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Crisis At The WTO

DAVID GREENE, HOST:

It took 70 years to put together a global system of free trade. That system has been in place since 1995, and it's governed by the World Trade Organization. The Trump administration, though, has taken aim at the WTO. The president argues that he can get a better deal for Americans negotiating on his own.

CHAD BOWN: This was what President Trump campaigned on. It was very clear that President Trump had his eyes set on destroying the WTO or severely weakening the WTO.

GREENE: That's Chad Bown. He is an economist with the Peterson Institute for International Economics. He's also a veteran of the Obama administration.

Now, President Trump has undermined the WTO in a few ways. Recently, he announced two major trade deals outside the WTO. His administration has also refused to approve judges to help settle disputes between countries. Chad Bown says this is not necessarily good for the U.S.

BOWN: I think there is a number of different ways in which the United States is actually much, much weaker without a WTO out there. The first is, yes, we can do what we want unilaterally against other countries in certain instances, but they can basically then do the same thing to us as well.

And the second is the way that the WTO works is it actually serves to help police and regulate the behavior of all these other countries in the world and how they're behaving toward each other. So the United States doesn't actually have to be a policeman or woman, you know, regulating trade between all the Japans and the Koreas out there of the world as well. And we're starting to see those types of countries and those types of fights crop up.

And, yes, that, in and of itself, is going to have blowback against the United States. When two other countries start fighting between themselves, that makes it more challenging for everybody, makes it more difficult economically. So I think destroying the WTO is actually going to be very bad for the United States but probably in a number of unanticipated ways and with unintended consequences.

GREENE: What, in your mind, is largely at stake here if the WTO is truly in a moment of crisis?

BOWN: To me, the big question is what comes next and what system replaces it. So the WTO and its predecessor, this thing called the General Agreement on Tariffs and Trade, have basically established the rules-based trading system since the end of the Second World War. And it's been a very effective way of keeping the peace, for the most part, in trade relations until, essentially, President Trump came along. We've never seen a trade war in the scale of the U.S.-China conflict, for example, over the last 70 years during this period.

And if we're going to get rid of this thing called the WTO, what is it that's going to replace it? That, I think, is the really, really big unknown. The United States doesn't have the power, I don't think, economically that we had back in the 1940s when we created this existing system, or in 1995 when we established the WTO itself. We're in a new state of the world. What comes next?

GREENE: What if nothing comes next? What if the WTO goes away and there's nothing to replace it?

BOWN: If the WTO goes away, I think then we are very much in kind of the law of the jungle. And, you know, I don't want to suggest that we're going to head back to the 1930s, but that was really the last period of time in which we lived in a lawless trading world where there weren't these agreements that kind of restrained governments from imposing lots of tariffs on one another.

But I fear without broadly held, shared views on what the common rules that we should all abide by in international trade should be, lawlessness may be where we end up.

GREENE: Thanks so much for talking to us. We really appreciate it.

BOWN: My pleasure. Thanks for having me.

GREENE: Chad Bown is an economist with the Peterson Institute for International Economics. Transcript provided by NPR, Copyright NPR.

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