This book is designed as a guide to the multilateral trading system, its past, its present, and a look toward its potential future. It includes taking the reader on a virtual walk through the corridors of the World Trade Organization (WTO), the Italianate Centre William Rappard, and, after hearing of the history of trade and trade negotiations, to sit in on some of the working sessions of delegates. The book’s objective is to convey an understanding of the value of the WTO, as well as the values that it promotes, to have a first-hand feel for what the WTO is all about, to understand its importance and its shortcomings, and to join with it in celebrating its successes. The look to the future in these pages includes some ideas upon which to start a discussion of how to obtain the oft-pledged “WTO reform.”
The United States, at the apogee of its power, working with its allies, created a multilateral trading system of rules and greater liberalization for trade on a global scale, the likes of which had never been seen before in human history. It was built upon the unshakable belief of the American Secretary of State Cordell Hull and his President, Franklin Delano Roosevelt, that open markets and nondiscrimination would be, if not a guarantor of peace, the means to underwrite a more durable peace.
Their generation, the founding generation, had been scarred by the First World War. They had experienced the Great Depression interposed between the two wars. A full third of a century, from 1914 to 1945, the years in which the postwar leadership matured, was filled with hardship and international conflict. Their mission was driven, in part, by their disappointment at America failing to take up the mantle of world leadership a quarter-century earlier when Woodrow Wilson, shortsighted in other ways, had sought to build a better world in relations among sovereign nations. It was also because these founders felt a deep obligation to, in current parlance, build back better.
The International Trade Organization (ITO) that these Americans and their allies created on paper was destined never to come into being. It was a bridge too far even for a Congress that had become more outward-looking than ever before during the presidency of Franklin Roosevelt. His successor, Harry Truman, sought to carry the cause of multilateralism forward but for Congress and the American business community, the ITO proved too intrusive for the United States to join. Instead, a code of rules and tariff schedules that accompanied them, embodied in the GATT (General Agreement on Tariffs and Trade), survived.
The world envisioned by the creators of the GATT did not come into being overnight. There was nothing like free trade at the outset. Quantitative restrictions had to be dispensed with, and tariff walls, at least among the industrialized countries, were gradually dismantled brick by brick over the course of four decades. The new order of rules-based freer trade was patiently constructed through eight rounds of multilateral negotiations, each one having more participants than the prior one. In the seventh round, the Tokyo Round, which turned out to be the penultimate one, new rules were crafted for subsidies, product standards, antidumping, government procurement, and customs valuation – nontariff barriers as well as tariffs.
In the last great negotiating round, the Uruguay Round, 134 nations decided to create a global institution, the World Trade Organization – to fill the role envisioned by the founding generation as part of a troika of global economic institutions. It, along with the International Monetary Fund and the World Bank, was designed to foster the well-being of all peoples. This time, it was not the United States that pressed for the creation of the institution. Rather it was in large part a reaction by Canada, the European Union, and others to what were seen as problems of the day, arguably the largest being American unilateralism, using trade measures as leverage to obtain concessions from its trading partners.
Astrophysicists measure the rate of expansion of the universe and extrapolate their findings backwards to assess a single point of origin, when all matter was concentrated at a hypothetical center, before becoming the universe that can be observed today.Footnote 1 For those of us who are interested in the multilateral trading system, the origins are relatively clear and are described in this book. What is unknown is whether what we are observing, the WTO’s acquis of rules and the current degree of openness to trade, is going to continue to expand. Here the laws of physics are inapplicable. We leave the realm of natural science behind and deal with political science. Continued progress depends on the strength of the community of supporters of the system, transcending national borders, as well as differences in culture, geography, and political beliefs.Footnote 2 The experiment of the multilateral trading system was not aimed at creating a global government with independent powers to regulate international commerce, to supersede the nation-state. It was and is about whether there will be a system of global rules for international trade that nations will uphold and live by, for mutual benefit.
