on December 10, the terms of 2 of the 3 are set to end. Since the rules need 3 people and only 1 person will be functioning, for all intensive purposes the Body will cease to function or will cease to function in the new year.

The WTO meets monthly on the third Friday and the latest meeting was in Mexico. The WTO was set up as a consensus body, however if there is one objection nothing happens. The US was expected to raise that objection.

Similarly to all countries, the US has registered big wins, but tends to focus on its losses, chiefly those limiting its right to counter what it sees as dumping or unfairly subsidized imports.

Linking to dividend paying stocks, most dividend paying stocks have some sort of protection against competition, in the utility business is a monopoly or semi-monopoly. There are valid reasons of it, however what would happen if it raised its rates too much? All companies want access to markets where there are customers to pay for their goods and services, most want fair access, but what is fair and how can companies compete both at home and in the international space? A reasonable dispute mechanism is needed or some company cheats. if there is no penalty why not?

There are more questions than answers, till the next time – to raising questions.

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