The fragmentation of the world economy poses an existential threat to the World Trade Organization and the multilateral system that has fueled the global economy’s growth for the past half-century. Paradoxically, the threat comes from the United States, historically the world’s leading proponent of trade liberalization.
NEW DELHI – For nearly 50 years after the end of World War II, the United States led the effort to liberalize global trade through the General Agreement on Tariffs and Trade (GATT). In 1994, the US rallied 123 countries to sign a multilateral treaty establishing the World Trade Organization, which subsumed GATT while expanding its scope to cover services trade and intellectual property.
Paradoxically, America’s current industrial policy poses an existential threat to the multilateral trading system it worked so hard to build. In Washington, there is now a bipartisan consensus that the WTO has failed to defend America’s vital economic interests and inadvertently created a formidable geopolitical rival by allowing China to take advantage of the system. This realization has led both Democratic and Republican administrations to take steps that have shaken the foundations of the institution the US helped found.
Since 2016, the US has refused to approve new judges to the WTO’s Dispute Settlement Body and blocked the reappointment of those whose terms have expired. By December 2019, the DSB was reduced to a single member, below the minimum of three required to adjudicate cases. Consequently, there is currently no effective mechanism to resolve trade disputes among WTO members, significantly increasing the likelihood that member countries will adopt policies that violate their legal obligations.
NEW DELHI – For nearly 50 years after the end of World War II, the United States led the effort to liberalize global trade through the General Agreement on Tariffs and Trade (GATT). In 1994, the US rallied 123 countries to sign a multilateral treaty establishing the World Trade Organization, which subsumed GATT while expanding its scope to cover services trade and intellectual property.
Paradoxically, America’s current industrial policy poses an existential threat to the multilateral trading system it worked so hard to build. In Washington, there is now a bipartisan consensus that the WTO has failed to defend America’s vital economic interests and inadvertently created a formidable geopolitical rival by allowing China to take advantage of the system. This realization has led both Democratic and Republican administrations to take steps that have shaken the foundations of the institution the US helped found.
Since 2016, the US has refused to approve new judges to the WTO’s Dispute Settlement Body and blocked the reappointment of those whose terms have expired. By December 2019, the DSB was reduced to a single member, below the minimum of three required to adjudicate cases. Consequently, there is currently no effective mechanism to resolve trade disputes among WTO members, significantly increasing the likelihood that member countries will adopt policies that violate their legal obligations.