World's Biggest Exporters Benefit Most From WTO, Report Says

The U.S., China and Germany are the largest beneficiaries of the World Trade Organization, according to a report released Dec. 30 by the Bertelsmann Foundation. The three countries, also the world’s biggest exporters, saw the largest amount of income gains due to the WTO’s rules-based trading system, the report said. The report also finds a direct correlation between WTO membership and a sharp rise in exports, saying both the WTO and the General Agreement on Tariffs and Trade have led to a “significant increase” in global exports.

“A GATT or WTO accession leads to a rise in exports for most of the member states,” the report said. Although it is sometimes difficult to “identify the direct country-specific effects” of WTO membership, the report obtained in-depth “country-specific estimates” to more accurately assess the impacts of the WTO on each member country. It concluded that for the “majority” of countries, the effects of joining the WTO are “positive and sizable.”

The report comes less than a month after the WTO’s dispute settlement system stopped functioning due to the U.S.’s refusal to allow new appointees (see 1912240016). The upcoming year “is shaping up to be a critical one” for the state of the WTO, the report said, as members face “institutional and political challenges” within the multilateral rules-based trading system. The study advocates for the continued operation of the WTO, saying its achievements are “clear” despite the future of the WTO being in question. “It is no exaggeration to consider the rules based system under the shelter of the WTO as a crucial pillar for the experienced economic prosperity over the past decades,” the report said.

International trade is in “a deep, existential crisis,” the study said, calling the U.S.’s blocking of appointees to the appellate body “the most immediate threat.” But a “more fundamental problem” is the growing diversity of its members, the report said, ranging from poor and rich countries to strict autocracies and open democracies. And because each member has a veto right, creating a consensus rules-based system has been one of the most difficult hurdles. “Given this complexity, striving for a uniform body of rules has become a challenge despite the existence of special carve-outs for developing countries and the possibility of plurilateral agreements,” the report said.

But the international trading system cannot afford to abolish the WTO, which has delivered “very sizable economic benefits to almost” every country in the world. “Wrecking the system would impoverish the world and make distributional concerns much more pressing,” the study said. “The challenge, therefore, is on adjusting the rules such that they do justice to the complicated landscape we face today.”

The report made three suggestions to sustain the WTO: members should agree to “keep minimum functions of the multilateral system operative,” work on a “plan B” -- or a legal system that can substitute for the WTO in case it collapses -- and continue with regional trade agreements. “Regional deals provide a degree of legal certainty in times where the big reorganization of the global trading order opens many questions that will take time to be solved,” the report said.