WORLD TRADE ORGANIZATION: Down the Toilet?
[Opinion]
Justice is a two-way street. To reap the benefits of it, the biggest perhaps being the ability to peacefully resolve disputes through implementation of duly adopted rules, one must also accept the costs and responsibilities that go with it. And that means, peacefully acquiescing in adverse decisions every now and then. After all, no one is perfect or right all of the time. And the same goes for nations.
Rich and powerful people as well as rich and powerful nations have a tendency not to like it when a fair and objective “justice” system requires them to do something that doesn’t suit their purposes. It doesn’t matter that the rules promulgated for that justice system may have been mutually agreed upon, after long and arduous negotiations conducted over many years by hundreds of signatories and that those rules may have a fair, objective and rational basis–all aimed at the lofty and noble goal of achieving peace and harmony in global trade. (See our video on David Ricardo’s theory of comparative advantage in international free trade.]. No, too often we find that fat cats and big bullies don’t like rules. Too often the wealthy tend to think that they are above being bothered to obey the law. Laws to them are for the little folk. Apparently this is true for wealthy nations as well.
The World Trade Organization was established to promote international trade and crucially, to provide a forum where trade disputes between nations could be peacefully resolved. History shows that trade disputes can not only cause higher prices and lower employment but worse, they can also cause war. Thus, the mission of the WTO is vital. Virtually every nation is a member of the WTO. Its organization and the rules that it implements were painstakingly negotiated over many years by hundreds of countries.
But this intricate balanced system is now under attack by the Trump Administration. Why do we say this? It has done nothing less than engage in an all-out assault on the World Trade Organization by not paying the America’s pro rata share of the funds needed to pay the WTO hearing officers necessary to resolve trade disputes under WTO rules.
Implicit in our novel, Rao’s Solution, is the notion that the rich disproportionately benefit in an economic system with few rules because they can afford to take risks that the rest of us can’t. That means that eventually the wealthy will virtually always earn higher returns (meaning more money and wealth) than poor or middle class folks. This is probably why the current administration wants no rules. The U.S. is bigger (economically speaking) and richer than other nations. Meaning it is apparent that the current administration banks on America’s superior economic muscle is being a bigger trump card than the impartially refereed multilateral system symbolized by the World Trade Organization.
A strong argument can be made that that kind of philosophy might well be short-sighted, ill-advised and perhaps even morally wrong. The strategy of pursuing a series of bilateral treaties, to “Make America Great Again”, which the administration seems to be banking on, has distinct disadvantages, such as: (i) there will be no neutral objective third party to referee trade disputes (the whole reason the WTO was established) [instead nations dealing with the U.S. will find that “might versus right” will be the prevailing means through which disputes are resolved]; (ii) it will complicate corporate international business planning because of the multitude of treaties presumably with different rules, that will have to be negotiated by the U.S. individually with other nations; and (iii) the U.S. could well be left on the sideline as other nations move toward forming their own multilateral trading blocks. Moreover, what nation will put much faith in any agreement with the U.S. which now has a substantial track record of pulling out of the treaties it previously agreed to. All of this is not to mention that people and nations have a tendency to gang up on big bullies.
Putting aside the critical areas of threatened withdrawal from the Paris climate accord and the withdrawal from the Iran nuclear deal, the U.S. has now withdrawn crucial funding from the World Trade Organization making it impossible for that organization to properly function to peacefully referee and resolve trade disputes between nations. This is because it won’t be able to pay for its dispute-resolving hearing officers. In fact, the WTO may have to shut its doors within a matter of a few weeks (some say by mid-December 2019) because the U.S. won’t pay its share of that organizations operating costs.
Naturally, all of this is consistent with the present administration’s practice of allowing many State Department diplomatic ambassadorships and other foreign service posts go unfilled. All of which naturally diminishes the footprint and effectiveness of U.S. foreign policy.
The Russians must love it. Does that surprise us? This is where the mere appearance of the impropriety of the Russian contacts, not to mention Trump’s international business dealings coupled with his failure to put his assets in a blind trust and his refusal to turn over his tax returns cause many to look askance at everything this President does. Many argue with great justification, that the President should be above even mere suspicion when it comes to potential susceptibility to foreign influence. After all, the President can do ruinous damage to the nation’s security, not to mention world peace, before he can be impeached and removed from office.
In any event, we did a video on the World Trade Organization and its benefits almost two years ago. Here it is again.
David Dixon Lentz
Corrected 3d November 21, 2019
David Dixon Lentz All Rights Reserved. Copyright © 2019.