Fifteen Eighty Four

Academic perspectives from Cambridge University Press


Revitalizing the World Trading System

Alan Wm. Wolff

The history of trade is fascinating. Its origins can be traced back to even before there was a human race (the forebears of our forebears relied on trade to supply them with obsidian for weapons and tools). Some scholars credit long-distance trade as a plausible reason for the invention of writing (to give instructions to distant agents). In ancient times, Athens sent its fleet to keep the grain it needed flowing through the Black Sea and shipped its highly sought-after sophisticated clay pottery to consumers on distant shores throughout the then-known world.

The modern era of trade can be traced to an important meeting between Winston Churchill and Franklin Roosevelt on a battle cruiser in Argentia Bay, Newfoundland, in August 1941, early in the Second World War. The two statesmen had been close observers of what had already been a catastrophic period comprised of unprecedented bloodletting in World War I followed by a global economic depression. They saw trade as a means to restore both peace and prosperity to the world. Theirs was a utopian vision – “to further the enjoyment by all states, great or small, victor or vanquished, of access, on equal terms, to the trade and to the raw materials of the world which are needed for their economic prosperity”. This policy, which they issued as a press statement, was of sufficient importance that it was forever known as the Atlantic Charter.

When the war was won, the vision was gradually made into reality. Twenty-three nations signed the first-ever multilateral trade agreement, the General Agreement on Tariffs and Trade (GATT), to be administered by an International Trade Organization (ITO). The ITO never came into being, but the parties to the GATT kept up their efforts, decade after decade, liberalizing trade under a system of agreed rules. There were eight great rounds of multilateral trade negotiations, each one becoming more complex, until the last, the Uruguay Round, which lasted eight years, from 1986 to 1994. The number of participants grew dramatically to 128 and they agreed to try again to create a World Trade Organization (WTO), this time successfully.

The world economy benefitted enormously. Trade flourished, economies grew, and peace reined among the major powers (until the Russian invasion of Ukraine). Before the multilateral trading system existed, real GDP took seven decades to quadruple, moving from US$1.92 trillion in 1870 to US$7.81 trillion in 1940. Over the next seven decades, world GDP grew by 14 times, from US$7.81 trillion in 1940 to USD 108.12 trillion in 2015. With the help of trade, hundreds of millions of people have been lifted out of poverty. Human life expectancy has increased over this period by 62 per cent due significantly to the organization of the world economy in favour of openness and living up to internationally agreed rules.

Today, the WTO consists of 164 members, and its rules govern 98% of world trade. An additional 24 countries are pursuing WTO membership. The organization has, however, been experiencing internal problems and facing external challenges. The members all recognize that reform is needed. Over the last quarter-century of the WTO’s life, the number of truly multilateral trade agreements they have negotiated, that is with all signing on to binding obligations, just number two – one on trade facilitation (lowering administrative burdens at the border), and an incomplete agreement limiting subsidies to fisheries. Binding dispute settlement applicable to all, a distinguishing feature of the WTO compared with other international arrangements, is no longer functioning. Transparency in terms of reporting measures affecting trade is inadequate.

Even so, world trade is served by ongoing WTO functions. Members large and small come before a committee of the whole to have their trade policies reviewed. Governments for most of their trade live up to their international obligations. Assistance is given to the least developed. Tariffs generally do not exceed agreed levels. Groups of members seek to reach an agreement on important new subjects such as rules for the burgeoning world of digital trade, while others created an alternative dispute settlement mechanism.

Revitalizing the World Trading System is a guidebook to the WTO. It traces the organization’s history from the outset in 1995 when it came into existence, through 12 Ministerial Meetings, at which decisions were taken or failed to be taken, that defined the role of the organization in international trade. The book describes the subject areas governed and to be governed by the rules of the trading system, including agriculture, services, e-commerce and more. It places the reader in committee and working party meetings to see how members express their concerns and how they respond to the concerns of others. Key moments in trade history are witnessed, such as bringing China into the WTO, and hearing what the representatives of members and China said at that time. In other committees, members discuss product standards that will channel trade, and the reader is present for their deliberations.

The book considers both the value and the values of the WTO. It addresses the challenges the world has faced (such as the COVID-19 pandemic) and will face. Future challenges include the trade aspects of climate change (moving food from areas of plenty to areas of need), the development of the digital world, future pandemics, how to best bring about economic development through trade, how to support peace among conflict-affected countries, and the accession process for bringing additional countries into the organization.

The book offers ideas on how to make the WTO more effective in meeting global needs. It recommends solutions to restore binding dispute settlement, reinvigorate rule-making and multilateral trade negotiations, and strengthen the executive functions performed by the Secretariat. It also provides practical advice for trade negotiators based on a lifetime of practitioner experience as a former US trade negotiator, a trade lawyer, and a former international civil servant as Deputy Director-General of the WTO.

World leaders, including Nelson Mandela, Bill Clinton, and Tony Blair, came together in Geneva in 1998 to celebrate the 50th anniversary of the multilateral trading system embodied in the GATT and express their hopes for the future of the then-new organization, the WTO. The year 2023 is the 75th anniversary of the system, and it needs world leaders to once again focus on the kind of world they wish for and the role of international trade in delivering it. Revitalizing the World Trading System is designed to assist their negotiators in thinking through how to achieve this objective.

Revitalizing the World Trading System by Alan Wm. Wolff

About The Author

Alan Wm. Wolff

Ambassador Alan Wm. Wolff is a Distinguished Visiting Fellow at the Peterson Institute for International Economics, and was co-Acting Director General (2020–21) and Deputy Direct...

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