How to Set World Trade Straight



Robert E. Lighthizer | The Wall Street Journal

There seems to be a growing international consensus for a “reset” of the World Trade Organization—and for good reason. The international trading system has devolved into one of wildly uneven tariffs, rules that apply to some countries but not others, and scores of so-called free-trade agreements that in many cases codify protectionism and undermine the core WTO principle of most-favored-nation treatment. At the same time, the WTO’s dispute-settlement system rewards litigation over negotiation and has attempted to create a jurisprudence often divorced from the text of the rules agreed to by the WTO’s member states.

It’s helpful to recount how we got to this point. After World War II, a new global trade regime was established through the General Agreement on Tariffs and Trade. The system was based fundamentally on the principle of nondiscrimination, which gave rise to most-favored-nation rules requiring that GATT members treat each other equally. Members also committed themselves to future negotiations on new rules to liberalize trade and promote market reform.

Not every country liberalized at the same rate. The U.S., Western Europe and Japan led the way, lowering their average tariffs to the low single digits by the early 1990s. Developing countries maintained much higher tariffs and were also entitled to “special and differential” treatment, which absolved them of certain trade obligations altogether. The expectation was that these countries would agree to reduce tariffs and to adhere fully to the rules as they developed. From the signing of the GATT in 1947 to the conclusion of the Uruguay Round in 1993, there were eight successful rounds of multilateral trade negotiations.

To read the full article, please click here