Whither, or Wither, WTO?

August 6, 2018

Today’s pun is contained in the title, and it relates directly to the World Trade Organization’s future. Does it have one? What is it? If there’s a choice in the matter, how can we influence the outcome?

There is no question the WTO is under attack, but that is neither a new development nor entirely a Trump-related development. Indeed, much of the criticism comes from the left rather than the right. Briefly, there appear to be three categories of disaffection for the institution. There are those on the left who are trade skeptics anyway and believe the WTO accelerates a “race to the bottom” by catering to the interests of large multinational companies at the expense of workers and health, safety, and the environment. Those on the right view the WTO, along with other international institutions, as infringements on national sovereignty—organizations that get in the way of allowing countries to do what they each think are in their best interests. These are political debates that largely occur in developed countries where the targeted companies reside, and activists have the luxury of participating in these kinds of arguments.

Probably more damaging to the WTO is the persistent nibbling away from within by countries who pay lip service to its principles but do their best to subvert them by paralyzing the organization’s ability to act. Good examples are India, which has done its best to prevent agreement on virtually every negotiating proposal over the past 25 years, and China, which gives great speeches supporting free trade but generally ignores the rules and reporting requirements unless they are so specific as to give it no choice. (In fairness, Trump opened the door to their speeches by ceding trade leadership and leaving a vacuum.) There are complex reasons for their actions, rooted in history, but they will be saved for another day.

Sadly, a third example is the United States, which is increasingly flouting the rules with tariffs that cannot be justified and doing its best to destroy the dispute settlement process.

That brings me to the three things the WTO actually does, two of which are in peril. First, it is supposed to be a forum for multilateral trade negotiations, but it has produced exactly one of those—the Trade Facilitation Agreement—in the 24 years since the organization’s founding. Its most ambitious undertaking, the Doha Round, has clearly failed, though some countries, most notably India, seem unable to move beyond that and support other approaches, insisting instead, in yet another illustration of Einstein’s definition of insanity, that WTO members return once again to beat their heads against the wall trying to conclude an unattainable agreement.

There is a fundamental divide between rich countries which created and sustained the institution and its GATT predecessor for 70 years but are no longer willing or able politically to do so, and emerging economies who have benefitted enormously from the trading system but refuse to take on a greater share of responsibility for sustaining it. Evolving maturity may eventually solve both problems, but in the short run the only viable course is seeking plurilateral agreements—smaller coalitions of countries willing to address specific issues. That was done successfully with the Information Technology Agreement and its update, among others, and continues to be attempted with the Environmental Goods Agreement and the Trade in Services Agreement, both of which are in purgatory waiting for the Trump administration to make up its mind about them.

Second, it is the only multilateral organization with a dispute settlement system that actually works because it does not require unanimity to reach its conclusions and compel remedies. The United States, objecting to judicial overreach and arrogation of power by the Appellate Body—valid objections in my view—is busy trying to destroy it. I have written about this before to suggest that destroying the village in order to save it is not the wisest tactic in an organization where major decisions depend on consensus. Our attempt to kill it off appears to have focused the attention of others, but it remains to be seen whether the United States has a strategy for reaching agreement on reforms, or even what reforms it wants.

The third leg of the WTO’s stool, its committee work, appears to remain intact, but it is the least of the three functions.

So, as Lenin wrote, “What is to be done?” As a confirmed globalist, which apparently makes me a Trump adversary and a Koch brothers fellow traveler, I suggest a rousing defense of the system. The trade barriers it has eliminated or reduced and the discipline it provides for the system have contributed to jobs and growth in all its 164 members, and it is past time for those members, along with their workers, to stand up and acknowledge that. As my CSIS colleague, Scott Miller, has said about the WTO, “You may not notice it now, but you’ll miss it when it’s gone.” We should not have to wait for that to start doing something, and here in the United States, we should be demanding our own government exercise the leadership it has historically demonstrated on behalf of the organization.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

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