Trade Win No. 1
TAMING THE LAW OF THE JUNGLE | Angela Paolini Ellard
Trade relationships mimic hiking in bear country. Hikers travel in groups to maximize safety, even if they prefer solo. The hiker who breaks out when the bear attacks survive not by outrunning the bear – just the other hikers.
Likewise, in the trade world, winning means outperforming your competitors. It’s all relative.
Tariff Liberation Day drove this home. I spent a sleepless night calming angry WTO ambassadors. But one ambassador was surprisingly sanguine and even bemused, conveying that despite his new tariff, he was better off than his competitors, who were saddled with higher tariffs and unable to seize export markets the U.S. would lose through retaliation. Fair point, if brutal.
Economies created the WTO to tame the savagery and chaos they would experience if left to their own devices. By establishing the economic rule of law, they compromised to reduce unpredictability, develop resilience and interdependence, and promote sustainable development.
But the jungle lurks not far beneath the surface. After all, the essential nature of trading relationships, even peaceful alliances, is to build advantage.
The WTO moderates this dog-eat-dog environment with a fragile understanding among sovereigns. More than merely a thinly veneered attempt at civility, that understanding has endured, still governing 72% of global trade. No Member seeks withdrawal. Stability and predictability result from rules covering goods, intellectual property, standard-setting, customs procedures, and services, with multiple opportunities to address concerns. Members use dispute settlement, even absent a functioning appellate body, to resolve or settle half of cases.
But some Members cynically test the rules, while others are unable or unwilling to comply. Many Members fail to meet basic transparency obligations. Sometimes, the constructive ambiguity used to secure agreements has merely deferred controversy. Anger over trade distortions linked to overcapacity and subsidies has triggered a broader reckoning about the role of non-market economies and the absence of the liberalization many expected. The U.S. has responded unilaterally.
And so, some pundits say the WTO is stalemated and no longer useful. While that’s simplistic, modern economic challenges are too complex for tidy, overnight fixes.
The answer lies in between, by leveraging the shared view among Members that the system is essential, warts and all. In fact, we see slow, albeit glacial, effort by Members to reform to make the WTO more adaptable while recognizing its limitations. At last, Members see value in improving, even if they disagree on how. For example, Members are thinking creatively about the bedrock Most Favored Nation (MFN) principle to treat all trading partners equally. It was telling how quickly the EU, a staunch MFN believer, supported MFN reform after the U.S. attacked the concept, which already has many exceptions.
Members are also considering how to break gridlock in consensus-based decision-making, frustrated that India single-handedly blocks adoption of WTO plurilateral agreements to which it would not be bound.
These reform efforts are painfully slow but credible. The responsibility to forge trust and compromise rests with Members. Their reckoning is here. While Members may sometimes be frustrated, they choose to stay because navigating the jungle alone is far worse.
Note: CSIS does not take specific policy positions. All views, positions, and conclusions expressed are solely those of the author.
