Tags
Biden, Dispute Resolution System, Donald Trump, globalization, rule of law, Trade, World Trade Organization, WTO, {What's Left of) Our Economy
The World Trade Organization (WTO) has been essential to preventing the global trade system from being governed by “the rule of law” rather than “the law of the jungle” – and collapsing into an “all-out trade war.” That’s what supporters of free and unfettered trade have been telling us ever since the trade body came into existence in 1995. (Here’s a representative example.)
And all-out trade war would be disastrous because, according to the WTO itself, the “exceptional” growth in world trade that’s been seen over the past 70 years – since its predecessor organization was created – “has been a powerful engine for overall economic expansion.”
Warnings about the demise of this system have become more frequent and panicky lately because the Biden administration keeps making clear that its determination to keep the WTO’s dispute settlement mechanism (DSM) effectively shut down has been just as strong as the Trump administration’s. (Here’s an example from last Friday.) And without this mechanism, there’s no way for WTO-appointed tribunals to enforce the organization’s rulings in trade disputes between members.
So you’d naturally expect that, since the DSM’s neutering began (in 2019), a resulting state of Hobbesian chaos in the trade system would have led to a cratering of global trade values and volumes. But judging from the WTO itself, as the following two graphs show, no such nosedive has taken place, especially in world trade volume, which factors in inflation. Or even close. In fact, at least through the end of last year, by both measures, global exports and imports combined have kept growing strongly.
Just as obvious, from both charts, the recent world trade slumps that have occurred generally have had nothing to do with the DSM — which has been in existence the entire time. They generally have to do with contractions in world economic growth, as during the Global Financial Crisis and the CCP Virus pandemic.
Sure, it’s just been four years since that initial Trump administration decision. But the WTO isn’t forecasting plummeting global trade in the near future, either.
As I’ve been writing for many years, the United States has no need for the WTO or anything like it because as literally the king of any world economic jungle that anyone supposes exists, it can rely on its own power to prevail in trade disputes. In fact, the WTO can only hamstring America’s pursuit of its international economic interests, and undercut its sovereignty to boot.
But the strong growth of world trade despite the deactivation of the WTO’s enforcement mechanism strongly indicates that the rest of the world, or at least most of it doesn’t need the WTO to ensure healthy trade growth and prosperity, either.