Article: In Defense of the WTO: Why Do We Need A Multilateral Trading System?
With the upgraded tensions of trade wars led by the U.S., many people are concerning if the multilateral trading system will still be working and effective. A new research paper by Herbert Smith Freehills member Dr Weihuan Zhou made great efforts in defending the necessity and significance to have a multilateral trading system.
The recent headlines on rounds of U.S. actions on imposing tariffs on its major trading partners, especially China, has made people worrying about the recovery of unilateralism and protectionism. The possibly escalated situation between the U.S. and its trading partners may lead to a devastating impact on the current multilateral trading system led by the WTO.
In the paper “In Defense of the WTO: Why Do We Need A Multilateral Trading System?” published on the UNSW Law Working Paper Series (UNSWLRS) recently, Dr Zhou took a deep look into fundamental functions of the WTO and stressed the significance of the Theory of Distortions and Welfare.
He argued that “the WTO is designed to play a critical role in disciplining the use of protectionist policy instruments for trade or non-trade objectives.”
By analysing six cases dealing with the WTO’s dispute settlement mechanism (DSM), Dr Zhou found that the DSM fulfilled the WTO functions “by imposing an external constraint on domestic protectionist pressure on regulatory decision-making without restraining the capacity of governments to respond to non-trade/non-protectionist interests of other domestic constituents.”
Dr Zhou believed that more efforts should be made to promote public understanding of WTO’s functions amid the doubts about the efficiency of it as a multilateral trading system is the answer to a healthy world economic environment.
“[I]f the WTO does collapse and the potential economic and political consequences materialize, then the political need for trade cooperation and non-discrimination and rules-based dispute resolution will quickly re-emerge and become a common policy priority. By then, it will not take long for governments to realize that the best way to pursue that policy priority for long-term peace and prosperity would be to rebuild a multilateral trading system,” Dr Zhou writes in the paper.