Hard Brexit enthusiasts hold up the WTO as the ultimate insurance policy for Britain. But the survival of the body itself is under threatby Paul Wallace / March 3, 2019 / Leave a comment
The World Trade Organisation is in the spotlight as hard Brexiteers advocate leaving the European Union without a deal on “WTO terms”—a phrase that is supposed to sound reassuring. But regardless of what sort of trade relationship with Europe we eventually settle into, we should all take a keen interest in how much protection this institution really provides.
If our departure from the EU is as hard as some hope, we will know soon enough; if it is softer, then the Brexiteers will grumble about “vassalage”—submitting to European rules we no longer help to write—and continue to agitate for dealing with the continent on WTO terms. And the way politics is drifting they could very well, sooner or later, succeed.
But what exactly is the World Trade Organisation? It is based in Geneva, but where did it come from? What security can it really give? And what lies ahead for an institution that an avowedly “America First” US president is, through a mix of his public diatribes and stealthy black ops, working to undermine? And how worried should we be?
The Road to Geneva
With or without Brexit, the WTO matters because of its role in regulating international trade. For two centuries, since David Ricardo spelt out the underlying rationale, the case for countries to trade with one another has been crystal clear: it works to their mutual advantage, leaving both sides better off overall. Just as fundamentally, international competition drives industries to become more productive. Despite the overall gains, though, trade can create losers—such as lower-skilled workers in more advanced economies—as well as winners, which is why it so often runs up against protectionist pressures. And although history testifies to the benefits of free trade, it also records the frequent misuse of trade policy by governments pursuing their strategic national interests, or offering a sop to domestic producer lobbies.
“The Appellate Body is the cornerstone of the system. But the US is vetoing the appointment of judges. It could soon cease to exist”
There are past eras that support the sanguine view that institutions and policies are, in the end, less important than the sheer logic of trade and the power…