President Donald Trump has made no secret of his disdain for the World Trade Organization.
Since taking office, the Trump administration has been blocking the appointment or reappointment of WTO judges – imperiling the essential work of its court in issuing trade rulings. The president has even threatened to leave the global body if it doesn’t “shape up.”
But what exactly is the WTO, why does it matter and should Americans care if the U.S. left it?
As an international trade scholar, I believe the WTO matters a great deal. To show why, I’d like to start with the history, which begins long before the agreement establishing the WTO was signed 25 years ago, on April 15, 1994.
History of the WTO
Before World War II, European powers imposed harsh trade restrictions against countries outside their empires, which hurt U.S. exporters substantially. This also contributed to Japan going to war to carve out an “East Asian Co-Prosperity Sphere” and Nazi Germany attacking eastward to obtain “living space” – that is, vassal territories – nearby.
The 1948 General Agreement on Tariffs and Trade, the WTO’s predecessor, was designed to avoid a repeat of the collapse of trade in the 1930s that worsened the Great Depression and to eliminate market access as a reason to go to war. But this agreement applied only to trade in goods, not services.
Efforts to forge a more comprehensive trade treaty didn’t succeed until the 1990s, following the so-called Uruguay Round of trade talks, which ultimately led to the creation of the WTO on Jan. 1, 1995.
A success story
The result has been spectacularly successful. Country exports as a share of global output surged from less than 5% in 1948 to over 30% today.
This enabled countries to grow faster and steadier and brought peace and prosperity to Europe and Japan.
Members of the WTO, which currently number 164, agree to four core principles:
- Nondiscrimination, which means all imports are subject to the same tariff rate, with some exceptions;
- Reciprocity, which balances the reduction of barriers and allows for retaliation;