But this system is under increasing pressure. As of 11 December, the quorum of the appeal body for the WTO dispute settlement procedure has been over, so trade disputes can no longer be definitively assessed. „A rules-based system cannot last long without the application of the rules,“ Bluth said, adding: „The WTO urgently needs an update to continue to create wealth. The total membership of the WTO has seen an overall prosperity growth of some $855 billion. This represents an average profit of 4.51% of GDP per member country. But membership in the world club is also a good deal for most countries, in addition to the best winners. For example, EU member states, with $232 billion, and OECD countries, benefit from a total of $480 billion. But the history of success also has its drawbacks: non-WTO countries lose – on average – 0.96% per country – due to greater economic integration of WTO members. The study uses the most modern econometric techniques to assess the effects of WTO membership. It is based on long-term datasets (1980-2016). Given the economies of scale induced by international market integration, commercial and wealth effects are calculated based on estimates of a pseudo-Fish Maximum Likelihood (PPML) method.
Trade protectionism is rarely the answer. High tariffs only protect domestic industry in the short term. In the long term, global companies will hire the cheapest workforce, anywhere in the world, to make higher profits. Environmental protection measures can prevent the destruction of natural resources and crops. Labour laws prevent poor working conditions. The World Trade Organization imposes rules on free trade agreements. „The WTO is the operating system of the global economy that ensures that goods and services can be traded daily in a stable, rules-based environment. Even if no organization is perfect, anyone who thinks they can rely on a system of bilateral trade agreements rather than the WTO risks losing a lot of wealth in international trade,“ says Christian Bluth, a trade expert at the Bertelsmann Foundation. But the trade agreements we sign and discuss – like the proposed Trans-Pacific Partnership – have almost nothing to do with free trade. These agreements are really just selective protectionism.
Some participants will be exposed to the full burden of global competition, such as U.S. factory workers. But some will make the rules that protect them from competition, like some pharmaceutical companies. They use these agreements to force governments in developing countries to use account collectors to enforce their patents, driving up drug costs. A recent New York Times article has reappeared something that has been known for some time: globalization – and trade agreements that make the rules of the game of globalization – are not a win-win. The WTO helps ensure that trade around the world is fluid through its trade agreements. WTO members know what the rules are, and they understand sanctions for violations of the rules – creating a safer trade area for all. The WTO also offers its members a fair method of resolving trade disputes; They do not need to resort to violence or war. How the WTO resolves trade disputes is important. It prevents trade protectionism, a practice that hinders economic growth.