The World Trade Organization, formed as a globalist incentive at the Bretton Woods conference of 1944, has already been held crippled to the isolationistic approaches of America during the times of the League of Nations. In modern day, it is yet again at the mercy of decaying international relations. America is currently embroiled in a trade war with China, which involves tariffs worth billions of pounds and the WTO is merely a bystander of the crumbling system it was set to oversee.
To one extent, we can argue it is not plainly the fault of the WTO for the recent failures, namely because since joining the WTO in 2011, China has not turned towards markets, as the west expected. Instead, it has distorted trade on a scale that is far bigger than the dumping and other causes of disputes between market economies that the WTO was designed to handle. China’s state owned firms and its vast opaque subsidies have distorted markets and caused gluts in supply for commodities such as steel. It is for this reason that the EU and other developed countries share America’s desire to constrain China’s mercantilism, which results in foreign firms operating in China having to struggle against heavy-handed regulation, and are required to handover the intellectual property as a condition of market access. According to sources, the WTO is currently aiming to plug these gaps by reforming government distortions and broadening the scope of banned subsidies but even the optimist would see it’s naïve to fathom China accepting such reforms that would jeopardise its state-run economic model.
However, as far as I can see, it is in China’s interest to preserve the global trading order because, if isolated, the communist party cannot achieve the prosperity that cements its legitimacy. The benefits to China of its WTO membership has come not from lower tariffs in America but from the certainty of stable trading relationships. Sure enough, China and the EU agreed on July 16th to cooperate on enforced WTO reform.
For many, there is a much better strategy than wrecking China’s economy, one of which that is very well regarded is forming blocs so large that China would have to choose between compliance or isolation. Not to mention, ‘a WTO fit to handle complaints about unfair competition would be a gift to the world’, nevertheless a world in which China is pursued by critics through the WTO and faces proportionate retaliation when necessary, is preferable to one in which a tit-for-tat trade war can escalate without limit.
The WTO is currently a system far from perfect and has drawn criticism from both within and outside its ranks of users, however I believe with adequate reform the world trading system may yet be saved or even improved.
