The Domestic Political Economy of the WTO Crisis: Lessons for Preserving Multilateralism

Abstract

A major contributor to the crisis at the World Trade Organization is the decline in support for multilateralism in the United States. Three key problems with the organization’s design precipitated the decline. First, incomplete rules related to trade remedies are interpreted by the organization’s Appellate Body in ways that conflict with a narrow set of sensitive US domestic priorities. Second, existing organization rules do not sufficiently account for non-market economies, such as China. Third, remediation of these problems is infeasible due to consensus-based decision-making in the World Trade Organization. These problems represent more fundamental challenges induced by increased economic integration—loss of sovereignty and erosion of democracy. To alleviate these problems in multilateral agreements we suggest: (1) a narrow solution that carves out a special process for handling trade remedy disputes; (2) a broad solution that relaxes the requirement of consensus for the organization’s reform, adopting some form of supermajority voting or a sunset clause; (3) the reform of domestic consensus-building institutions within the US that directly address the political-economy sources of voter discontent.