Who Still Needs the WTO?
By Dr. Enobong Udoh
Far back in the 18th century, Adam Smith revolutionized economic thinking by arguing that national wealth stems from international trade, a direct challenge to the mercantilist view (which was mainstream) that export is good while import is bad. Ignorantly, even as it was in the 18th century, in this present age some countries feel they can amass more wealth by exporting far more than they import. Their trillion-dollar balance of payment position gives them a feeling of superiority which would not be possible if not for manipulations. This mercantilist mindset led to wars in the past because when a country over-expands its balance of payment, it is unduly squeezing other countries and exporting poverty around the world. That is why the WTO was set up to promote shared prosperity as rich countries cannot isolate themselves from the troubles that global poverty brings to their doorsteps.
Indeed, we are lucky to be alive in this present time when the world is experiencing a realignment of world trade. All thanks to President Trump who has indeed taken the bull by the horns to adjust trade infractions and manipulations just as he promised. True to his word, on the 2nd of April 2025, President Trump announced sweeping tariffs for all countries that trade with the US. When Trump’s tariffs were announced some countries came out to deny they charge such tariffs, but sooner we heard many of those countries reached out to the US administration wanting to reduce their tariffs. But how can this even be true, when we have a WTO that publishes the Most Favored Nation (MFN) tariff which is the ‘baseline import duties a country applies equally to all WTO members unless a special trade agreement provides lower rates? An example of a special tariff is the US free-trade agreements with Canada, South Korea, and Mexico. So, this means according to WTO standards, the highest tariff rate for WTO members is the MFN. But how true is this?
According to MFN, none of the big economies of Europe has tariffs up to 4%, India is 12%, and China is 3%. Is it not laughable that if truly China has an average tariff of 3% its balance of payments will be a colossus? This deceitful MFN is why a lot of third-world countries remain poor. Rich countries have all these hurdles called nontariff barriers which added to the ‘true’ tariff cause detrimental unquantifiable effects. But how are all these even possible when we have a WTO? In response to President Trump’s new tariffs, the current WTO president released a statement about their analysis of an expected 1% contraction in world trade, with no hint about what led to the impasse in the first place. International trade has been skewed for far too long and what Trump has done, is to show countries that they have to take their trade matters into their own hands for they cannot wait for WTO rhetoric while others continue to swell their balance of payment. It is frustrating that the US has filed over 25 WTO cases against China since China joined in 2001. The problems remain unabated which makes us wonder about the kind of leadership WTO has had.
The last comparable event to Trump’s tariffs was the Smoot-Hawley Act of 1930 under President Herbert Hoover imposing high tariffs on over 20,000 imported goods to protect American farmers and industries during the Great Recession. It was unsuccessful because it triggered retaliatory tariffs from major US trading partners. This time President Trump’s own seems to be different because he is responding to agelong trade discrepancy. Part of the ineffectiveness of WTO comes from its quality of leadership. WTO needs a strong leader from the private sector who can look defaulting countries in the eye to enforce rules. We have seen how Elon Musk has taken on the US bureaucracy which was neck-deep in corruption and red tape. WTO has a dispute settlement system whereby if a country is found guilty, the country must bring its policies into compliance, if it fails, the complainant country can get authorization to impose retaliatory tariffs. No denying that WTO’s relevance is waning, its rules have not been updated in more than twenty-five years. Some countries have learned how to navigate the rules for their betterment. Trump has set the right precedent and this is the way to go. Though Adam Smith prescribed free global trade, it is not possible because no country thrives by being a dumping ground. Notwithstanding, trade must at least be fair!
Dr. Enobong Udoh writes from Abuja
