World Trade Organization

How to Block Trade

How to Block Trade

As Covid plus a deteriorating global trade regime makes previously unthinkable actions possible, expect more actions to block trade. Some will try for creativity, but others will simply act and dare others to challenge their bad behavior. It is easier to take such actions, of course, at a time when the global trade dispute system is broken. Governments can continue to file claims against one another at the WTO. Absent a fully functioning system though, the “losing” party can simply sit on the verdict (“send it out into the void”) and make no change to any policy. Some bad behavior could, in theory, be constrained by a variety of regional or bilateral trade deals that often come with their own dispute settlement mechanisms. Most of these dispute systems have never been used, though, as governments have tended to trust the WTO system to resolve disputes whenever possible. It’s unclear how well these other mechanisms in the majority of trade agreements might fare in tackling tough disputes. A determined government is never likely to be constrained by the mere presence of a dispute settlement system. The system works only when members are willing to abide by the rules. The global trade problem is not just that the “court” system is not working, but that some of the members in the system don’t even seem interested in participating.

Wanted: An Unusual Suspect for the Next WTO Director General

Wanted: An Unusual Suspect for the Next WTO Director General

It is time for WTO members to salvage the system they have and begin its repair rather than choosing a new wallpaper. This is a tall order for the next Director General. The next DG must have an intimate understanding of emerging trade and economic issues, particularly those that will define competitiveness and sustainability in the future in areas such as digital, services, and intellectual property, which account for a growing proportion of value-added. Issues related to climate change—from carbon reduction solutions to climate friendly products and processes—will play a growing role in national actions and thus in trade policy. Part of the DG’s role will be to demonstrate to members that these are no longer Northern agenda items, but global ones, and that multilateral engagement on these issues is essential to deliver prosperity for all. High on the list of selection criteria should be managerial skills, which have been given lower priority in previous processes. Such skills include the capacity to envision, to bring out-of-the-box thinking to bear, and to guide change processes with members; to synthesise and communicate a shared vision of an updated WTO; and the ability to energise members and the WTO staff in the Secretariat toward a mission of reform. She or he will need the interpersonal skills to bridge differences and build trust, and the strategic and tactical skills to organise for action. The WTO possesses a devoted and high-calibre Secretariat with whom the DG should promote shared objectives and leadership in generating the innovation that will be needed for effective change

The Future of Trade

The Future of Trade

In a world of fear and panic, compounded by a global rulebook that is increasingly being suspended, firms are struggling. Companies do not manage increasing risks and growing uncertainty very well. The natural inclination is to suspend all decisions—to not hire any additional staff, to retrench, to cut costs, and to limit future investments. Contraction by firms only exacerbates the challenges. Companies that are in shutdown mode are not buying goods or services. Suppliers are caught, unable to manage their own costs. Many of these challenges are going to be hard to manage, no matter what responses governments provide. Companies and citizens will make their own decisions about employee and personal health risks. Individuals that end up with radically altered lifestyles as a result of prolonged periods at home or out of work may permanently change their buying patterns. Unlike companies or households, government cannot simply shut down. It has to do two things that are hard: manage the immediate situation and plan ahead to limit future damage. Understandably, the former task occupies most of the time and attention for officials. But the latter also needs focus or countries will come out of this current crisis unprepared for accelerating growth and supporting future development.

Trade Without A Referee

Trade Without A Referee

The game of football is basically the same all over the world.  Kids can learn the game in Morocco, Brazil, Laos or Germany secure in the knowledge that they might all one day compete together in the World Cup. They can sleep soundly at night because the rulebook is the same and because the referees that enforce the rules on the pitch do so in a broadly consistent manner. Both parts are important.  If kids in various countries had the same rulebook, but enforcement varied by a lot in different places, it would not be possible to play the same game anymore.  If what counted as a penalty was widely different in Morocco from Germany, or the total number of players allowed on the field was different in Laos from Brazil, the game would no longer be the same even if the “rulebook” were officially identical. We are about to find out what happens if the referees simply vanish from the pitch entirely.  How long will players keep following the same rules before local variations of the game appear?  Without a referee to maintain order, how will players behave in each match?  How long will the global game continue at all? Before football fans panic, this problem is not actually found in football, but in the global trade arena.  The referees are a much more obscure group of just seven individuals known as the Appellate Body of the World Trade Organization (WTO).  Today in Geneva, the referees were officially pulled off the trade pitch.

The Titanic Has Hit the Iceberg: Global Trade in Profound Trouble

The Titanic Has Hit the Iceberg: Global Trade in Profound Trouble

We have not seen this sort of global trade system in a very long time, so it is not possible to imagine fully what it will look like.  But to return to the Titanic discussion, if the main boat is sinking, what will happen?  Everyone will be desperately looking for any way possible to avoid drowning. The ideal scenario is to have another luxurious cruise ship nearby to pick you up.  For some countries, this trade option is available.  The European Union fits the bill for some lucky passengers.  Slightly less fancy, but still desirable, will be the Comprehensive and Progressive Trans-Pacific Partnership (CPTPP), which gives members significant benefits from being inside a new luxury liner. A bigger boat is much better in a wide ocean than smaller boats.  The Regional Comprehensive Economic Partnership (RCEP) with 15 members in Asia is slightly less well-appointed than the CPTPP, but will do quite nicely for most Asian countries.  Some countries will be looking for any lifeboat, including tiny rowboats made from lashing together bilateral deals with key trading partners.  Some will get stuck trying to straddle a bunch of smaller boat options. Finally, some members will have no true options and are facing the freezing waters.  One of the main purposes of the multilateral trading system, in fact, has been to help smaller, poorer countries navigate a world of bigger, more powerful countries.  Once the Titanic sinks, this safety net is no longer available.  Drowning is a real risk.