You’re reading Understandary: a weekly news analysis column by the host of Let’s Know Things, Colin Wright.
Shortly after World War II, leaders of countries around the world were keen to create a meta-national organization that would allow them to, first, bind the many interests of the globe together a little more tightly in order to avoid such confrontation in the future, and second, to make international trade a little more predictable, safe, and equitable.
The first effort in this direction, the establishment of what was called the International Trade Organization, failed, due to a lack of interest within the United States Congress in submitting itself to a global trading system that would not necessarily favor the priorities of the US above those of other nations.
But that failure to gain US support was educational, and it led to the creation of an interim legal agreement called the General Agreement on Tariffs and Trade, or GATT, which, it was thought, would allow interested parties to deal with each other via an incredibly loose framework until a more thorough and concrete system could be sorted out.
It wasn’t until nearly half a century later that a successor to the failed ITO would emerge in the shape of the World Trade Organization, or WTO.
By this point in history the GATT had evolved and grown and even sprawled a little, but its usefulness despite that sprawl was part of why an organization like the WTO had begun to make a little more sense to everyone, including the US, compared to how such a concept had come across in the decade following WWII.
Whether we’re talking about the ITO, GATT, or WTO, though, the core purpose of these organizations was to create a commonly agreed-upon system of rules and standards that would allow two or more countries to do business with each other without trust—or a lack of trust—becoming a barrier.
Before such rules existed, you might have agreements between pairs of countries when it comes to certain types of trade, but there wasn’t one broad, core, default piece of legislation that you could point to and say “Let’s start with that, shall we?” Instead, every single fundamental had to be sorted out every single time, and that took ages, but also left a lot of room for mistrust and misunderstanding.
As a result of that lack of trust, a lot less trade took place, and a lot of wealth was left on the table; that’s the assessment of many economists, at least. The WTO seems to have helped with that issue, and this has been accomplished, primarily, through the implementation of common standards, policies, and a decentralized court for hearing and making judgements in cases brought by member nations.
At the moment, the WTO has 164 member states and 23 observer governments: the former being countries that have agreed to adhere to the policies and standards of the Organization, and the latter being countries that aren’t members but which are still interested in following the discussions taking place within the Organization.
Research has shown that the introduction of the GATT and WTO systems and frameworks has led to substantial economic gains around the world, in part due to the staggering reduction in tariffs (an 85% reduction in all tariffs, worldwide, on average) and in part because of the trade opportunities that emerge (for economies of all sizes) when large economies have fewer opportunities and incentives to bully smaller economies.
The economic and political world that we’ve lived in since the mid-1990s has been partly shaped by the existence of the World Trade Organization.
In recent years, though, some governments have become skittish about the WTO, at times openly wondering about its contemporary utility, and whether or not some new organization, or a return to “rule of the jungle” trade relationships, might better favor them and their priorities.
This is especially true of so-called “populist” politicians: a term that’s thrown around a lot right now, but which broadly refers to any kind of politics that at least ostensibly focus on the needs and desires of the everyday working person, often at the expense of supposed elites.
Populism is often held up as a response to the increasingly globalized nature of even the smallest corners of the economy, these days, but globalization has been a burgeoning issue since WWII (and arguably before), and populism has been a part of politics since the beginning of politics (in some form, at least). So although there’s a good chance one is informing the other to some degree, there’s a good chance that both are also resurgent for other reasons.
It’s been claimed, by some, that the WTO and other globalization-related structures favor the wealthy and well-connected, and harm the working class in the trade-off.
It’s also been claimed that the WTO reinforces structural inequalities by its very nature, locking in the ability of wealthier nations to implement certain types of defensive tariffs while forcing smaller countries to—among other things—open up their agricultural industries. It also keeps those smaller countries from dumping their wares into larger markets at low costs in order to gain market share; something larger economies are allowed to do, at times.
These claims have led to widespread opposition to the WTO from some facets of the ideological world, even as other facets celebrate it as one of the most beneficial systemic developments in modern human history. Most research lands somewhere in the middle, showing evidence of mostly benefits for some and mostly harms for others, but a little of both for everyone involved.
At the moment, the United States government is openly questioning the usefulness of the WTO in today’s global economic environment.
That doubt and questioning makes sense if you subscribe to the principles and perspectives of the current US administration. After all, if you fancy yourself an excellent deal-maker and negotiator, it’s logical that you might sniff at the very concept of a meta-national organization telling you what you can and cannot do, in terms of wheeling-and-dealing.
There’s also a connection between the Trump administration’s issues with the WTO and the ongoing trade war between the US and China.
China entered the WTO in 2001, and since then has been slapped with hundreds of complaints from other countries: the vast majority of them from the US, and most of those related to alleged (and almost certainly quite real and frequent) intellectual property theft.
Some experts believe that the necessary levers and buttons already exist within the WTO to make trade with China more equitable, but the Trump administration seems to believe that a more unilateral approach—a one-on-one trade war—is more likely to bring the rising power to heel.
There’s speculation that Trump’s posture toward China may actually be putting a significant amount of stress on China’s economy at a moment in which it needs to be doing very well to keep things from becoming dangerously fragile.
There are also arguments that this type of direct, weaponized use of trade policies and tariffs are in breach of WTO law, and thus, if the US can’t knock the WTO out of the equation, there may be penalties; which could explain some of the expedience with which this administration seems to be nudging the Organization’s leadership from their pedestals.
There’s something to be said for having shared standards and a centralized hub for economic justice that allows all sorts of people from all around the world to do business with each other, without suffering from a lack of trust and the missed opportunities that tend to arise in a low-trust environment.
At the same time, it’s easy to argue that the WTO’s many flaws make it unfit for that purpose: like its alleged bias toward wealthier economies and its lack of coherent policy when it comes to certain increasingly vital areas of interest, like environmental standards.
The WTO’s inability to do anything about its own collapse—arguably something that an entity meant to judge and punish governments should be able to do when one of those governments comes after it; otherwise, what’s the point?—likewise demonstrates that we probably need something better, by many different definitions of “better.”
There are some interim solutions being tossed around by the EU and Norway, in the event that the WTO is brought down by the Trump administration or a similar threat in the near-future; something that looks fairly likely at the moment.
The WTO is not dead in the water quite yet, though, and will almost certainly remain influential on global trade policy for a long time, even if some new system is introduced in the next few years. Like that recently announced European Union- and Norwegian-developed scaffolding, whatever comes next will probably use the WTO’s existing framework as a fairly sturdy, pre-poured foundation.
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