The paralysis of the WTO or the end of the world economic order that we know

WTO building, in Geneva

The recent and profound crisis of the World Trade Organization (OMC) is just the latest sign of the wasting of the world economic order. In opinion article recently published by Washington Post, the professor in international politics Daniel Drezner sees the end of the liberal economic order as we know it.[i] In fact, there are indications that the world economy is entering a new (of)order protection-based economic. It is not just the end of liberalism as reasoned by Prof. Drezner, we also run the risk of reaching the end of the principle of economic cooperation. The world economic order we know was forged by iron and fire at the end of World War II and expanded since the end of the cold war. Launched in the west after the Conference of Bretton Woods in 1944, the economic order the post-war era was based on economic cooperation and coordination through multilateral institutions thus avoiding the appearance of new conflicts and zero sum games. With the fall of the Berlin wall in 1989, marking the collapse of the Soviet economy experiment and the end of the cold war, we entered the era the primacy of the market economy. There is 30 years the world economic order entered in the implementation phase of economic liberalism. Many accepted the thesis propagated by political scientist Francis Fukuyama that we had reached the History end.[ii]

Effectively in the past 30 years the world economy has gone through a phase of liberal cooperation and expansion to the four corners of the world. However, one new historical phase seems to have started with the arrival of liberalism trade to the People's Republic of China. In 2001, and thanks to the support of the american government, China has been accepted as a WTO member country. Since then, China has consolidated its status of world industrial and commercial superpower. The economic superpower of the century 21 It's peculiar because it has its centralized internal economic foundation and its articulation established in economic liberalism. The rapid and continuous rise of the China surprised almost all experts in the West and currently seems to terrify western political leaders. Hence the renewed wave western conservative, that is nationalist and populist, and who opts for dismantle the world economic order based on cooperation and liberalism. O new western conservatism associates globalization and commercial liberalism to the Chinese advance and the decay of the West.

No brazil, the economic team of the current conservative government seems to go on against the growing conservative Western populist wave that is notoriously protectionist - see the trade war against all launched by Donald Trump and the argumentative bases of Brexi. O buzzword associated with the Brazilian government “conservative in customs and liberal in economy ”demonstrates that Brazil accompanies world conservatism with the exchanged economic signal. While there are clear signs of regression in the free world trade - as indicated by the ineffectiveness of the WTO as of 2020 and for the record number of complaints brought to the institution in 2018–, Brazil declares his desire to enter into free trade agreements - advancing the absurdity of a free trade agreement with China - and open its economy unilaterally to the world - using WTO rights in exchange for “nothing”. [iii][iv] [v]  The current Brazilian government does not understand how the global protectionist narrative propagated by his main alleged “strategic partner” - the Donald Trump administration - can destroy free trade. Transiting against the economic trend of the world current - whatever it may be - can be fatal to any economy.

The end of century world economic order 20

Some will say that the world economic order is being dismantled or deconstructed. Others that it is falling apart in view of the changes caused by technological advances and the new concert of forces between powers economical. The agonizing situation of the World Trade Organization caused by the emptying of its Appellate Body by the hands of the United States government is just the latest evidence of the possible - and likely - end of the era of international economic cooperation initiated in the post-war period with the Conference of Bretton Woods in 1944 and liberalism post-cold war economic situation.[we]

THE importance of economic multilateralism: coordination between partners

The creation of multilateral organizations in the immediate post-war era offer a space for negotiating rules for the adoption of monetary-financial-commercial policies by the world powers and over time by the greatest number countries as possible. As evidenced by the dilemma of the prisoner, classic game-theory problem, is through cooperation between participants that the well-being of the group is maximized - yet there are incentives for one participant to deceive others who choose cooperate. The point of the matter is that if each participant seeks his own interest and well-being to the detriment of others, everyone is punished. THE unrestrained and uncoordinated competition between powers can lead to losses collective agreements for the entire world economy.

The World Trade Organization is the youngest and also the most fragile of the three large global multilateral institutions focused on cooperation economic - the International Monetary Fund (IMF), the World Bank (BM) e a OMC. The IMF and the BM were already founded at the Conference of Bretton Woods in July 1944. The first is focused on policy cooperation monetary, the second for financing infrastructure for the purpose of economic development. The attempt to create an institution that coordinate the liberalization of trade practices, However, was hit only decades later. The alternative found in the post-war period was the by general agreements based on negotiations between groups of countries on themes commercial transactions and the reduction of tariffs and customs barriers - hence would emerge in 1947 the institution that would become known as GATT (of the acronym in English of General Agreement on Tariffs and Trade). In this way countries adherents to GATT have been liberalizing their trade in a timely manner. Between 1947 e 1995 eight negotiations took place with the increase of goods and countries adherents. In the final act of the largest, most ambitious and longest round of negotiations of the GATT started in 1986, no Uruguai, the WTO was created which would come to the fore officially on 1995.

