Is the WTO useless?
13/8/18 15:17![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
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talkpoliticsHow will the world trade order cope with a large, increasingly powerful, increasingly assertive new emerging superpower like China, which quite evidently views globalisation differently from the established power-brokers? That's the question that probably keeps both US and European politicians awake at night these days. The tension is most visible in the US, where Trump's administration has openly accused China of economic aggression, and responded by launching a trade war. Trump's methods could be perceived as too extreme, but the notion that something must be done about China's trade and industrial practices is actually quite prevalent among the mainstream political elites.
Sure, the tone is much milder in Europe, but they're sharing the same concerns. The EU commissioner of trade Cecilia Malmstrom recently asked how the Chinese state-dominated industrial model could be made compatible and placed at equal competitive footing with the open markets, globally. And that's a legitimate question. Because the Chinese model has some competitive advantages.
But those are not necessarily the right questions that the US and EU politicians are asking themselves. The problem might not be so much about China's policy, as much as it's about the global trade regime. The WTO, as well as any trade agreements stemming from its function and activity, is based on the idea that the economic practices of the various nations are ultimately to be synchronised in the long run. But that isn't happening, as the Chinese case is showing. Even more importantly, there's no sensible reason for trying to synchronise all national economic models, no incentive. The rules of global trade would better be evolving despite what China is doing, to address economic diversity worldwide.
The trade agreements that were signed in the early post-war period were designed to leave the sovereign economies enough leeway. The various circles on the global tariff agreement introduced tariffs only for certain products, while services and agriculture were freed of tariff. This way the developing countries could produce as much as they wanted. When in the early 70s the developed countries saw a rapid increase in the imports of clothes (which they saw as a threat to the economic balance), this led to the introduction of a special regime that allowed them to impose quantity limits.
The WTO has changed everything. It was first negotiated at a time of neoliberal domination, but it's now reaching a point where it's rather an obstacle, trying to block domestic policies in the sphere of subsidy and intellectual property. Its rules say that almost any internal legislation that's unfavourable to imports is to be viewed as a trade restriction. All the resulting trade agreements are in the same vein, giving precedence to trade and foreign investment over domestic need and consumption.
Politicians in the West are prone to perceive today's global trade rules as neutral and impartial, pretending they're treating all participants fairly. But in reality, trade agreements are a political tool that reflects the interests of the dominant trade alliances. Multinational corporations, international banks and pharmaceutical giants are all playing a particularly significant role in their formation, hence the natural bias.
It's doubtless that China is violating the spirit, if not the WTO rules in terms of intellectual property and subsidy. But when the EU and Europe complain that China is violating the global norms and rules, they're conveniently omitting to mention their own economic history. China's policies are not that different from the ones the Western countries had systematically applied in order to become leaders in the first place.
For instance, US patent rules used to be very loose in the 18th and 19th century, and the US textile industry would've never emerged without the theft of intellectual secrets from Britain. And let's not also forget that China's policies have led not only to a significant domestic growth and a shrinking of poverty, but they've created a vast market for Western imports and investments. A market that would've never been so huge, had China not applied the same policies inspired by Western experience.
So yeah, when various trade strategies are favourable to most trade partners, they're generally beneficial for the particular local peculiarities. In turn, China must admit that other nations have the right to develop their own social and economic strategies too. When trade starts to threaten the undermine the internal labour standards, the financial systems and technology investments, the wealthy countries must also have the right to exploit those concerns about imports and foreign investment. A truly fair world trade order would acknowledge the value of diversity of economic models, rather than try to curb it. The relatively best possible balance doesn't necessarily involve ever stricter rules and restrictions. And trade war is only a short-term tool to stir up the nest and prompt a re-adjustment of the status quo. Probably not the best tool, but still a potentially useful one.
Sure, the tone is much milder in Europe, but they're sharing the same concerns. The EU commissioner of trade Cecilia Malmstrom recently asked how the Chinese state-dominated industrial model could be made compatible and placed at equal competitive footing with the open markets, globally. And that's a legitimate question. Because the Chinese model has some competitive advantages.
But those are not necessarily the right questions that the US and EU politicians are asking themselves. The problem might not be so much about China's policy, as much as it's about the global trade regime. The WTO, as well as any trade agreements stemming from its function and activity, is based on the idea that the economic practices of the various nations are ultimately to be synchronised in the long run. But that isn't happening, as the Chinese case is showing. Even more importantly, there's no sensible reason for trying to synchronise all national economic models, no incentive. The rules of global trade would better be evolving despite what China is doing, to address economic diversity worldwide.
The trade agreements that were signed in the early post-war period were designed to leave the sovereign economies enough leeway. The various circles on the global tariff agreement introduced tariffs only for certain products, while services and agriculture were freed of tariff. This way the developing countries could produce as much as they wanted. When in the early 70s the developed countries saw a rapid increase in the imports of clothes (which they saw as a threat to the economic balance), this led to the introduction of a special regime that allowed them to impose quantity limits.
The WTO has changed everything. It was first negotiated at a time of neoliberal domination, but it's now reaching a point where it's rather an obstacle, trying to block domestic policies in the sphere of subsidy and intellectual property. Its rules say that almost any internal legislation that's unfavourable to imports is to be viewed as a trade restriction. All the resulting trade agreements are in the same vein, giving precedence to trade and foreign investment over domestic need and consumption.
Politicians in the West are prone to perceive today's global trade rules as neutral and impartial, pretending they're treating all participants fairly. But in reality, trade agreements are a political tool that reflects the interests of the dominant trade alliances. Multinational corporations, international banks and pharmaceutical giants are all playing a particularly significant role in their formation, hence the natural bias.
It's doubtless that China is violating the spirit, if not the WTO rules in terms of intellectual property and subsidy. But when the EU and Europe complain that China is violating the global norms and rules, they're conveniently omitting to mention their own economic history. China's policies are not that different from the ones the Western countries had systematically applied in order to become leaders in the first place.
For instance, US patent rules used to be very loose in the 18th and 19th century, and the US textile industry would've never emerged without the theft of intellectual secrets from Britain. And let's not also forget that China's policies have led not only to a significant domestic growth and a shrinking of poverty, but they've created a vast market for Western imports and investments. A market that would've never been so huge, had China not applied the same policies inspired by Western experience.
So yeah, when various trade strategies are favourable to most trade partners, they're generally beneficial for the particular local peculiarities. In turn, China must admit that other nations have the right to develop their own social and economic strategies too. When trade starts to threaten the undermine the internal labour standards, the financial systems and technology investments, the wealthy countries must also have the right to exploit those concerns about imports and foreign investment. A truly fair world trade order would acknowledge the value of diversity of economic models, rather than try to curb it. The relatively best possible balance doesn't necessarily involve ever stricter rules and restrictions. And trade war is only a short-term tool to stir up the nest and prompt a re-adjustment of the status quo. Probably not the best tool, but still a potentially useful one.
(no subject)
Date: 14/8/18 07:05 (UTC)(no subject)
Date: 14/8/18 10:12 (UTC)WTO arrangements not being perfect? Please don't tell the Brexiters that. They've been using WTO rules as a backstop for ages.
[Sadness.]