Slow progress leaves WTO vulnerable to liquidation
The world trade organisation (WTO) was initiated in 1995 after the previous trade organisation “general agreement on tariffs and trade” (GATT) broke down due to disputes on negotiations. Their work is built on the same principles of GATT to create a globalised trading system which gives all governments a say in exports and imports. Recently however, WTO has become at risk of failure: their united approach to communication amongst trade deals has caused Donald Trump’s latest statement of “raising tariffs on imported steel and aluminium” to cause concern on the global trading system. Those governments with great reliability on supplying to America are now at threat of losing a massive economical advantage and end up retaliating with more extreme measures. This will overall leave the WTO as the bridge between the frustrations and cause quite a hostile environment, potentially resulting in a total restructure of the principles of the WTO.
This decline in progress for the WTO came about due to a lack of understanding on economic change. Investment is increasingly linked towards intangible assets such as patents and copyrights. This manoeuvre has been brought about by the great technological advancements, patent approval has become a lot more efficient and a government would prefer something controlled by technology because it is a lot safer. The drawbacks that came with patent investment have been eliminated which results in governments taking their investments out of physical assets such as steel mines. These physical assets are what made the criteria of fair trade in the eyes of the WTO, so this leaves them in the dark in terms of control over trade; an old school approach.
The threat from Donald Trump is that his tariff difference potentially goes against two WTO rules, one being freer trade, the other encouraging and developing economic reform. The WTO favour negotiations for special treatment for poorer countries and because America is home to a large proportion of demand for these poorer country’s goods; then proposition could be viewed as going against economic reform.
Also the WTO feel a threat from the dominant force of America and other members of the WTO do as well. America claims that its desire for an increase in tariffs is a result of the protection of their security. Competition from other countries is at its highest and the government have it in their best interest to protect their domestic industries i.e. metal and plastic manufactures. Furthermore, America places a victimisation tone on to their argument saying that China’s state owned enterprises were able to export goods with no questioning from the WTO, resulting in their economy becoming the second largest in the world. The members of the organisation say that if WTO can’t reduce the effect on neighbouring countries then they will be forced to retaliate, saying that they have lost equality within trade deals, losing the equal terms which is heavily emphasised in the WTO organisation.
The world trade organisation’s only hope to restore a sense of order among its members is by creating new rules, adapting their criteria to suit the digital age. This will allow the courts to minimise the chance of having to interpret ambiguities, the judgment on events can be specific throughout and they will gain a firmer trust of their members. Clarity and consolidation will enable governments across the world to understand the possibilities of trade and ultimately live up to the expectations of the WTO, backing up the idea of fair trade.