A Trade War on the Poor?
President Donald Trump’s tariffs on imported steel and aluminum have set off fears of a global trade war, an eventuality which would damage an already weak World Trade Organization. And the collapse of the WTO would most severely impact the world’s poor, according to an article in Foreign Affairs.
Poor countries derive a number of benefits from the WTO. One is that the global organization provides “a relatively level playing field for negotiating with more powerful countries.” Absent such a forum, it’s easier to coerce poor and weaker countries into accepting harsh trade deals.
Another benefit developing countries have with the WTO is its Dispute Settlement Mechanism (DSM). The WTO can authorize members to take retaliatory measures in the event it finds trade practices that violate WTO rules. Developing countries such as China, India, and Brazil are increasingly making use of DSM. Smaller countries have also found success with DSM: in 2005, Ecuador filed a complaint against US action against its shrimp exports and won.
The WTO has borne the brunt of much of the resentment felt in some quarters over international trade. The solution, the article posits, is for government to recognize how trade has damaged some economic sectors and to take action to correct that. “A failure to do so in the past has contributed significantly to a misguided resentment against the WTO,” the article said. “Correcting this could have a transformative and positive effect on the organization. Even though Trump alone cannot be blamed for the looming collapse of the WTO, the current panic that he has generated over a WTO collapse and impending trade wars might galvanize the organization to set itself on the right course.”
But “allow the WTO to wither away,” the article concluded, “and the world returns to a system of unchecked power politics.”