Why Trump wants US to Quit WTO?


Post WW II, US emerged as the undisputed leader in the world both politically and economically. One reason for this situation was – the relative least damages to US and its economy from WW I and WW II. Moreover, US interventions in both the wars were significant and decisive to the outcome or at least to the ‘culmination of the wars’. US led efforts were made, post WW II, to supposedly bring an ‘order in the world’, which may be expected to lead to lesser chances of WW III. Based on this notion, a need was felt of a ‘world governance political and economic model’ which would be acceptable to the world and more so to the US.

For this end, representatives of all the countries of the world were invited in an important US led conference at a place called Breton Woods to allow for brain storming about an innovative ‘world governance model’. International financial system and its leading currencies were also concurrent agendas and motivations for US and other big countries. Russia felt left out on many fronts at the emerging thought process and so it chose to keep it out of such world governance efforts. It remained opposed to US led ideas until 1991 when its own world collapsed. Many other countries had followed suit with Russia during Breton Woods initiatives on the similar grounds as of Russia and world emerged to became a bi polar world and a cold war ensued between US and Soviet Union led by Russia.

A world governance model acceptable to US and the western world was however agreed at Breton Woods and what emerged from this agreement was a set of so called Breton Wood organizations namely and predominantly – UN, IBRD and IMF. A fourth one ITO – International Trade Organization could not be established owing to lack of memberships and lack of consensus on a sensitive issue like economic and financial sovereignty of the countries of the world with respect to their rights of doing world trade in their own ways. However a temporary economic and trade agreement was agreed upon by a select few countries in place of ITO. This agreement, popularly called as GATT, was supposed to be short lived with the aim of establishing ITO in next few years. However it took almost 48 years to replace GATT into ITO (renamed as WTO when it was finally established in 1995). During GATT years while number of members increased substantially, it was generally felt that certain big members, especially US benefited most on economic and trade front through GATT provisions. Frequently direct accusations were made by poorer member countries towards US of manipulating by it, the loop holes of a supposedly temporary world economic and trade agreement like GATT. Indeed US flourished during GATT years while poorer countries could not find their right and just positions in the world trade during those years, probably due to manipulation of world trading system through GATT by rich nations led by US.

The establishment of WTO in 1995 coincided with a lot of liberalization and economic reforms by countries in the third world led by China. China started with liberalization of its economy in 1979. By 1995, China’s economic reforms had started giving good results. Establishment of WTO seems to have provided a new sense of drive and enthusiasm for the poorer and developing economies of the third world to participate more prominently in the world trading system and helped them produce more and become richer. Provisions of WTO quite different from GATT, more or less provided a level playing field specially because of innovative WTO working mechanism and consensus based trade agreements based on principles of fairness and equality.

However this situation seemed to be proving to be a great setback for richer countries like US and those in Western Europe who seem to have benefited most from GATT provisions. In spite of the fact that US had all the resources to put its points more professionally, knowledgeably and strongly even in a just and fair system of WTO while other poorer member countries continued to be suffering from lack of knowledge about WTO mechanism and its functioning, WTO system seemed to help the so far unprivileged countries which were member of erstwhile GATT and now of WTO.

It is debated that establishment of WTO coincided with the so called ‘rise of east (especially China and India)’ and caused one of the biggest global power shift in the world in recent times to smaller economies in the east. This off course did not augur well to the likes and working of traditional and established rich members of erstwhile GATT. In spite of the well defined principles and mechanism for agreements and dispute resolution at WTO, there was found room for Trump to complain about unjust treatment to US by dispute settlement bodies of WTO. No other US president in the past, post WTO and before Trump could gather courage to shamefully throw unfounded blame on WTO like Trump did. Frustrated with the current situation at WTO very well that level playing field in the world trading system will continue to undermine US position after decades of articulated economic hegemony by US and US dollar over the world trade regime.

After the collapse of Soviet Union, US found its position stronger than ever and not vulnerable to small or even radical changes in the world governance system. Establishment of WTO and its outcome was contrary to such perception and also seems to have broken some kind of a cartel of rich countries over world trade. Post WTO, even other rich members especially European countries chose to compete on just and fair world trading mechanism even with each other while accepting the equal playing field and field rules. However US seem to have still not forgotten its unjust and dominant position in the world trade in the decades during GATT years.

However US threat to quit WTO, even if it is a kind of temporary pressure tactic to control the working of WTO and its principles, is not likely to have a major impact on the world trading system. Already ‘world think tanks’ which are no more only located geographically in US now, are already looking for alternative approaches to govern the world to meet the newer and more complicated global challenges, world in facing politically, economically, environmentally and demographically. Trump’s similar threats only reduce the leadership position which US has enjoyed over the recent decades. What remains to be seen if the world can find its future sustainability, security and existence without US being its big brother?