The WTO: Useless For Trade, Useful For The State

Authored by Carmen Elena Dorob?? via The Mises Institute,

This week WTO officials will gather in Buenos Aires for their 11th ministerial conference. There is very little hope that any of the deals on the agenda will be reached, as both the WTO’s negotiations and its dispute settlement system have long been paralyzed by political bickering and a deep-seated inefficiency in the organization itself. Anxious WTO ministers (such as the EU’s trade commissioner) are now grasping at straws and blaming Trump and his lack of support for the WTO’s troubles.

Yet twenty-two years after its creation, the organization has almost nothing to show for it as far as trade liberalization is concerned. Juggling 164 member countries, each with its own protectionist agenda, was never likely to bring about ‘more open trade’, ‘more competitive markets’, or ‘market stability and predictability’. Especially not after trade rules, services, intellectual property, and environmental protection were brought to the negotiations table alongside tariffs and non-tariff barriers. Countries started by holding agreements hostage to their demands, continued with disregarding agreements completely, and now end on quibbling over the language used in joint statements.

An easy, albeit crude, depiction of WTO’s failure can be seen in the figure below, where the world tariffs effectively applied (which include unilateral liberalization and preferential trade agreements) have been consistently lower than those achieved via multilateral negotiations (most favored nation) in the first twelve years after WTO’s creation—when it was allegedly most successful. 

world tariff rates.jpg

Other research offers the same story, and we’ve seen in detail before the reason why bottom-up, unilateral trade liberalization tends to work, and top-down, multilateral trade agreements never do (here, here, and here).

The WTO’s end seems nearer now, and not a moment too soon.

So it did a few years ago, though, and yet it lingers on because governments have a few reasons to keep it alive.

First of all, once bureaucratic spending machines are set in motion, there’s little that can be done to rein them back in. The less efficient they are and the less they do, the more their budgets are increased for meetings, summits, and conferences meant to tackle precisely their inefficiencies. Had a private company been so utterly unproductive in its main activity, it would have long ago filed for bankruptcy. But the WTO, like the IMF, the World Bank, and all the other national and international governing bodies, does not operate on a profit and loss basis, but on political partisanship. As such, the WTO can easily reinvent itself during expensive lunches in exotic locations, and squander almost $200 million of taxpayers’ money every year.

 

Second, and more importantly, the WTO is actually useful to governments, even though it is detrimental to free trade and consumers. It provides a forum ripe with opportunities to satisfy domestic interest groups by hurting international competition, create political alliances with favored countries, or use trade as a strategic asset in a game of political tic-tac-toe.

Will we ever see the WTO dismantled? I’m not holding my breath. It will continue, in other shapes or forms, to waste money and facilitate trade: not merchandise trade, mind you, but the exchange of political favors.

Comments

BritBob Tue, 12/12/2017 - 05:11 Permalink

''This week WTO officials will gather in Buenos Aires for their 11th ministerial conference.''A South American trading bloc has agreed to close its ports to ships flying the Falkland Islands flag.Mercosur, which includes Brazil, Argentina, Paraguay and Uruguay, came to the decision at a summit in the Uruguayan capital, Montevideo.But Uruguayan President Jose Mujica said British-flagged civilian ships that may supply the islands would still be allowed to use its ports.The Foreign Office said there was "no justification" for the action.The Falklands flag is flown by 25 boats, mostly fishing vessels operated in joint ventures with Spanish companies.The Mercosur decision is the latest in a series by Latin American regional bodies designed to show solidarity with Argentina which has long claimed sovereignty over the Falkland Islands, which it calls Las Malvinas.Ha ha How can Argentina claim the Falklands when she has never legally owned them?Falklands- Never Belonged to Argentina (1 pg): https://www.academia.edu/31111843/Falklands_Never_Belonged_to_Argentina 

Let it Go Tue, 12/12/2017 - 08:05 Permalink

People are naive if they do not recognize the distinct advantage a state-driven economy has over free enterprise, at least initially. A bit predatory in nature, such a system can quickly exploit the weaknesses of its competitors. It is important we recognize China is a state-run economy based on a business model that is geared to expand by crushing the competition. Subsidizing those companies working within its system in a multitude of ways helps it achieve this goal. The article below explores the ramifications of this. http://China State-Driven Business Model.Geared To Expand html

Vendetta Tue, 12/12/2017 - 08:18 Permalink

I am all for all WTO facilities and ‘convention centers’ in the US be converted to housing for the American workers who are now homeless because of the policies the WTO has bribed our corrupt politicians to implement

Vendetta Tue, 12/12/2017 - 08:18 Permalink

I am all for all WTO facilities and ‘convention centers’ in the US be converted to housing for the American workers who are now homeless because of the policies the WTO has bribed our corrupt politicians to implement

Ghordius Tue, 12/12/2017 - 09:06 Permalink

ehmmm...

"WTO is..."

- according to many Brexiters, the "fall back solution" in case of a "Hard Brexit"

- according to China... Pure Free Trade, and good (and it asks to be recognized as "Market Economy" there)

- according to the critics of Globalizatiion... the same, but bad

and now the Mises Institute sees it as "Statist", while commenters see it as various other things, including "globalist"

Mises Institute: "Yet twenty-two years after its creation, the organization has almost nothing to show for it as far as trade liberalization is concerned. Juggling 164 member countries, each with its own protectionist agenda, was never likely to bring about ‘more open trade’, ‘more competitive markets’, or ‘market stability and predictability’."

so... it's Not Free Trade? and what is Mr. Trump saying, then?

falak pema Tue, 12/12/2017 - 09:30 Permalink

Moar von Mises institute BS to about turn from what they supported when the Neo-cons of Bushists-- under the Bush Snr/Clinton/Bush Jnr period --who built it-- were in Power.Why this about turn ?Here's why :http://money.cnn.com/2017/12/11/news/economy/tax-bill-warning-europe/in… the fight between Eu and US about the Duck's protectionist about-turn now comes to the front; Von Mises plays the Pied PIpeR to trumpet "Sodom and Gomorrah" about the WTO; there where in yesteryears they trumpeted its "free trade" and Hayekian "Invisible Hand" at work.What was good for the goose n gander show of China-US handshake ain't anymore!Haha! The same shills who sold gold yesterday to say "gold" is Libertarian Talisman against the Obama QE/ZIRP, now say "forget gold" and love Crypto as its more libertarian and anti-state than the "barbarous relic"...You can't make this shit up; Von Mises is as credible as the Duck and his Jerusalem caper.