Why trade chaos is not all Trump's fault | DW News

Key Concepts:

• Globalization
• Multilateral Institutions (WTO, IMF)
• Free Trade
• Digital Trade
• Developing vs. Developed Countries
• Fairness and Legitimacy
• Populism
• Liberal Democracy
• Market Economy
• Centrally Planned Economy
• Rules of Origin
• Process vs. Substance in Agreements

I. Governance Problems in Multilateral Institutions

• Hector Torres, a former high-ranking employee of the IMF and WTO, argues that these institutions have become increasingly irrelevant due to outdated governance structures.
• The IMF is in better shape than the WTO, but both face serious governance problems.
• Countries self-declare as "developing" to avoid competing on equal footing with rich countries.
• At the WTO, no country ever develops because it's more convenient to be a developing country.
• Developing countries reduce tariffs far less than developed countries and have more time to reach commitments.
• China, India, and Argentina claim to be developing countries despite being competitive in manufacturing, digital services, and agriculture, respectively.
• This has "killed" the organization.

II. US Role and Dissatisfaction

• The US was the architect of the current system but now seems to want to destroy it.
• The US has lost its capacity to lead monopolistically and faces competitors in many sectors.
• Despite being the advanced economy that grew the most, the US is unsatisfied because not everyone profited equally.
• A political mistake was made in assuming that job losses could be addressed with unemployment benefits, retraining programs, and mobility of pensions.
• The idea was that workers who lost jobs in places like Missouri could move to Silicon Valley and find better jobs.

III. Responsibility for Globalization's Effects

• It's not the WTO's fault that factory workers lose their jobs.
• The fault lies with the liberal intelligentsia who assumed labor was just another factor of production.
• Labor is not just a factor of production; it involves families, communities, and where people want to live.
• Forcing people to live on welfare or move elsewhere is a failure.
• Trump's message, "Americans don't like welfare checks. They want paychecks," resonated with people who felt elites hadn't understood their needs.
• Trump is the product of a failure, not an historical aberration.

IV. Failure of Fairness and Legitimacy

• Multilateral institutions are not independent from their members; they are their members.
• The failure was not seeing that the legitimacy of proposals depends on the fairness of the results.
• Fairness was not there for the United States people.
• Populism is growing in many places.
• Globalization can lead to a race to the bottom as companies move to places with the cheapest labor.
• Institutions could have warned about this and explained that liberalizing trade wouldn't necessarily bring benefits for everybody.
• It would be dishonest to blame institutions without speaking about the leading members, such as the United States and other Western liberal democracies.
• There is a collective responsibility of the elites for this failure.

V. Digital Trade and the Need for New Rules

• The world is economically and geopolitically fractured.
• Leaders imagine regional free trade agreements will replace worldwide rules.
• Goods are made of atoms, which can only be in one place at a time, allowing for rules of origin.
• Digital trade is based on bytes, which can be reproduced at zero marginal cost, stored in multiple places, and shipped from anywhere.
• There are no rules of origin for digital trade, which is the trade that is growing the most.
• A multilateral organization is needed to deal with this problem, which cannot be dealt with regionally.
• Liberal democracies must decide if they want an Orwellian state capable of determining where each byte is coming from.
• Preferential trade movements are forgetting digital trade.
• The speaker's think tank is working on establishing a framework to govern the trade in digital services.
• It's not an easy time to get any kind of multilateral agreement.
• Agreement on substance is unlikely, but agreement on process is possible.
• A multilateral agreement is needed to prevent the misuse of digital trade and the capacity to screen bytes in prejudice of liberty, democracy, and privacy.
• Building consensus on process, not substance, is the way to preserve the dynamics of multilateralism.

VI. Free Markets and Liberal Democracies

• The idea that free trade goes hand in hand with liberal democracies is being questioned.
• The optimistic thought that consumers used to having a panoply of alternatives would want the same as citizens was not true.
• There are countries with market economies that are not liberal democracies.
• When China entered the WTO in 2001, many believed it would integrate into the world market and move towards a liberalized market economy and eventually democracy.
• China has a centrally planned market economy, a blend between a market economy and a centrally planned economy.
• People in China didn't ask for democracy; they asked for social mobility and fast growth, and they got it.
• This proves that the ideology that free markets bring liberalized political environments was wrong.
• There is nothing that can prove now that free markets bring liberalized political environments.

VII. Synthesis/Conclusion

The global trade system is facing a crisis of legitimacy due to outdated governance structures in institutions like the WTO and IMF, the failure to fairly distribute the benefits of globalization, and the rise of digital trade which existing rules don't adequately address. The assumption that free markets would automatically lead to liberal democracies has also been proven false. A collective responsibility lies with the elites for these failures, and new approaches are needed, particularly in governing digital trade, focusing on process and preserving multilateralism.