The WTO, with its ‘market knows best’ ideology, has failed. It’s time to bury it

When delegates arrive in Geneva today for the long delayed World Trade Organization (WTO) summit, they will find an institution in the middle of an existential crisis. For 18 long months, the WTO has been debating a moderate proposal from South Africa and India which would have allowed countries to temporarily override the property rights of pharmaceutical corporations so they could produce patented Covid-19 vaccines. Opposition by Britain, Switzerland and other European countries has kept it from progressing. Even a global pandemic, it seems, isn’t sufficient cause to prompt a temporary rethink of the WTO’s pro-business approach.

Just as bad, the WTO cannot agree a common approach to the food crisis fast spreading across the globe, or the invasion of one of its members by another, or, most serious of all, the climate catastrophe facing humanity. All it can do is fall back on the mantra of more free trade. Unable to break with a “market knows best” ideology which is actively exacerbating the world’s problems, the WTO is now a failed institution. It’s time to bury it.

The WTO’s crisis is part and parcel of the greater crisis of free-market globalisation as a whole. It was formed in the mid-1990s, the high point of free-market capitalism, when the answer to every problem was more markets, more private sector, less government red tape. There was, we were told, simply no alternative. Summing up the feeling a few years later, Tony Blair told the Labour party conference, “I hear people say we have to stop and debate globalisation. You might as well debate whether autumn should follow summer.”

But it hadn’t always been that way. Before the WTO, there had been a much looser set of international trade rules created at the end of the second world war. This system was also based on the idea that trade was a good thing and high tariffs were usually a bad idea. But to the extent that free-trade policies didn’t achieve those goals, countries had a fair bit of freedom to ignore them. There was no enforcement mechanism, and plenty of room for developing countries, in particular, to design policies they thought worked best for their own development.

The WTO changed all that. Radical free trade became an end in itself. WTO treaties laid the basis for a set of hard global economic rules, embedded in international law. At their core, they removed power from the state to interfere with the supposed rights of big business and big finance, undermining the ability of governments to protect their farmers and infant industries, and to regulate big finance and big business. Unlike its predecessor, the WTO incorporated a dispute system with real teeth which made the whole system enforceable.

We can see the results all around us. Far from creating a global version of a farmers’ market, it has encouraged the growth of agricultural monopolies practising intensive farming, which dominate our food system at huge cost to the environment. It has encouraged manufacturers to “offshore” production to wherever labour is cheapest and regulations are lowest, creating political resentment and fuelling rightwing populism in the west.

It has created staggeringly complex and vulnerable supply chains, best symbolised by an oversized container ship becoming stuck in the Suez canal and bringing global trade to a halt. And it has allowed a handful of multinational corporations to dictate the world’s ability to produce the vaccines needed to end a global pandemic, because they owned the – often publicly funded – research behind those medicines.

None of this should surprise us. The great theorist of capitalism, Karl Polanyi, warned us 75 years ago that trying to turn the whole world into a gigantic marketplace would end in the “demolition of society”. The fascism of the 1930s was the nightmare reaction that Polanyi lived through, but we see our own version of that social breakdown today.

This system cannot cope well with crisis. But crises are now a defining feature of our era. Which is why many governments, including Joe Biden’s administration in the US, are moving gradually away from the WTO’s free-trade system. It’s a process initiated, perhaps unwittingly, by Donald Trump. Seeing which way the wind was blowing, Biden has continued in this direction – with less bullying and bluster – eschewing free trade deals and standing up to the corporate monopolies that globalisation has created.

This is to be welcomed. But we’ll need to go further and faster if we don’t want to replace a global free-market system with one of nationalist competition in which the strongest player wins. We need a fundamentally different global trade system, which helps rather than hinders government action in protecting their people and the planet. The WTO cannot play that role. It is not reformable, as the Covid waiver debacle proves.

Developing states have always been especially constrained by this system. If we want change, these countries will have to work together to begin creating change on the ground: building up their own industries, supporting their small farmers, regulating and taxing big business and big finance, and using the proceeds to build up public services to remove people’s basic needs from the market.

There are hopeful signs – from South Africa’s creation of “open source” medical research to Indian farmers successfully refusing to be further liberalised. The globalisation project cut short the developing world’s experiment with economic decolonisation. It’s time to return to it. Any attempt by the US and Europe to punish these countries will have to be met with resistance, there and here.

From this point, we can begin rebuilding an international architecture for actual fair and free trade. None of the problems we face will be solved by the WTO’s “market knows best” proposals, which will only accelerate social and environmental breakdown. It would be no loss to the vast majority of the world if this WTO summit was the last. It’s long past time for something else.

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