This book addresses the value of the multilateral trading system, how it is currently threatened, and why it must be preserved and strengthened. What is absolutely certain is that it will not endure in any meaningful sense absent a level of effort from its members not witnessed for at least the last two decades. The book is also about what must be done to save the system for the benefit of all the world’s peoples. It is clear that world peace, having existed among major powers for the last three-quarters of a century, is not a natural state for humanity, given Russia’s invasion of Ukraine, and tensions between the United States (and to a degree its allies) and China. Nor for that matter is engaging in effective international cooperation necessarily a natural condition for sovereign nations. One suspects not. Just as the founding generation was faced with catastrophe and met the challenge of that era, the world’s peoples are faced with current tests of pandemics, climate change, and famine. We do not know if the nations constituting the WTO will rise to meet the current challenges collectively or whether the liberal international economic order is a natural equilibrium that will persist. The jury is out.
In studying the world trading system, the first hurdle is the lack of an accurate picture of how and why trade is taking place. As a result, we lack perspective. In architecture, this is analogous to a problem faced by Filippo Brunelleschi, the Italian architect who built the duomo of the cathedral in Florence. He is credited with discovering linear perspective in the year 1415. Linear perspective is an approximate representation, generally on a flat surface, of an image as it is seen by the eye. In any writing on the world trading system, one is looking at a flat surface, a description of the complex world of trade, trading rules, their implementation and nonimplementation, in a narrative that will always be based upon an insufficiency of accurate information, because there are serious limits as to what is known. No present system of monitoring trade reveals more than the surface of what is taking place. This is true both in the case of what the WTO is able to report, as well as for private sources, such as the Global Trade Alert, which is able to discern more due to its being freed from member-imposed restrictions on reporting. These sources constantly seek to make improvements in their coverage.
Beyond the fact that those interested in saving the WTO are operating on the basis of a finite body of knowledge with respect to the forces that shape trade, there is one more element for the reader to be aware of, and that is the perspectives of those offering interpretations of trade realities and prescriptions for improving the system. Points of view are likely to differ if the commentator is situated in Brussels, Beijing, or Washington, or, for that matter, Pretoria or New Delhi. It will also sometimes differ by individual, and over time. We are all shaped by our personal experiences. I have set out to provide my own narrative of what I have witnessed of the trading system, as a believer in the Washington Consensus, updated to take into account current concerns, and supplemented by additional research for this volume. Parts of this book are a journey of personal exploration. To the extent possible I draw upon contemporaneous sources, including my own observations contained in several hundred speeches and writings delivered as a US government trade negotiator and lawyer, as a trade law practitioner, as chairman of a pro-trade group of multinational companies, as an international civil servant at the WTO, and now affiliated with a distinguished group of international economists in a Washington think tank.
My objective is to give the reader a sense of both the possibilities and the limitations of nearly 200 nations interacting in one location, either in-person, or since the pandemic also virtually, on the shores of Lake Geneva. In these pages, I have tried to place the reader onsite as much as possible, to witness the evolution of the multilateral trading system, the values it represents, and the cooperation and conflicts that take place. The attempt is to provide a guidebook, to convey an accurate feeling to the armchair traveler, to prepare any who are to enter the fray, as well as to be a resource for those in one part of the arena as to what has been taking place in another part. I have, where I could, let the combatants, the negotiators, speak for themselves. Attaining international cooperation among so many nations is a daunting task, and not for the fainthearted.
I have also tried to report on the perspectives of those who created and managed the trading system, taken from the record that they created. What did they intend this system to be? Has it fulfilled its promise? Is any course correction necessary? We and they are most often the captives of our times, so a comparison is warranted to adjust, if necessary, the lens through which we view the system today.
Studying impressionist paintings helps inform the eye when looking outside at nature itself – to appreciate to a greater extent light and shadows, colors and shapes. It is my hope that readers will emerge from sharing my experiences and observations, to see trade policies and measures and international trade agreements, differently to some extent than they did before, sometimes in agreement with what they have read here and sometimes in reaction to it, but with greater clarity.
My objective in writing this volume is to help assure that the WTO does not, in the words of the great novelist, Carlos Ruiz Zafón, become “a relic of a vanished civilization.”
