Talking Trade blog
Global trade system in crisis: A failure to think of treatment options
Published 23 November 2018
As one interviewee explained to me this week in Yangon, before designing an effective treatment, it is important to correctly diagnose the problem. Otherwise, a doctor runs a risk of having a diagnosis/treatment mismatch that does not cure the problem or even exacerbates the issue.
The global trading system clearly suffers from a diagnosis/treatment mismatch. The situation has gone on for entirely too long, leaving the patient prostrate in a hallway outside the intensive care unit (ICU) while various doctors continue to argue over whether or not any treatment should be started.
The patient in this extended metaphor is not just the World Trade Organization (WTO), although the WTO is the most obvious example of the global trading system.
That the WTO is suffering is not in dispute. The institution has had repeated failures. It opened in 1995 with great optimism and an expanded mandate to tackle trade issues beyond just dealing with tariffs in industrial goods (which had occupied the majority of time and attention in the predecessor institution GATT).
The WTO has three primary functions: to negotiate trade rules and commitments; to administer and adjudicate existing rules; and to increase transparency between member states on trade.
Of these functions, none are working. Under the WTO, only one agreement has been completed on trade facilitation. No other significant trade negotiations have concluded, despite decades of effort.
The so-called “crown jewel” of the WTO, the dispute settlement system, is headed to crisis as it bogs down with too many cases and—particularly now—too many disputes between major parties.
The transparency function has never been particularly successful, as the 164 members are not all equally keen on quickly reporting their own efforts (or lack of effort).
Slow stagnation does not automatically mean crisis. The current state of calamity in trade comes from the new approaches taken by the largest players in the system.
But this is not a post to discuss the diagnosis of the problem. It is, instead, to discuss the difficulties in treating the patient.
What has been especially striking over the past few weeks has been the inability of many trade policy experts to conceptualize treatment options that go beyond simple or recognizable remedies. If, indeed, the patient is on life-support or headed for the ICU, it may be necessary to think of unusual options.
Yet different forums that ought to be perfectly positioned to do so seem to be caught. Perhaps they do not want to acknowledge the severity of the illness, do not want to admit that the diagnosis goes beyond conventional treatments, do not want to handle the intervention of others in handling the patient treatment, or do not want to think about more depressing trade news.
A classic case might be the World Economic Forum’s (WEF) Global Future Council on International Trade and Investment. While my other committee members will likely disagree, it seemed that most trade experts in Dubai wanted to spend considerably more time and energy on the exciting new opportunities posed by technologies that are going to radically reshape value chains in the future.
When pressed to address the ongoing and unfolding trade war or trade disagreements, members offered up little. What was expressed were mostly incremental adjustments with terms like “variable geometry” and “plurilaterals.”
Yet, if the patient is truly dying (and this is a topic worth examining), then surely the WEF is the perfect place to think about radical treatment options. Not all will be feasible. Many will be rejected out of hand for political or economic reasons. But some ideas could turn out to be extremely valuable.
A group that brings together companies with academics and governments seems an ideal venue. If not WEF, then another group with mixed stakeholders should get going right away to tackle the issue.
The crisis in the global trading system is not just in the WTO either. This week the 21 economies in APEC failed to issue a communique for the first time in history. When a non-binding, idea-generating organization cannot issue a final declaration, it is a clear signal that the system as whole is under unusual stress.
The patient is not well. This goes beyond just a minor problem that affects only one part of the body. It appears it cannot be isolated or contained, nor dealt with by specialists operating in narrow areas alone.
It is not the time to just explore ideas that have been raised before, but to offer up new ones that are genuinely “blue sky.” Failure to do so at this point does not just mean another depressing WTO Talking Trade piece in December 2019, but a possible collapse of the global trading system.
Since we are all part of this particular “patient,” it matters to all of us that our “doctors” do more than simply toss up their collective hands and declare the problem is too big or too complicated or needs more time or more experts or a different set of doctors to solve.
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