The beginning of end: a stillborn project.

Anyone who thinks Donald Trump is the first American president to boycott the WTO is wrong. Indeed, the United States has always positioned itself as the antagonist of a world trade concert. The initial proposal for Bretton Woods suggested the creation of the International Trade Organization (OIC), but it was rejected several times by the US Congress on the claim that such an institution would affect the country's economy. In 1950 then American President Harry S. Truman declared that in view of the constant rejection of its congressmen the United States would not ratify its adhesion to ICO. That is, a OIC, as an embryonic idea of ​​what would become the WTO, was stillborn on American soil. It took 50 years of strong growth in the economies of the West and the worldwide consolidation of the economic hegemony of the United States so that the idea of ​​a coordinating entity for the liberalization of world trade could finally get off the ground. Since the creation of the WTO in 1995 the relationship with the United States has been harmonious only in the speech, but very conflicting in practice.

The confrontation of the United States government with the WTO, However, it was never frontal, but always exercised behind the scenes. Despite the United States being the country that most appealed to the WTO (124 arbitration proceedings for a total of 592) and that had the highest number of favorable sentences in the courts of this institution, US concern about the WTO has centered on verdicts contrary to its positions. The strategy found was to retaliate by blocking the appointment of arbitrators from the WTO Appellate Body with a history of decisions contrary to US interests.. The first case of an American veto of WTO arbitrators by the USA dates back to the government of George W. Bush. The Barak Obama administration has also blocked the appointment of two arbitrators : Jennifer Hillman (americana) and Seung Wha Chang (of South Korea that had favored China in two disputes opened by the USA).[vii] E, Finally, Trump that faithful to his critical position the WTO led the institution to paralyze. Trump broke the precedent set by his two predecessors in the presidential post by blocking all appointments to the agency until it became inoperative in 11 last December due to lack of referees. In the USA, not only did the government show dissatisfaction with the WTO, in reality the first confrontation came from the streets.

30 November 1999. The scream of the streets of Seattle: sign that something was wrong.

The first major WTO challenge on American soil came from the streets exactly 20 years. During the opening of the Millennium Round, in the city of Seattle in 30 November 1999, public demonstrations against the WTO took over the city streets. The opening of the round was hampered, since national representatives were prevented from reaching the meeting place by the numerous acts of civil disobedience on the part of the demonstrators. Concomitantly, other acts spread throughout the city as rallies led by national unions and even attacks by black-blocs anarchists to downtown Seattle stores. The scenes that followed shocked the country by the police forces' offensive against the protesters. Because of multitudinous mobilizations and acts of violence, the city of Seattle went into a state of emergency and received support from the national guard. The final balance was five days of protests, more of 600 arrested and the cancellation of the Millennium Round. These protests are still considered to be the largest in the country since the protests against the Vietnam war in the late 1970s. 60. There are also those who claim that the “Battle of Seattle” caused irreparable damage to the image of the WTO because of the huge media coverage of traditional and independent networks with global repercussions..

The protests and demands of the demonstrations of Seattle against the WTO were diverse. Many of the protesters associated the WTO with economic neoliberalism agenda, in full swing at the end of the years 90, and the protests marked the first reportedly anti-globalization acts. The voices coming of the streets were defenders of small farming against the interests of large global corporations as well as labor and rural unions. Steel industry unionists, for example, already protested against the practice of dumping foreign steel in the United States. Many NGOs criticized the conduct of trade with countries that registered human rights violations, working conditions and protection environmental. In the communiqués issued by several entities, there was talk of a alternative globalization - alter-globalization.

Discussions between national delegations during the millennium round were negatively influenced by the screams of streets and have not reached an understanding. The meeting was then declared by closed and the Millennium Round officially canceled. Two years later in November 2001 a new round was launched in safe and remote Doha, not Taste: the Development Round. Precisely this Round became the biggest failure of the WTO to this day.

