Whatever we call the decade just past, it was more trial than triumph: Sept. 11; wars in Afghanistan and Iraq; bursting bubbles in high-tech and housing; and two recessions. The past decade was not so hot for the World Trade Organization either.
Established on Jan. 1, 1995, the WTO has weathered a trying decade. The year 2000 began with WTO members and officials picking up the pieces from the failed ministerial meeting in Seattle the month before. The Doha Development Round was launched with promise in late 2001, but subsequent ministerial meetings in Cancun, Hong Kong, and just last month in Geneva failed to yield anything close to a comprehensive agreement to lower tariffs and other trade barriers. The WTO enters the 2010s limping along, with friends and foes alike questioning its value and relevance.
At this moment of vulnerability, the U.S. House will take up a privileged resolution sometime in 2010 calling for the U.S. to withdraw from the organization. The Uruguay Round Agreements Act that Congress passed in 1994 contained a provision that essentially requires Congress to vote every five years on whether our government should remain a member of the WTO. A withdrawal resolution in the House attracted 56 votes in 2000 and 86 votes in 2005.
When the resolution comes up again this year, members of Congress would be wise to vote it down once again. Despite complaints from critics on the left, such as Ralph Nader, and even a few libertarians, such as Rep. Ron Paul of Texas, membership in the World Trade Organization serves Americas national interest.
WTO membership encourages the United States to keep its own markets open, for the benefit of U.S. consumers and import-using industries. It also promotes trade liberalization abroad, which opens markets and keeps them open for U.S. exporters. WTO agreements put those commitments in writing so there is less temptation for governments to backslide and re-impose damaging trade barriers under short-term political pressure.
Americans have witnessed the benefit of a global trading system during the recent economic downturn. A major reason why more governments have not raised barriers to U.S. exports is the agreements they signed along with the U.S. government to reduce barriers and keep them down. Governments know that if they raise tariffs beyond the “bound” rates written in WTO agreements, or if they violate other provisions designed to keep markets open, they will be vulnerable to challenge in the WTO dispute-settlement system.
A global rule of law for trade is one of the huge advantages we enjoy today compared with the 1930s, when the race to raise trade barriers was unchecked by either economic sense or international agreements. Mr. Paul rightly blames the government for causing the Great Depression, while criticizing modern-day trade agreements that make those mistakes of the past less likely to occur again. Trade agreements have provided a rule of law for trade relations rather than the beggar-thy-neighbor rule of the jungle that prevailed so disastrously in the 1930s.
By its nature, the WTO is incapable of infringing on U.S. sovereignty. It lacks any tangible enforcement power other than the respect and credibility that its dispute settlement mechanism has built among its members. The threat of trade sanctions by other nations existed long before the WTO came into being. By providing a legal framework for settling disputes, the WTO prevents routine trade spats from escalating into full-blown trade wars.
The U.S. governments membership in the WTO has yielded tangible benefits for American citizens. Successive rounds of negotiations through the GATT have lowered global trade barriers here in the United States and around the world. For example, since China joined the WTO in 2001, its average tariff imposed on goods of special export interest to the United States has dropped from 25 percent to 7 percent.
WTO agreements also restrict the ability of foreign governments to place quotas on imports, to impose domestic regulations that unfairly discriminately against U.S. products, and to subsidize domestic industries that compete against American firms.
Daniel Griswold is director of the Center for Trade Policy Studies at the Cato Institute in Washington and author of the new Cato book, Mad About Trade: Why Main Street America Should Embrace Globalization.
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Membership allows the United States government to challenge the trade practices of other nations within the rule of law. If China, the European Union, or other WTO members are violating their commitments, the United States can present its case before an impartial WTO panel of trade experts. Between establishment of the WTO in 1995 and mid-2007, the U.S. government had successfully used the WTO dispute settlement system to open foreign markets in 53 cases, 28 by winning a final judgment on the core issues of the complaint, and 25 by settling favorably before completion of the case.
Appealing through the WTO has helped the U.S. government to remove barriers to the sale of U.S. semiconductors in China, beef and rice in Mexico, genetically modified crops in the European Union, apples in Japan, milk in Canada, 2,700 specific product categories in India (including high-technology products, petrochemicals, textiles, and agricultural products), and copyrighted sound recordings in Japan.
Membership in the WTO does not limit our freedom as individual Americans. Trade agreements limit the power of governments to interfere in the peaceful commerce of their citizens. By limiting the scope of government action, our membership in the WTO enhances the liberty and prosperity of all Americans.
‘Daniel Griswold is director of the Center for Trade Policy Studies at the Cato Institute in Washington and author of the new Cato book, Mad About Trade: Why Main Street America Should Embrace Globalization.’