Quiggin predicts the ‘end for WTO

meta-cre­ation_­date: 12 Novem­ber, 2003
JQ has appar­ent­ly “con­vinced himself”:http://mentalspace.ranters.net/quiggin/archives/001358.html that the WTO’s rejec­tion of the US steel safe­guard action could spell “the end of the line” for the Orga­ni­za­tion. bq. As I’ve pre­vi­ous­ly men­tioned, the WTOmade lots of ene­mies by over­reach­ing itself in the 1990s, on the assump­tion that big-coun­try gov­ern­ments would always back it up in the end. The wis­dom of that assump­tion is now being test­ed. It’s a some­what pre­ma­ture obit­u­ary. The big coun­tries back the WTO because they believe it’s in their own inter­ests to do so: the for­eign pol­i­cy costs of return­ing to more tra­di­tion­al forms of set­tling trade con­flicts (remem­ber WWII?) are too big. They much pre­fer dis­pute set­tle­ment. What’s the evi­dence on dis­putes? Over and over, in the 8 years of WTO’s exis­tence, the US, EU and Japan have com­plied with deci­sions against them (see the score­card[⇒ relat­ed sto­ry] in my ear­li­er sto­ry). Even in multi­bil­lion-dol­lar cas­es such as the EU ‘bananas’ case (a $50 bil­lion indus­try at EU whole­sale prices) which the EU lost. Com­pre­hen­sive­ly. Three times. To devel­op­ing coun­tries. JQ says the ‘WTO made a lot of ene­mies’. It’s cer­tain­ly true that there are thou­sands of people—let’s say, even a mil­lion or two—wiling to make a lot of noise, destroy some prop­er­ty, cause dis­rup­tion and even com­mit sui­cide to express their objec­tions to WTO. But the pre­pon­der­ance of evi­dence points, nev­er­the­less, to the wild pop­u­lar­i­ty of WTO. Since the 1990’s the WTO mem­ber­ship has expand­ed from about 110 gov­ern­ments to near­ly 150; and there are 27 more coun­tries press­ing to get in. So who exact­ly do it’s ‘ene­mies’ rep­re­sent? On whose behalf do they fight? The steel case is far from an exam­ple of ‘over­reach’. The Appel­late Body that decid­ed this case against US steel pro­tec­tion was set up with sup­port from the USA and EU in 1994. In this case it did noth­ing more than inter­pret a rule that has been in place, with US sup­port, since 1948. In fact, from a legal point of view, this case was a replay (more or less) of the WTO deci­sion on US bar­ri­ers to Aus­tralian lamb ear­li­er this year; a case that did­n’t bring any sim­i­lar pre­dic­tions of doom. Is there, in fact, any­thing that jus­ti­fies Quig­gan’s skep­ti­cism? Where the big pow­ers are con­cerned, the hon­est answer is ‘prob­a­bly’. Lots of things. Bush may well try to ‘tough it out’ over steel. But, JQ’s instincts aside, the evi­dence still points in the oth­er direc­tion. There are only two WTO dis­putes where the los­er has not com­plied (yet) with the rul­ing: one involv­ing an EU ban on imports of US beef alleged­ly con­tain­ing growth hor­mones (it does­n’t) and one on the US income-tax sub­sidy to firms that own off-shore export cor­po­ra­tions. The US has with­drawn retal­ia­to­ry action on the Hor­mones case and the EU, although ‘huff­ing and puff­ing’, has not yet tak­en any retal­ia­to­ry steps on FSC. Why? Because the for­eign pol­i­cy costs are high and retal­i­a­tion sim­ply penal­izes con­sumers in the coun­try tak­ing the action: it does­n’t resolve the prob­lem. But even with­out retal­i­a­tion, the two big pow­ers have suf­fi­cient rec­i­p­ro­cal lever­age to keep the pres­sure up. The EU is stonewalling on hormone/beef, so the US Con­gress is dick­er­ing over means to resolve the FSC tax prob­lem (it’s made three attempts). At the moment, they’ve fought this to a stand-off. What­ev­er hap­pens, expe­ri­ence sug­gests that they will avoid seri­ous­ly under­min­ing the cred­i­bil­i­ty of the WTO sys­tem of rules and dis­putes. They both under­stand only too well what Chi­na might do in future if they weak­en the WTO.

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