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What exactly has the WTO ‘finally delivered’?
December 10, 2013, 6:41 am

There is no doubt that the trade deal reached at Bali is significant: the still-new Director General, Roberto Azevêdo, was close to tears as he announced the first trade deal to issue from the World Trade Organization (WTO) since it was set up in 1995. What is less clear is what it really signifies.

"We are back in business!" tweeted WTO Chief Azevedo (right) after the deal was signed in Bali [Getty Images]

“We are back in business!” tweeted WTO Chief Azevedo (right) after the deal was signed in Bali [Getty Images]

Snatched from the jaws of failure in the form of an Indian refusal to sign without concessions on food sovereignty and another obstacle raised by a clutch of Latin American Bolivarian governments over the US’s long-standing trade sanctions against Cuba, the ‘trade facilitation’ deal between the WTO’s 159 member countries focuses on reducing red tape at the borders.

It is expected to lead to a trillion-dollar increase in world trade. With world trade in 2012 clocking in at just under $18.5 trillion, this would constitute an over 5% increase. The likes of UPS and Walmart have predictably hailed it. The deal is also expected to breathe new life in the WTO.

But what sort of life will it be? The deal has come not a moment too soon: a failure at Bali, coming at the heels of biennial failures since the launch of the current Doha Development Round in 2001, the Financial Times editorialized, would have sealed the WTO fate as the ‘umpire’ of world trade. The success also showed, it continued, that the WTO had best focus on incremental deals as against ‘grand bargains’.

If this were not enough, the Chinese Commerce minister, in the very moment of hailing the ‘historic’ deal in Bali also signaled his country’s openness to ‘plurilateral’ trade deals, precisely the sort of regional as opposed to world-wide trade deals, which some of the biggest trading countries in the world – such as the Western European countries and the US – have pursued before and since the WTO was created and which have been the bane of the organization’s existence, slowly sapping its raison d’être. The WTO may have been revived but the lift it’s now been granted is considerably less robust than the one that, practically all imagined, was in store for it when it was first launched, with such fanfare, in 1995.

The WTO deal could boost the German economy by 60 billion euros per year says the German Chambers of Commerce [Getty Images]

The WTO deal could boost the German economy by 60 billion euros per year says the German Chambers of Commerce [Getty Images]

When the WTO replaced the General Agreement on Tariffs and Trade (GATT) as the world’s peak trade organization, it was expected to take the politics out of trade and base it on ‘economics’. Then the WTO was part of the gathering enthusiasm for what used to be called ‘globalization’ – the idea that the world economy was, or soon would be, a unified by markets into a single world economy in which states, and their politics, would cease to matter and international trade would follow the same laws as domestic trade. The WTO was supposed to be a super-sovereign institutionalisation of ‘free trade’. The world would be as a single country.

This vision was replaced in the new century with an only slightly different one – in which the US and its ‘empire’ would unite the world economy and force politics out in the interests of its own corporations, and of corporations in general. If either ‘globalization’ or ‘empire’ had even ordinary-sized rational kernels, however, the WTO would not have come to the sorry pass at which it finds itself today.

Contrary to the deeply entrenched bias in favour of free markets and free trade, laissez-faire and laisser passer, in mainstream neoclassical economics, policy-makers in practically every seriously ambitious industrialising country – from the US and Germany in the late 19th century to the BRICs today – know that free trade only benefits the already competitive and serves to entrench the existing international division of labour in which some countries produce higher value goods and are rich and other countries produce low value goods and are poor.

If the success of the US and Germany is today being followed by that of the BRICs, it is because they realise that protection and, more to the point, trade management, have a central place in generating prosperity. That is why the GATT was little more than a negotiating forum between national governments and why the WTO, despite the ambition to create a new international legal structure for world trade, also had to resort to a very similar ‘rounds’ of negotiations – the Doha development round and why they remained stalled for so long: they relied on sovereign agreement.

And what most often prevented sovereign agreement was precisely that policy-makers in all successfully industrializing countries have long seen through the neoclassical fairy tale about free trade and its beneficence. They know, for instance, that the experience of the ‘golden age’, the most dynamic period of growth the world has known was also the most statist in terms of economic and trade policy. They know, further, that free trade and more trade are not the same and could, indeed, be opposites. Free trade systematically undermines the prosperity of all but the most competitive countries, as, for instance, the former Communist world found out at such great cost in the first decade after the collapse of communism. And they know that well-managed, growing economies will inevitably trade more.

The Indian Commerce Minister (center) led a hard bargain to ensure that food security programs in India and many African countries are shielded at the WTO [Getty Images]

The Indian Commerce Minister (center) led a hard bargain to ensure that food security programs in India and many African countries are shielded at the WTO [Getty Images]

While both the GATT and the WTO have witnessed their share of agreements that went against the interests of developing countries, this was also the sort of knowledge that ensured that while visions of a world economy unified by markets or its most powerful state reigned, the underlying trend of these decades was towards a multipolarity – a world economy fissured by increasing contention between its established powers, the triad of the US, Western Europe and Japan, and the contender powers, the Emerging Economies in general and BRICs in particular, intent on managing their economies and their trade for growth. It is this knowledge that has been responsible for the historically unprecedented spread of productive power the world has witnessed in the last couple of decades.

And this is the knowledge, and its deployment that has paralysed the WTO and the ‘Doha Development Round’ of trade negotiations punctually every couple of years as important issues – whether agricultural subsidies or intellectual property rights – between the established economies and contender powers remained unresolved.

The reality of multipolarity, though increasingly insistent in the new century would not find full acknowledgement until after the 2008 financial crisis and it comes as no surprise that only then did the WTO appoint someone from one of the BRIC countries as its Director General and it’s no wonder either that it was only under Brazilian, Roberto Azevêdo, that the Bali trade deal was achieved: he knew the limits of the possible and strove to realise it by carefully side-stepping the controversial issues and focusing on the motherhood and apple pie issues of ‘red tape’.

There is absolutely no reason why the WTO should not be as successful as GATT once was, in facilitating more trade through mutually beneficial agreements between savvy policy-makers wary of compromising their country’s prosperity or growth prospects. The sooner some of its major actors, primarily the established industrial powers, dispense with the ideology of free trade, the sooner it will realise this potential.

The views expressed in this article are the author's own and do not necessarily reflect the publisher's editorial policy.