The Great Failure of the WTO: the Development Round

The biggest blow to the WTO came just over a year ago decade with the collapse of the Doha Round that should have been the largest and most comprehensive commercial negotiation so far, bringing to the center of the table negotiations on trade in agricultural products. The proposal was to offer better conditions for developing countries with trade negotiation world market for agricultural products, seeking to end the distortions caused by subsidies applied by developed countries. The complexity of the topic and the inability WTO efforts to reconcile and find solutions among the many interests led to Doha round to fail. European agribusiness interests, American and Japanese prevailed over the front of developing countries led by Brazil, India, China and South Africa. In July 2008 negotiations collapsed and the Round remained paralyzed until 2015 when it was officially closed.[viii]

The complete collapse of the Doha Round negotiations represented for the WTO its total paralysis in time: the last successful WTO update was there more of 25 years, in 1994, when the WTO was created at the end of the Uruguay Round. The WTO did not manage to advance one centimeter during the period of great strength economical, unmatched technological transformation and major global changes. THE lack of updating of the legal rules applied to international trade was one of the main reasons for the wear and tear of the WTO with countries like the USA. It is a classic case in which the lack of political advancement - or the consensus between political actors so that the central institution can continue to be improved and evolving - has led the legal system to become obsolete.

Despite the huge setback that the Millennium Round (1999) and the Round development (2001-2015) meant, over the years the WTO has succeeded significantly increase the number of member countries adhering to its rules free trade. Beyond the 123 countries that formed the GATT in 1994, the WTO negotiated the accession of more than 40 new members since its founding in 1995 - with emphasis on the entry of non-western economic powers, for example: ex-republics soviet, like Russia (accepted as a member only in 2012 after 18 years old of negotiations); Persian Gulf monarchies, like Saudi Arabia; e, until even China's entry into 2001.

The sin capital: the entry of China.

Few speak openly about the main problem of the WTO and consequently of world trade: a China. The Republic People's Republic of China was admitted as a WTO member country in 2001 thanks to the support of then President Bill Clinton. By allowing China to enter the main stage of global trade, the United States sabotaged the entire productive structure worldwide. China with its highly controlled economy and wages infinitesimals entered with enormous cost competitiveness. In 2001 the economy China was then the sixth economy in the world. After its entry into the WTO, GDP Chinese business grew again by double digits between 2003 e 2007 and yours exports grew at unprecedented rates. The Chinese economy is now eight times the Chinese GDP of 2001 and its exports to the world quintupled consolidating China as the main world exporter since 2009. [ix]

The main criticism is that China has not implemented fully the rules established by the WTO. The main claimant in the WTO against China is precisely the USA. Of a total of 43 cases brought before the WTO appeal against China since 2001, 23 were taken by the USA. At guidelines are that China cheats on some of the rules established by the WTO as: subsidized financing to Chinese companies and tax exemption; discriminatory treatment against foreign companies operating in China as, for example, prevent foreigners from exploiting mineral resources and other raw materials available in the country.[x]

Another point of conflict is the status of “Non-market economy” still in force for China's WTO case. Accordingly with the protocol of China's accession to the WTO after 15 years China would benefit automatically from recognition as a market economy. However, The Most WTO countries did not grant such recognition on the grounds that the economic opening of the country since 2001 it was insufficient. Maintaining status ‘Non-market economy’ allows for more drastic measures to be taken against possible illegal practices carried out by China. More of 70 countries already recognized China as a market economy without ratifying such recognition - as is the case in Brazil, which has been doing it since 2004.[xi] You U.S, members of the European Union and Japan expect China to continue opening up its economy to be recognized as such.[xii] One of Trump's main complaints about China and other developing countries development is that, within the framework of the WTO, these countries enjoy exceptional and unfair privileges with developed economies.[xiii]

"America First ”and Retaliation: Donald Trump’s trade policy

Donald Trump's trade policy can be summed up with his motto of “America First” campaign and the principle of retaliation. Any and all measures that may hinder the growth of the American economy has been answered with disproportionate and unreasonable retaliation. In the case of Brazil, we have already informed of the steel surcharge for the claim that the Brazilian government seeks an exchange rate war against the dollar. Trump does not consider the fact that Brazil suffers in 2019 the biggest capital flight ever registered, he simply understands that competitive Brazilian steel becomes even more competitive with an exchange rate that depreciates. In the clear gesture of excessive and disproportionate Trump surcharge one of the main products of its supposed “strategic ally” in South America.

Another example of unreasonable retaliation by the Trump administration is gave against France. With the proposal for a new French tax on services that will directly affect the profits of giants like Google, Facebook and Amazon the American government announced as an immediate response the increase in cheese taxation, champanhes, french makeups and bags. In 8 in last december, the French Minister of Finance, Bruno the Mayor, threatened initiate a complaint at the WTO against increasing 100% on tariffs for entry for traditional products from French companies and producers.[xiv] Two days after Minister Le Maire's announcement came the expected fatal blow to the WTO Appellate Body.

The Trump administration's aggressiveness in retaliating against important business partners, violating principles of economic cooperation and the rules free trade agreements established by the WTO, it's never seen since creation of the WTO. As if these retaliatory practices were not enough, Trump invests against the institution itself by blocking the renaming of all its referees. There is no doubt that Trump intends to dismantle one of the pillars of order world economic formation formed during the second half of the conflicting century 20 for a skillful and complex political-economic concert.

