Many of the world's multilateral organizations have the longevity of nation states. The International Telecommunication Union is older than Germany. The World Intellectual Property Organization directly descends from a body Victor Hugo helped to establish. The institutions governing global trade, by contrast, last about as long as Spinal Tap drummers.
After 25 years of existence, the World Trade Organization may be hurtling toward the irrelevance that doomed its predecessors. Robert Azevedo, who's been director-general since 2013, will step down before his term formally ends next year, four people familiar with the matter told Bryce Baschuk and Jenny Leonard of Bloomberg News.
That decision is hardly surprising. The kingdom over which he presides is crumbling. Global trade liberalization, the original purpose of the WTO and its predecessor, the General Agreement on Tariffs and Trade, or GATT, hit a wall more than a decade ago when the Doha round of talks collapsed, thanks in part to the perennial sticking points of agriculture and services.
The so-called free trade deals that have been signed since are better described as preferential agreements, serving as much to constrain as to open up global commerce by creating in- and out-groups. Those on the outside often do worse than if no pact had been signed at all. The biggest regional agreements that have been worked on over the past decade, the Trans-Pacific Partnership and the Regional Comprehensive Economic Partnership, are more-or-less explicitly treated not as instruments to free up trade but as fronts in the long-term soft power fight between the U.S. and China.
That same rivalry last year put paid to the WTO's most important remaining function after the fall of the Doha round, the Appellate Body. The Geneva-based quasi-court, which adjudicates disputes between members, solved one of the most glaring problems with GATT, the inability of the trading system to bind its most powerful members. Still, it had always had its discontents - both in emerging economies, which often saw it as a tool to force open their markets to powerful multinationals, and in the U.S., which equally didn't appreciate coming in on the losing side of cases. With the rise of China as an export powerhouse and the arrival of long-standing WTO skeptic Robert Lighthizer as President Donald Trump's trade representative, the Appellate Body's disintegration last year was all but inevitable.
Right now, global trade seems under threat in a way it hasn't been since the Cold War. In the short term, the coronavirus has brought swathes of international commerce to a halt: The WTO expects trade could decline this year by as much as 32%. World merchandise volumes, which almost always grow once you smooth out month-to-month volatilities, had been in decline for nearly a year even before the outbreak hit. The U.S.-China trade deal announced with great fanfare in January isn't worth the paper it's written on, as we've argued.
Worse still, its main deliverable outcome ended up being a $200 billion-over-two-years increase in Chinese imports from the U.S. that would lean heavily on farm produce and petroleum. That's now at the mercy of both Chinese demand and rickety virus-hit U.S. supply chains, not to mention plummeting prices and production of American oil which will push the headline dollar target even further out of reach. Trump has recently been signaling deep discontent with the agreement as he ramps up anti-Chinese rhetoric around the coronavirus. In the current moment, January's deal risks becoming less a balm for U.S.-Chinese relations than an irritant.
While all that seems quite grim, the course of liberalizing trade never did run smooth. GATT was born from the ashes of the International Trade Organization, which John Maynard Keynes had envisioned as a global body to eliminate trade surpluses and deficits. The WTO itself arose to fix GATT's drift into irrelevancy in the 1980s, when a young lawyer named Robert Lighthizer assisted in a previous round of might-is-right trade diplomacy between the U.S. and Japan. Few suspected, as the WTO's 1999 Seattle meeting attracted enormous anti-globalization protests, that China's coming membership would kick off one of the richest periods for trade the world had ever seen.
That's reason to hope that despite the current pre-dawn darkness, international commerce will someday find a way to rise above its current problems and open anew. The common view that trade liberalization has only helped the rich is justified - yet that was a shortcoming not of the WTO, but of the governments that failed to use the benefits of open commerce to improve the welfare of working people. Perhaps it requires the fall of the existing regime for the world to build a new trading system fit for the 21st century.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.