The Limits of the WTO

In “Governing the Interface of U.S.-China Trade Relations,” Gregory Shaffer argues that legal rules and dispute processes can play a major role in managing conflict and competition between the United States and China. While trade is the central focus of Shaffer's article, he realizes that it cannot be severed from other dimensions of the great power rivalry, including human rights and security issues. Shaffer rejects the idea promoted by some scholars (e.g., Petros Mavroidis and André Sapir) that the World Trade Organization (WTO) should double down on neoliberalism in response to the impact on trade of China's industrial policies by crafting rules that would constrain distinctive features of China's political economy. Such an approach fails to explain why China, a rising power with a strong sense of its own sovereignty and entitlement to its own political and economic system, would ever agree to these constraints. Shaffer and I agree on the basic vision of a pluralist WTO that respects deep differences among states and that is deferential to domestic policies to further legitimate objectives, whether protecting the environment or promoting the observance of basic labor rights around the world. Yet I differ with Shaffer on where the WTO fits into an overall strategy for addressing the global economic governance issues raised by the U.S.-China conflict. While I see the WTO as a useful and necessary part of the picture, I have a lesser estimate than Shaffer of its amenability and centrality to addressing many of the governance challenges that are at play. The post-war General Agreement on Tariffs and Trade from which the WTO system originates still plays a crucial role in providing a structure for voluntary reduction in tariffs through negotiations based on reciprocity and a set of rules for the legal security of tariff concessions. This is reinforced by non-discrimination norms that apply to domestic policies that affect trade. But where non-discriminatory domestic policies are claimed to be trade restrictions, it is much less clear that they should be disciplined multilaterally through a trade-focused institution like the WTO that is not particularly sensitive to the demands of public policy in complex areas of regulation.