Globalization,  Research

WTO’s Overreach Explains its Growing Irrelevance

Contrary to the optimistic predictions of free trade theorists (and their seemingly scientific economic models), free trade agreements haven’t been beneficial for all participants in international commerce. Rather, for many reasons (including the emergence of large trade imbalances, deindustrialization, and lasting unemployment), business-friendly trade agreements have produced ‘losers’ as well as ‘winners.’ Moreover, losses have been concentrated in particular industries, regions, and social groups – fostering a backlash that has disrupted trade flows, and thrown into question the future viability of the WTO itself.

Ironically, part of the failure of neoliberal trade policy rests with the overreach of those trade agreements (including the WTO), which have gone far beyond simply liberalizing trade and reducing tariffs. Instead, their provisions aimed to establish a far-reaching business-friendly economic framework, limiting government involvement in all kinds of areas – including those that have little if any connection to international trade. By tying the hands of national governments to support industries and communities suffering painful trade-linked dislocations, those agreements limit the extent to which governments can pro-actively support adjustment and ensure that the potential gains from trade are in fact realized and broadly shared (as predicted in the free trade models).

In this research paper, “Back to Basics for World Trade Policy,” Centre for Future Work Director Jim Stanford argues that trade agreements should get “back to basics”: abandon the effort to establish and enforce over-arching business-friendly rules for the whole economy, and focus instead on incremental trade-promoting measures that respect the necessity of government economic intervention to meet social goals.

Read Jim Stanford’s full paper here.

The paper was prepared as part of a special series on the future of the WTO published by the Centre for International Governance Innovation (CIGI). Please see the full CIGI series of papers and commentaries here. CIGI also produced a short podcast with Jim Stanford, based on this commentary: listen to it here.

Jim Stanford is Economist and Director of the Centre for Future Work. He divides his time between Sydney, Australia and Vancouver, Canada. Jim is one of Canada’s best-known economic commentators. He served for over 20 years as Economist and Director of Policy with Unifor, Canada’s largest private-sector trade union.