Ashwani Mahajan
Recently, WTO’s Director General, Roberto Ezvedo, visited India. During one of his meetings with some experts and organizations, associated with trade & commerce, he was asked about the WTO’s future, after Trump’s taking over as US President and how will he deal with his (Trump’s) disenchanting free trade system? His quick response was that if a member nation violates the WTO rules, the affected members could make a complaint against the member nation; and on the basis of this complaint, action can be taken on that country under the WTO dispute settlement provisions. The WTO itself cannot take suo moto action about this.
Significance of President Trump and Brexit
After the WTO came into existence in 1995, the world’s trade began to be operated under (WTO’s) rule based system. Tariffs started decreasing and non-tariff barriers began to move away. But due to these rules, all the countries did not have the same effect. Although the reduction of import duties and removal of obstacles had increased the trade of all the countries; however, the trade balance of most of the countries had worsened.
Although American industries faced the heat, however, business of big American corporations continued to grow throughout the world due to US’s diplomatic influence and economic power. The revenue of the American Government was also growing due to this reason, as these corporations were contributing hugely to US public exchequer. The new patent system was also benefiting American companies. So, the United States was a main beneficiary of globalisation and WTO. The US dollar also strengthened vis a vis other currencies. However, this honeymoon with globalisation did not last long in developed world and America and other developed countries started getting disillusioned from globalisation. The participation of these countries in WTO meetings started diminishing and WTO meetings were also gradually reduced to rituals. After the economic recession since 2007-08, the USA and other developed nations apparently started adopting a conservationist approach.
Last year, in the UK, the referendum took place and Britons decided to part with European Union (EU), what was termed as exit of Britain from EU or in short ‘Brexit’. In the meanwhile, Donald Trump started gaining popularity in the United States and was subsequently elected as president of USA. These changes reflected changed attitude of developed countries towards globalisation. Now, whereas, Britain is moving forward towards bilateral agreements, after its imminent exit from EU and the US’s attempts to impose heavy import duty on imports from China. All these developments depict dumping of WTO by the same set of countries, who were its fierce supporters. With America separating itself from Trans-Pacific Partnership (TPP) and adopting protectionist approach, it seems that the WTO is taking a back seat now. In such a case, when the country that advocated for free trade and multilateral trade agreements the most, is withdrawing itself, naturally a debate about the new trade system has sprung up.
Arguments of WTO Supporters
Naturally, with new developments in US and Europe, and changed thinking of the policy makers there, nervousness is quite visible amongst supporters of WTO and globalisation. They are also scared that this trend will further accelerate. However, at the same time, they are busy explaining that the WTO and multilateral trade agreements would ultimately survive. They give three arguments :
First, after the WTO came into existence, the alternative trade system ceased to exist; and the biggest change came when China also subscribed to the WTO. Earlier European integration also contributed to strengthening of the WTO. WTO supporters argue that due to the abandonment of TPP by the US and the absence of any alternative trade system after Brexit, European nations will have to accept the WTO as readymade forum for trade agreements. In such a situation, WTO will become important again, because this is the only forum for trade negotiations.
The second argument of the WTO supporters is that while the United States under the leadership of Donald Trump has decided to impose tariff and non-tariff barriers on imports from different countries, the affected member nations of the WTO would complain against US only at WTO forum. And WTO can only effectively curb the protectionist attitude of the US. Therefore, WTO will gain prominence once again and emerge as a more robust institution directing world trade.
Their third argument is that although it is true that regional trade agreements will move forward in Asia and other countries in the near future, but this requires a new leadership at the global level. Since there is no such capacious leadership in the world today, nations will again have to turn towards WTO.
These supporters of the WTO say that many countries including India, South Africa, Brazil, China, Australia and Indonesia will come to the rescue of the WTO, because their interests coincide with free trade as nurtured by multilateral agreements.
Voice of Democracy
We have to understand that due to the unemployment, poverty and inequalities in United States, Britain and other parts of the globe (generated by trade led globalisation), people’s sentiments are getting reflected in upsurge against globalisation democratically. In France too, similar feelings are being revealed. Not only the people, the governments have also started realising that due to free trade, there is not only an imbalance in foreign trade, industries are shutting down and employment opportunities are eroding due to heavy imports in the name of making available cheap products from China and other countries. Rise of poverty and unemployment is the natural outcome. Therefore, protection of industries by way of import restrictions is important. Though, supporters of globalisation look upon protectionism with contemptuous attitude, there is no better way to save employment and industry than the protectionism.
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