Years ago, in the early 2000’s, the WTO hired me to write several books about the Organisation and the treaties. I still sometimes get a request, although not from WTO, to “tell us all about WTO” (in 500 word or less).
It probably can’t be done: I didn’t bother to try. Instead, I have tried to summarise “everything you need to know” — in case you knew nothing — about WTO. In fewer than 500 words.
- The main idea was to ‘de-weaponize’ trade. Even before their victory in World War II, Roosevelt and Churchill decided to avoid future international conflicts arising from trade discrimination and protection. This was the origin of the General Agreement on Tariffs and Trade (GATT) in 1948.
- The goals of the GATT — still in force as one of the World Trade Organization (WTO) agreements — are to ensure the peaceful regulation of international trade, especially imports, and to promote prosperity. The treaties set out a few broad principles and a large number of trade-administration standards that member governments agree to adopt and be held to.
- Each member government of WTO must abide by the principles, standards and rules and must publish detailed schedules of its own undertakings that also become part of the treaty. The schedules cover taxes on merchandise imports, regulations on imported services and spending on farm supports.
- The treaty does not say governments must adopt free trade policies. Members may maintain high protection for domestic firms if they wish; many do in particular sectors. But the rules lean in the direction of reduced protection and provide for progressive cuts in government supports for production because this approach reduces friction in international trade relations.
- The treaty does not say that states must have market-based economies. From the start, there have been member states that controlled prices, production and profits in their economies. But the treaties do require governments manage the economy in accordance with published laws and apply equitable competition regulations of the kind that support a competitive market.
- WTO binds only states and acts only in response to what all its member-states want. Every member has an equal say in its management. Like many other treaties, WTO has built-in incentives for members to comply with its provisions.
- Membership of WTO is like a ‘gold-star’ rating for trade regulation. It creates a right, under the treaty, to the same gold-star treatment of a country’s exports by other, importing, states. This reciprocity is the main incentive for each government to comply with the treaty.
- Dozens of governments that weren’t original members of WTO have worked hard to join. China spent decades adjusting its trade regulations so it could comply with the treaty standards. Almost every trading economy is now a WTO member.
- The reciprocal incentive does not work as well for big economies as it does for small economies. Small economies are more vulnerable to withdrawal of their benefits under the treaty; big states are less vulnerable. WTO attempts to minimise this problem by putting its rules in a legal framework that includes compulsory adjudication of all disputes.
- WTO’s adjudication of disputes between governments over compliance with the treaty helps to keep the peace. It’s always better to go to court than go to war — even a trade war — because no war ever increased prosperity or even ensured lasting peace.