Isn't the WTO just so amazing?

"The US must do more to eliminate billions of dollars in illegal subsidies to its cotton farmers" writes the FT. Who says?  A dispute resolution panel of the World Trade Organization. And guess what: the U.S. may well grumble and choose to appeal, but in the end, it will have to act. Just as it did on earlier occasions, when it had to bring its tax regime and environmental regulations into line with WTO rules following similar procedures.
Whether you like it or not, the WTO is the only international organization in existence that actually makes the U.S. do what it would not otherwise have done on its own. No other organization has such power. I would love it if somebody would come up with a sensible story as to why the U.S. has ceded so much power in trade, while zealously guarding its sovereignty and right to unilateral action in every other domain.

Comments

[Mike C.]

Its power makes a lot of sense if you bear in mind that cotton subsidies, and most other trade distortions (in the US, at least) that the WTO rules against are generally acknowledged to harm the country, but are pushed through by powerful interest groups anyway. WTO prohibitions allow Congress and the executive branch to avoid pressure to cave to these interest groups. The sanctioning mechanism, which allows other countries to enact reciprocal restrictions, only makes explicit the costs to those who benefit from free trade more generally - ie, consumers and producers in other industries. The WTO, in other words, saves the country from its own politics by altering the political economy of trade policy. I'm pretty sure these arguments were explicitly made when the WTO was established. I know they were explicitly made when China negotiated its accession - WTO constraints simply strengthened the domestic political capital of those who already wanted to push through trade-friendly policies.

[Simple]

Nice call, Mike C. Remembering the old two level game, the WTO helps US trade interests in two key ways - 1) it provides a useful international forum for the US to use or ignore in managing the very complex trade relationships with strong powers like the EU, China, Brazil, etc, (by allowing the US to build coalitions of strong and weak states on certain issues without starting from scratch each time) 2) it provides some domestic justification for the implementation of its trade agenda when there is domestic opposition. The fact that these two "benefits" also exist for the EU and others adds to the WTO's general utility to trade-focused interests in Member States.

[David K]

This isn't the WTO telling the U.S. what to do, this is the WTO reminding us that we made certain commitments in exchange for other countries making similar commitments, and if we want to be part of the global trading system we should live up to those commitments. It's not a question of sovereignty. If we want to keep agricultural subsidies that don't comply with WTO rules that we agreed to, we can either compensate other countries to keep those subsidies, or withdraw from the WTO. But then we can't expect any other countries to live up to their commitments if we can't live up to ours.

[Adi]

Danni - what do you think of WTO's new World Trade Report on "Six decades of multilateral trade cooperation"?

[Mamicha]

"trade-friendly policies". Given TRIPS which is about mandating the most potent form of protectionism: "intellectual property" I don't see how you can call that "trade-friendly" policies.

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[Mr Punch]

Mike C. and David K. are right; I'd add, though, that these days US concerns with sovereignty usually turn out to be about military force; e.g., in legal affairs, fears of war crimes prosecutions. Economic interests dominate US foreign policy less than some believe.

[napablogger]

I think it is because we know the WTO is right, and they have the power to enforce sanctions that actually hurt. Other international organizations are often besotten with punishing America for being America, for doing things they don't like that are mostly a matter of opinion, with no real sanctions.

[Mr. Liberal]

Why are Democrats and Republicans able to compromise on budgets, taxes, the minimum wage, but not able to compromise on say, abortion?

Because dollars and cents naturally lead one to be able to compromise somewhere in the middle.

At the end of the day, cotton-subsidies are just about money. So, we will compromise on that. In contrast, we are less likely to compromise on what military options we have available in the event of a crisis.

I could be wrong. Just a thought.

[hari]

Dani-

US drafted the manadatory rules of arbitration under the new WTO!

How the h... do you expect them now to render their own conscience neutral or whatever you want to call it?

[Jason H]

I agree with Mike C as well. This gives the government the chance to do "the right thing" (economically speaking) without paying the political price of standing up to the farmers and lobbyists.

Bryan Caplan's excellent book
"The Myth of the Rational Voter" touches on this.

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