The Quickest & Easiest Way To WORLD TRADE happy mentality

If Japan is going to help save the multilateral system, it needs to do better than muddle through its G20 presidency on WTO (World Trade Org.) reform.  The G20 summit will be in Osaka, Japan this year, June.

There are at least four significant problems that their effort will have to overcome if it is to succeed:

The coordination problem. No single country in the group that met recently has the economic heft of the United States. The European Union comes closest, but it has its own internal divisions on trade to deal with (most prominently the looming problem of Brexit, though there are other less dramatic splits). Economic heft matters because countries at the WTO can lead best by example – offering significant market access to others if  they are willing to reciprocate. A group of countries can match or exceed the economic size of the United States, but then they have to be able to coordinate among themselves. It was notable that Canada and the E.U. came into the recent meeting with distinctly different approaches and proposals.

The consensus problem.The WTO is not an organization with majority rule; it requires consensus among its membership. In the years of its predecessor, the GATT, there was often an effort to reach such consensus among a small number of principal trading nations – the United States, Canada, Japan, and the European Union, for example. Then others could be brought in after – or left on the sidelines. 

In the Uruguay Round of the 1990s, there was a push to significantly broaden participation and have all countries sign on to a “single undertaking.” So how to get 123 countries to agree? Because the new WTO was being created, there was a one-time bit of leverage: any holdouts were threatened with exclusion from the new organization. As the Doha talks illustrated, however, reaching consensus without such a lever was very difficult.

The speed and scope problem. In the wake of the Uruguay Round, there was some hope that the WTO could avoid lengthy, expansive trade rounds and instead take on issues in an almost-legislative fashion. That didn’t happen. With such a large number of participants (now 164) and fears that a new trade round will not be coming along any time soon, there are strong pressures to include the favorite issue of each country or interest group. That can make for an unwieldy agenda and drawn-out negotiations. The Doha talks were launched in November 2001 and were intended to conclude by January 2005; they’re still not officially finished.

The Trump problem. While the United States did not need to be at the table for preliminary discussions, it does need to be involved in any ultimate resolution. Unlike China or any of the other major trading nations, President Trump has expressed distaste for the very idea of a multilateral approach. This distaste often appears to extend to the idea of any sort of global rules that could constrain U.S. actions on trade.

Crafting a solution to all these problems will be difficult to pull off. To survive, the WTO needs a relatively quick agreement.  To read more political topics CLICK HERE