Not all about the WTO

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.

1. 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.
2. 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.
3. 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.
4. 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.
5. 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.
6. 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.
7. 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.
8. 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.
9. 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.
10. 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.