In Defence of the WTO: Why Do We Need a Multilateral Trading System?

Abstract

For more than seven decades, the multilateral trading system has played an essential role in promoting international cooperation on trade policymaking and dispute resolution. As theWTOis being pushed toward the verge of irrelevance, it falls upon us, who believe in the utility of the WTO and multilateralism in general, to defend its legitimacy and significance. Taking theoretical and doctrinal approaches as well as case studies, this article expounds on the fundamental function of the system as being to discipline the use of protectionist policy instruments for trade or non-trade objectives and draws on the significance of the Theory of Distortions and Welfare in providing powerful economic guidance for how the system may operate to achieve a proper balance between the regulation of protectionist instruments and the preservation of policy space. Furthermore, this article shows how the WTO’s dispute settlement mechanism, particularly the Appellate Body, has served the underlying function of the system by contributing to disincentivizing governments from responding to protectionist demands of special interest groups but leaving sufficient latitude of discretion for governments to accommodate nontrade interests. This article cautions that if theWTOdoes collapse and potential adverse economic and political ramifications materialize, then the political need for international trade cooperation and rulesbased dispute resolution will quickly return. By then, the best way to address that need in pursuit of long-term peace and prosperity would be to rebuild a multilateral trading system. WTO, Trade War, Protectionism, Multilateral trading system, Non-trade values, Dispute Settlement, Appellate Body, Economic efficiency.