Understanding the ‘crisis of the institution’ in the liberal trade order at the WTO

Abstract

Abstract The liberal trade order is in crisis. I argue that the origins of the current crises lie in the underlying tension which exists in the World Trade Organization (WTO), magnified by a churning in global power dynamics. A dilemma at the heart of the WTO between two important goals of representativeness and effectiveness means that both goals cannot be pursued at the same time. Now, this inherent tension is being magnified by power shifts in the global economy most evident in the rise of emerging powers within the WTO, who demand more representation, and the retreat by the US towards a more inward-looking orientation; both together damage effectiveness. Simultaneously, new powers such as China and India are defending a ‘reformed multilateralism’ combined with selective protectionism with varying capacity. These shifts are transforming previous ‘crises within institutions’ into a ‘crisis of institutions’ at the WTO, wherein the rules of the game, ideas of free trade and the legitimacy of the WTO are under threat. Global trade politics is seeing new coalitions at the WTO, as emerging powers craft their own rise, US defends sovereignty and trade protections, and launches a challenge to China's rise, and some established powers (the EU for example) seek to reform it. The new global trade politics is walking on two uneven legs and creating winners and losers and new ways of managing the transitional trading order as did the creation of the post-world war order.