Change of Brazilian order and backwardness

Nowadays we experience the dismantling of the world economic order that was built on the principles of post-war cooperation and in the conviction of the economic liberalization of the last thirty years. One of the main pillars of support for the market economy and the free trade is trust between agents; and this is the pillar that deteriorates. The new order appears to be based on the ability to impose interests strongest ones generating conflicts and crises just as it was during the period between the two great wars of the century 20. The current government's economic team Brazilian does not seem to understand, or else it simply denies the reality of facts, and proposes with euphoria and delay of 30 years the hegemony of liberalism economic.

Grades


[i] Daniel Drezner, It’s the end of the liberal economic order as we know it, The Washington Post, 11 from December 2019.

https://www.washingtonpost.com/outlook/2019/12/11/its-end-liberal-economic-order-we-know-it/

[ii] A note on Francis' “End of History” Fukuyama, Capital Letter, 12 of April from 2019
https://www.cartacapital.com.br/blogs/brasil-debate/uma-nota-sobre-o-fim-da-historia-de-francis-fukuyama/

[iii] “WTO has never been more relevant”, defend director-general, AgencyBrasil, 19 of September 2018

http://agenciabrasil.ebc.com.br/economia/noticia/2018-09/omc-nunca-foi-tao-relevante-defende-diretor-geral

[iv] Wellton Maximum, Brazil will give up WTO rights to join the OECD, AgencyBrasil, 19 March 2019

http://agenciabrasil.ebc.com.br/internacional/noticia/2019-03/brasil-abrira-mao-de-direitos-na-omc-para-ingressar-na-ocde

[v] Guedes speaks of free trade agreement with Chinese, but then go back, Economic value, 14 November 2019

https://valor.globo.com/brasil/noticia/2019/11/14/guedes-fala-em-acordo-de-livre-comercio-com-chineses-mas-depois-volta-atras.ghtml

[we] Marcus Becker, Donald Trump Damages America By Defanging WTO, Mirror online, 10 from December 2019
https://www.spiegel.de/international/business/donald-trump-damages-america-by-defanging-wto-a-1300381.html

[vii] Manfred Elsig, Mark Pollack e Gregory Shaffer, The U.S. is causing a major controversy in the World Trade Organization. Here’s what’s happening, The Washington Post, 6 June 2016.
https://www.washingtonpost.com/news/monkey-cage/wp/2016/06/06/the-u-s-is-trying-to-block-the-reappointment-of-a-wto-judge-here-are-3-things-to-know/

[viii] The Doha round finally dies a merciful death, FT , 21 from December 2015

https://www.ft.com/content/9cb1ab9e-a7e2-11e5-955c-1e1d6de94879

[ix]Gabe Lipton, The Elusive ‘Better Deal’ With China. The Atlantic, 14 August 2018

https://www.theatlantic.com/international/archive/2018/08/china-trump-trade-united-states/567526/

[x] Jacob M. Schlesinger , Globalization in Retreat. How China swallowed the WTO,

 Wall Street Journal, 1 November 2017

https://www.wsj.com/articles/how-china-swallowed-the-wto-1509551308

[xi] Guilherme Bez Marques, O recognition of China as a market economy and the impacts on Brazil, HUFFPOST, 12 from December 2016

https://www.huffpostbrasil.com/guilherme-bez-marques/o-reconhecimento-da-china-como-economia-de-mercado-e-os-impactos_a_21700926/

[xii] Laura Puccio, The granting of Market Economy status to China – an analysis of WTO law and selected WTO Members’ policy, In-depth analysis, European Parliamentary Research Service, November 2015

https://www.academia.edu/20403541/The_granting_of_Market_Economy_status_to_China_-_an_analysis_of_WTO_law_and_selected_WTO_Members_policy

[xiii] Trump targets China in call for WTO to reform ‘developing’ country status, Jeff Mason e David Lawder, Reuters, 26 July 2019.

https://www.reuters.com/article/us-usa-trade-wto/trump-targets-china-in-call-for-wto-to-reform-developing-country-status-idUSKCN1UL2G6

[xiv] David Meyer, Fine Wine vs. Big Tech: How France’s Digital Tax Sparked a Trump Tariff Backlash, Fortune, 3 in December 2019.

https://fortune.com/2019/12/03/trump-tariff-threat-france-wine-digital-tax/
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Economist with more than ten years of international experience and studies carried out in France (Paris University 1 Panthéon-Sorbonne and Normal Higher School), Argentina (Buenos Aires' University) and United States (PSU).