World Trade Organization is experiencing a revival before death

It was a coincidence with symbolic meaning: while the head of the World Trade Organization (WTO), Nigerian Ngozi Okonjo-Iweala, defended the fall of the World Bank and the International Monetary Fund (IMF) in Washington last week against an emerging economic nationalism in world trade US Trade Representative Katherine Tai in a keynote address at WTO headquarters in Geneva at the same time highlighted the US trade policy, which is more oriented towards national interests, and called for a reform of the WTO.

These are not nuances, it is about a fundamental change of course in international trade, away from the Ricardian ideal of free trade, towards mutual protectionism in a world in which not only China, but also the USA and Europe with subsidies, tariffs, non-tariff trade barriers, a technological decoupling and a nationalistic industrial policy struggle for geo-economic dominance.

In recent months, the US President has made it clear that Joe Biden wants to continue the protectionist “America first” policy of his predecessor Donald Trump with a smile: The punitive tariffs against the new rival China are still in force and new sanctions are in place threatened Beijing should continue its unfair trade policy. But European steel and aluminum exports are still considered a threat to America’s national security under Biden and are subject to high import duties.

In addition, the US government has drawn the strategic conclusion from the current supply bottlenecks, particularly in the chip industry, that value chains for future technologies should be shortened and that new production facilities for key industries should best be built in America in the future.

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Taiwan is seen as the greatest risk. The chip manufacturers there are the industrial heart of a digitized global economy. Should China follow through on its threat and forcibly take over the renegade province, the current dependency could quickly turn into a dangerous hostage situation. Geoeconomics and geopolitics have long been two sides of the same coin.

The WTO can (again) become a global political arena in which the rivalry between the major trading powers is fought and the question of whether the world trade order will continue to be shaped by the spirit of free trade or the specter of nationalism in the future. That alone can be seen as progress, as Trump had already politically sentenced the WTO to death through his blockade policy.

US Trade Representative Katherine Tai

“We all recognize the importance of the WTO and we all want it to be successful,” said the American.

(Photo: Reuters)

With Tai, a US trade representative visited the WTO headquarters on Lake Geneva for the first time in half a decade. “We all recognize the importance of the WTO and we all want it to be successful,” said the American. At the same time, however, she criticized the organization as “cumbersome and bureaucratic”. The WTO lives in a “bubble” and reacts too slowly to global changes. At the same time, Tai set the tone for a controversial reform debate at the WTO ministerial conference in Geneva at the end of November.

The “to do” list is long: For more than 20 years, the 164 WTO members have been struggling to find an agreement to limit subsidies for the fishing industry and thus prevent overfishing of the world’s oceans. Should no agreement be reached again in November, the WTO would again be an inoperative nonsense.

It is no less important to break the blockade by the USA on the appointment of new judges for the arbitration tribunals of the WTO. The peaceful and binding resolution of trade disputes is the WTO’s greatest achievement and its most important raison d’etre. Although Tai in Geneva was now ready to talk, the US administration has still not lifted the blockade that has existed since 2019.

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There is also likely to be a dispute at the ministerial conference about the waiver of patent rights for corona vaccines, which is demanded by many WTO members, which is supported by the USA and rejected by the Europeans. Okonjo-Iweala described the negotiations as “deadlocked”, while Tai spoke of a lot of movement behind the scenes.

Here, as with most other disputes, the WTO is waiting for the US to resume its old leadership role in order to at least preserve the remnants of the rules-based world trade order. However, Tai’s speech in Geneva reminds one of an old American proverb: “Be careful what you wish for”.

Even under Biden, America is no longer the champion of unconditional free trade. Should the WTO members be able to agree on new rules for world trade at all, they will be less binding and multilateral, but more nationalistic. For the World Trade Organization, it would be like a resurrection before possibly ultimate death.

More: Biden wants to negotiate with China – and threatens new penalties

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