Project Syndicate: Global Trade System Could Break Down

The global rules-based trading system promotes global security. After World War II, the United States led in creating the World Trade Organization, which has contributed to global economic growth, contends economist Anne O. Krueger. Yet the Trump administration is “trying to undermine the institution both in letter and in spirit.” She explains WTO rules: “international trading firms are subject to the same national regulations as domestic firms, and traders have the same rights as nationals in trade partners’ courts. Governments may not discriminate against other WTO members…. Tariffs are permitted only under certain circumstances.” As a result, average tariffs on manufactured goods from advanced economies sharply declined. And even though the WTO’s dispute settlement process has benefited the United States, which has won more 90 percent of its cases, the Trump administration is blocking nominees to replace arbitration judges and relying on a national security provision against long-time allies like Japan and Canada. Other countries no longer viewing the country as a reliable leader. “The current-account balance of any country is the difference between its domestic savings (public and private) and domestic investment,” Krueger warns. “Unless savings increase or investment falls, a current-account gap cannot be narrowed.” The costs of WTO failure will be high, especially for the United States. – YaleGlobal