The WTO Should Continue to Fade Away

Roberto Azevedo stepped down as director-general of the World Trade Organization (WTO) on August 31, becoming the first to do so before the end of his term. Azevedo's surprise announcement was made in May, and the Brazilian was in the third year of his second four-year term. Eight candidates from Africa, Asia, Europe, and Latin America are vying for the post, but world events are rapidly making this competition irrelevant. There is no U.S. candidate, nor does there need to be one, as Washington should shun the WTO as an organization that is not just useless, but illegitimate.

The WTO is based on the principle that "A country should not discriminate between its trading partners and should not discriminate between its own and foreign products, services or nationals." This means national governments cannot protect their own people. Indeed, the WTO claims the authority to declare national laws to be “illegal” and to authorize sanctions. Who in a democracy would support leaders who abandon their constituents, their countrymen, in international competition?  Even in vital contests with foreign adversaries, citizens can get no help from their governments. They are on their own in a hostile world. A starker rejection of the social contract would be hard to imagine.

On the larger canvas of international relations, the WTO principle holds that there can be no distinction made between allies and enemies as “trading partners.” American should accord England and China the same trust. Security considerations can no longer apply to the transfer of goods, capital, or technology. It is, after all, such a peaceful world, no one will ever use their enhanced resources to build weapons aimed at us. The economic basis of the international balance of power is no longer a concern because the balance of power is no longer a concern. Or so the globalist ideology that spawned the WTO would have it. We are just citizens of the world. If your neighbor loses his job because the work is now being done in China, there is nothing to worry about because Chinese workers are your neighbors too. In the globalist business model, there are only factors of production with no identity.

During the debate over the creation of the WTO during the Clinton administration, its proponents argued that those who opposed globalization were “isolationists.” This was a nonsense charge as nations and empires have long pursued global ambitions while keeping an eye on their economies. To mobilize the means to project power into the wider world, governments must development domestic industries and attend to the international flow of wealth and resources. This is not isolationism, it is strategy. Globalization was the rejection of state-directed trade and finance. Everything was to be turned over to transnational corporations with no allegiance to any country. This was done in the name of “efficiency” measured by profits. There would be a global division of labor that would generate interdependence as the foundation for peace. This idea had its roots in two centuries of classical liberal ideology, but its record of success was lacking. Trotted out at the end of every “war to end all wars” since the Treaty of Paris in 1763, those it has mislead have paid a heavy price by leaving their societies weakened and vulnerable when new threats inevitably arose.

The 1990s was a period of immense corruption hiding behind liberal ideals. Communities across America were gutted as companies went out of business or relocated to distant lands; not by the invisible hands of academic theory but by the very visible, grasping hands of corporate managers and foreign officials.

The Chinese made the largest gains from globalization and are now its strongest defenders. Beijing did not withdraw government control from international economics, and has in every way “discriminated” in its own interest. It is ironic that those transnational corporations that had "escaped" regulation by the U.S. government under the banner of free trade were firmly captured in China’s sovereign grip; forced to surrender control of enterprises and technology to a power determined to displace them both at home and abroad. Beijing’s “opening up” was a hungry maw gobbling down resources from overseas to strengthen its own capabilities. A September 3 editorial in China Daily expressed the hope that the next WTO leader will “reverse the organization's downslide and save globalization… The post-pandemic world needs a robust global industrial chain and high-speed market operation to offset losses.” China wants to retain its grip on key “industrial chains” with access to export markets to recover from the coronavirus it released on the world.

Beijing has practiced what British historian Bernard Semmel called “free trade imperialism.” Great Britain became the “workshop of the world” by the middle of the 19th century by creating industries that could outcompete rivals in an open system. China has done the same, but on a less noble basis. London led the Industrial Revolution and built its superiority on innovation. Beijing built its edge on cheap labor backed by stolen technology. The market, however, does not judge on merits, only on results. Other nations erected trade barriers to protect the development of their economies by the end of the 19th century. The U.S. and Germany were the most successful and surpassed England in output as the 20th century dawned. Today, similar measures must be taken across the world to “decouple” from China and regain control over domestic economies.

An earlier China Daily column voiced the regime’s claim that it is too late for the world to escape Beijing’s control, “Even if more regionalized and diversified supply chains would reduce risks, China retains considerable competitive advantages in many areas, such as electronics and machinery and equipment manufacturing. It cannot be replaced, at least not in the near term” and “the world may now be more dependent on China than China is on the world.”

The just released Pentagon report on the “Military and Security Developments Involving the People’s Republic of China” demonstrates why decoupling cannot be delayed. It presents China’s “military-civilian fusion” (MCF) strategy for converting commercial success into national power. “While MCF has broader purposes than acquiring foreign technology, in practice, MCF means there is not a clear line between the PRC’s civilian and military economies, raising due diligence costs for U.S. and global entities that do not desire to contribute to the PRC’s military modernization.”

The broad measures taken by the Trump administration against China have been based on national security concerns. These actions have not been taken through the WTO, which would only have delayed them at best or sidelined them at worst. The U.S. does not need a permission slip from an illegitimate foreign body to protect its security, independence, and prosperity.

The globalization moment has come and gone. The 2017 "National Security Strategy" embraced the world as it is, an arena of Great Power competition where wealth and power are up for grabs and security cannot be taken for granted. The fate of the national economy cannot be left to chance or the whim of those who care nothing for the larger consequences of their actions. They certainly cannot be left vulnerable to the plans of foreign strategists who wish to do us existential harm. There is no place for the WTO or the sophistry that spawned it. Archives around the world are filled with documents that no longer have any meaning except to historians. The WTO can join the pile simply by being ignored.

William R. Hawkins is an economist and widely published author in the fields of national security and international economics with a long career in academe, think tanks and on Capitol Hill.

