π§΅In the last month, the WTO ruled that πΊπ² had violated trade rules in two separate cases. This little reported event has significant implications for the global trade and economic systems. Indeed, @greg_ip of the Wall Street Journal suggests the WTO is "crumbling". Why? [1/n]
Free trade has been central to economic development since WWII. In fact, it's been viewed as so important that since the end of the Cold War, it has become something approaching a shibboleth for the Western political class. The basic argument for free trade is that by...[2/n]
...specialising in areas in which a country has competitive advantages, and using that specialisation to generate export revenue, it can buy more imports than it could have produced itself, therefore becoming richer, and making its trading partners richer, than would have...[3/n]
...been the case without trade. However, free trade has not worked out like that. Some countries -- especially in SE Asia after the 1997 crisis that started in Thailand and spread throughout the region, and Germany since the adoption of the Euro -- have run persistent...[4/n]
...and large trade surpluses. In effect, this takes advantage of the demand for goods in other countries to create jobs producing those goods in the home market. It's classic 'beggar-thy-neighbour' currency and trade policy of the sort that has always caused huge trade...[5/n]
...and diplomatic friction in the past. We can see the effect of this in the falling share of manufacturing in the economies of the trade deficit nations, like the US, but also the UK and others. @greg_ip, in the aforementioned article for the Wall Street Journal, reports...[6/n]
...that the two rulings in which the WTO found against the US were based on Washington taking action in frustration that China was not playing by the rules. In fact, Washington has swatted aside the rulings, essentially refusing to recognise the WTO's competency to judge...[7/n]
...the matter and blocking appointments to the WTO appellate body which enforces decisions. And in its well publicised chip ban, the US is going much further, nakedly implying that it will simply not allow China specifically to develop technologically beyond a certain...[8/n]
...point. So is it really credible for @greg_ip to argue that this is all a function of the US growing frustrated with "the WTOβs inability to discipline Chinaβs protectionist and discriminatory practices"? No. There is something more at play. The US encouraged the...[9/n]
...formation of the WTO (1994) because it was frustrated at the inability of its predecessor, GATT, to punish trade violations. The WTO and trade and globalisation in general became central to Washington's hubristic post-Cold War efforts to rebuild the world in...[10/n]
...America's image. GATT itself was a cornerstone of Washington's efforts to build a postwar order that would generate prosperity while creating a bloc aligned with US interests to counter the Soviet Union. Yet US interest in mutual open access to markets goes back...[11/n]
...even farther, to the Open Door policy US Secretary of State John Hay outlined between 1899 and 1902. In his book, The Deluge, @adam_tooze explains that Woodrow Wilson sought to use the WWI to impose this on a demoralised Europe. In order words, the US interest in free...[12/n]
...trade -- from Wilsonian Internationalism, through postwar GATT to post-Cold War WTO & globalisation -- has had a *geostrategic* aspect as much as an economic one. Might it be the case now that geopolitics is driving US trade policy as much as frustration with China's...[13/n]
..."protectionist and discriminatory practices"? Afterall, there have been complaints about China 'gaming the system' almost since its 2001 accession to the WTO. Does it really really take two decades to act? Why now? A just as likely an explanation is that Washington...[14/n]
...has decided to jettison the system it created as it now believes that that system is longer working for the US, even as China, its main geopolitical rival, is making hay within it. As the world shifts from a Unipolar to a Multipolar world order, geopolitics will...[15/n]
SOURCE: wsj.com
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N.B. Tweets 2-5 were partially based on this excellent short thread by @michaelxpettis
TAGGING:
@SteveDavies365 @arisroussinos @ElbridgeColby @SohrabAhmari @bneeditor @ShockSur @policytensor @nfergus @ianbremmer
N.B. Tweets 2-5 were partially based on this excellent short thread by @michaelxpettis
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