Last Man Standing

Commentary by William Alan Reinsch

Published November 12, 2024

No, this is not a column about Tim Allen's most recent sitcom. It is about the rapidly declining group of people who still support the open, rules-based trading system, including me. That system has been under attack for some time, both practically and philosophically.

Countries are increasingly ignoring the rules and, thanks to the demise of the World Trade Organization (WTO)'s Appellate Body, are getting away with it. The United States, both in the current administration and in the previous one, has been a major culprit with its Section 232 tariffs on steel and aluminum and its Section 301 tariffs on China. Worse, it not only broke the rules but also refused to comply when WTO panels found the U.S. guilty. China and India have been just as bad, though perhaps subtler. The European Union's record of compliance has been, at best, selective, as its treatment of genetically modified organisms (GMOs) makes clear. And, when the big guys ignore the rules, you can expect the small guys to follow their lead as the system continues to crumble.

The WTO has contributed to this erosion by failing to achieve its fundamental objective-the negotiation of new multilateral trade liberalizing agreements. The last big one was the Trade Facilitation Agreement in 2015. The modest agreement on fish subsidies reached in 2022 remains incomplete due to the organization's failure to finish it in 2024.

Not content with simply acknowledging that they're cheating, countries are busy developing rationales to justify their apostasy. The big one, which has become popular in the Biden administration, is that the era of globalization is over, and that is good because it only benefitted large companies and not workers. Further, the rules-based trading system is no longer fit for purpose because it cannot address large changes in the global economy, primarily China's use of subsidies that skirt the rules and produce massive overcapacity in a growing number of industries.

Concluding that the world is done with globalization is simply wrong as a matter of economics. The huge reductions in the cost of communication and transportation and the more recent digitization of the economy enabled globalization remain. Containerization is not going to be un-invented. Digital communication is not going away. Trade continues to increase, albeit more slowly than in the past. And that is good for the United States, a mature, slow-growth economy. When 96 percent of the world's consumers are outside your borders, trade is essential for companies that wish to grow. More likely, globalization is not halting but is rearranging. Countries continue to trade but do so more with like-minded partners and less with political or economic adversaries.

The second part of the new theory-that the current rules are no longer fit for purpose-has some truth to it, but the answer is not to throw the senior citizen out with the bathwater. A better course is to adapt it to fit the twenty-first century. That requires leadership, which the United States has not provided in the past two administrations, and it also requires followership-a willingness on the part of others to work toward a consensus on issues affecting the global commons.

Inchoate signs of the latter can be seen in the growing number of countries recognizing that Chinese overcapacity is hurting them and acting against it. I discussed this in a previous column. The movement is disorganized and fragmented, but the will to do something seems there, which means there is an opportunity for leadership.

Sadly, one of the consequences of last week's election is that such leadership will not be forthcoming. The incoming president has proved to be the nemesis of international organizations and multilateral agreements. His clear preference is for bilateral negotiations based on the theory that the United States can most easily leverage other parties one at a time, as opposed to multilateral negotiations where the rest of them can gang up on the United States. A bilateral approach can work with smaller countries that can be bullied. It was not very successful with China during his first term and will not work if he tries again.

This approach will prove to be the biggest long-term disaster of a second Trump term. While tariffs will be a short-term disaster, Trump's lack of interest in multilateral institutions and rules and his bullying approach to negotiations will do lasting damage to the global economy. His unilateralist trade policy promises a return to the law of the jungle, and I expect his eventual withdrawal from the WTO will be the fatal blow for an already weakened institution.

The point of international institutions, as devised at Bretton Woods in 1944, is to protect countries from their own worst impulses and, in doing so, to protect everyone else as well. Global rules function as guardrails to protect us from a Hobbesian world of every country-for-itself economic aggression. Trump will eventually discover that the United States is not the only large carnivore in the system but that other small ones are growing fast, and they don't need us. If the system crumbles, everybody loses, including the United States. I hope I will not be the last person standing in support of international rules.

William Reinsch holds the Scholl Chair in International Business at the Center for Strategic and International Studies in Washington, D.C.

Subscribe to William Reinsch's Weekly Column

Programs & Projects