Image: WTO

Roberto Azevedo stepped down as director-general of the World Trade Organization (WTO) on August 31, becoming the first to do so before the end of his term. Azevedo's surprise announcement was made in May, and the Brazilian was in the third year of his second four-year term. Eight candidates from Africa, Asia, Europe, and Latin America are vying for the post, but world events are rapidly making this competition irrelevant. There is no U.S. candidate, nor does there need to be one, as Washington should shun the WTO as an organization that is not just useless, but illegitimate.

The WTO is based on the principle that "A country should not discriminate between its trading partners and should not discriminate between its own and foreign products, services or nationals." This means national governments cannot protect their own people. Indeed, the WTO claims the authority to declare national laws to be “illegal” and to authorize sanctions. Who in a democracy would support leaders who abandon their constituents, their countrymen, in international competition?  Even in vital contests with foreign adversaries, citizens can get no help from their governments. They are on their own in a hostile world. A starker rejection of the social contract would be hard to imagine.

On the larger canvas of international relations, the WTO principle holds that there can be no distinction made between allies and enemies as “trading partners.” American should accord England and China the same trust. Security considerations can no longer apply to the transfer of goods, capital, or technology. It is, after all, such a peaceful world, no one will ever use their enhanced resources to build weapons aimed at us. The economic basis of the international balance of power is no longer a concern because the balance of power is no longer a concern. Or so the globalist ideology that spawned the WTO would have it. We are just citizens of the world. If your neighbor loses his job because the work is now being done in China, there is nothing to worry about because Chinese workers are your neighbors too. In the globalist business model, there are only factors of production with no identity.

During the debate over the creation of the WTO during the Clinton administration, its proponents argued that those who opposed globalization were “isolationists.” This was a nonsense charge as nations and empires have long pursued global ambitions while keeping an eye on their economies. To mobilize the means to project power into the wider world, governments must development domestic industries and attend to the international flow of wealth and resources. This is not isolationism, it is strategy. Globalization was the rejection of state-directed trade and finance. Everything was to be turned over to transnational corporations with no allegiance to any country. This was done in the name of “efficiency” measured by profits. There would be a global division of labor that would generate interdependence as the foundation for peace. This idea had its roots in two centuries of classical liberal ideology, but its record of success was lacking. Trotted out at the end of every “war to end all wars” since the Treaty of Paris in 1763, those it has mislead have paid a heavy price by leaving their societies weakened and vulnerable when new threats inevitably arose.

The 1990s was a period of immense corruption hiding behind liberal ideals. Communities across America were gutted as companies went out of business or relocated to distant lands; not by the invisible hands of academic theory but by the very visible, grasping hands of corporate managers and foreign officials.

The Chinese made the largest gains from globalization and are now its strongest defenders. Beijing did not withdraw government control from international economics, and has in every way “discriminated” in its own interest. It is ironic that those transnational corporations that had "escaped" regulation by the U.S. government under the banner of free trade were firmly captured in China’s sovereign grip; forced to surrender control of enterprises and technology to a power determined to displace them both at home and abroad. Beijing’s “opening up” was a hungry maw gobbling down resources from overseas to strengthen its own capabilities. A September 3 editorial in China Daily expressed the hope that the next WTO leader will “reverse the organization's downslide and save globalization… The post-pandemic world needs a robust global industrial chain and high-speed market operation to offset losses.” China wants to retain its grip on key “industrial chains” with access to export markets to recover from the coronavirus it released on the world.

Beijing has practiced what British historian Bernard Semmel called “free trade imperialism.” Great Britain became the “workshop of the world” by the middle of the 19th century by creating industries that could outcompete rivals in an open system. China has done the same, but on a less noble basis. London led the Industrial Revolution and built its superiority on innovation. Beijing built its edge on cheap labor backed by stolen technology. The market, however, does not judge on merits, only on results. Other nations erected trade barriers to protect the development of their economies by the end of the 19th century. The U.S. and Germany were the most successful and surpassed England in output as the 20th century dawned. Today, similar measures must be taken across the world to “decouple” from China and regain control over domestic economies.

An earlier China Daily column voiced the regime’s claim that it is too late for the world to escape Beijing’s control, “Even if more regionalized and diversified supply chains would reduce risks, China retains considerable competitive advantages in many areas, such as electronics and machinery and equipment manufacturing. It cannot be replaced, at least not in the near term” and “the world may now be more dependent on China than China is on the world.”

The just released Pentagon report on the “Military and Security Developments Involving the People’s Republic of China” demonstrates why decoupling cannot be delayed. It presents China’s “military-civilian fusion” (MCF) strategy for converting commercial success into national power. “While MCF has broader purposes than acquiring foreign technology, in practice, MCF means there is not a clear line between the PRC’s civilian and military economies, raising due diligence costs for U.S. and global entities that do not desire to contribute to the PRC’s military modernization.”

The broad measures taken by the Trump administration against China have been based on national security concerns. These actions have not been taken through the WTO, which would only have delayed them at best or sidelined them at worst. The U.S. does not need a permission slip from an illegitimate foreign body to protect its security, independence, and prosperity.

The globalization moment has come and gone. The 2017 "National Security Strategy" embraced the world as it is, an arena of Great Power competition where wealth and power are up for grabs and security cannot be taken for granted. The fate of the national economy cannot be left to chance or the whim of those who care nothing for the larger consequences of their actions. They certainly cannot be left vulnerable to the plans of foreign strategists who wish to do us existential harm. There is no place for the WTO or the sophistry that spawned it. Archives around the world are filled with documents that no longer have any meaning except to historians. The WTO can join the pile simply by being ignored.

William R. Hawkins is an economist and widely published author in the fields of national security and international economics with a long career in academe, think tanks and on Capitol Hill.

Image: WTO