The World Trade Organization is under attack, above all by the US, the country most responsible for its creation. Roberto Azevêdo, the Brazilian diplomat who has been director-general since 2013, is not to blame for this. Yet, by resigning a year before his term was due to end, he has given members the opportunity to select a heavyweight successor, able to call on political leaders for support. Doing so is both the right thing to do, and in their interests.
US President Donald Trump will disagree. He will cling to the delusion that bilateral pressure will rebalance trade in favour of American exporters. Yet, as Jeffrey Schott of the Peterson Institute for International Economics notes, the president’s deals “have barely done anything to improve US access to foreign markets”. Worse, his bullying has caused costly retaliation.
People close to Mr Trump even propose abolition of the WTO. Fortunately, the US is unable to achieve this goal on its own. It can merely put itself beyond the pale of co-operative trade relations by choosing to withdraw. Sooner or later, a wiser leader would surely see the wisdom of being inside the room, rather than outside it.
The US cannot abolish the WTO. But it can wound it. Indeed, it has already done so by rendering the WTO’s appellate body inquorate. Others are trying to create a temporary substitute. Yet this can only be a makeshift solution.
Worse, the collapse of the judicial function is far from the only peril confronting the WTO. The legislative function, which requires fresh agreements among members, has been largely stuck for a long time. The trade facilitation agreement of 2013 is the last significant accord, and even it fell far short of what had been achieved in the past.
The risk now is not only of a further unravelling of the institutional fabric of world trade, but also of an acceleration of protectionist trends. This mistake helped cause the Depression.
Already, many fallacies about trade are resurfacing. Some argue, for example, that supply chains would be safer if they were solely domestic. The lockdowns imposed by Covid-19 have undermined this assumption. Supply that may be closed down is hardly safe.
Again, the delusion has surfaced that the WTO undermines sovereignty. But trade relations always involve at least two governments. If all insist on absolute sovereignty, the security needed by enterprises located in all others disappears. That is why wise leaders understand that binding mutual commitments increase effective sovereignty. Again, the more global the agreements the greater is the security.
Moreover, the WTO is not, as some imagine, an alien global power. It rests instead on the agreements among its members. A more valid complaint is that many such agreements are out of date, not least in relation to trade with a rising China. If the US had not gone into its bilateral cul de sac, this burning issue could have been handled within the WTO. China would have found making concessions less humiliating and other big players would have added weight to US requests.
If we did not have the WTO, we would have to invent it. Today, that would be impossible. Happily, we only need to make sure it survives, in order to underpin the open global economy we will all need on the other side of the pandemic. That will certainly require significant changes. As Alan Wolff, deputy director-general, has remarked, the WTO “must evolve towards a forum for greater co-operation”. The only way to achieve this is for members to engage fully and actively. The choice of a new director-general is an opportunity to demonstrate the needed resolve. Members should seize it.
Source: Economy - ft.com
