A MARTÍNEZ, HOST:
For decades, the World Trade Organization refereed global trade disputes until it was sidelined by the U.S. So in the midst of a new trade war, Wailin Wong and Adrian Ma of The Indicator from Planet Money explain why Washington has turned its back on an organization it helped create.
ADRIAN MA, BYLINE: After World War II, powerful countries like the U.S. and the United Kingdom got together to set up the new ground rules for the global economy.
WAILIN WONG, BYLINE: These post-war arrangements culminated in the creation of the World Trade Organization in 1995. It's basically a big club of countries that agree to trade with each other using the same set of rules.
MA: When governments get into disputes over these rules, they go to the WTO, and here's how that process works. First, the case gets heard by a panel of experts. They make a ruling.
WONG: And then the governments can appeal that decision to a different panel of experts. This group is known as the appellate body.
MA: Jennifer Hillman is a professor at the Georgetown Law Center, and she served on the appellate body from 2007 to early 2012.
JENNIFER HILLMAN: You basically have to be ready to drop everything the minute you are put onto an appeal, fly to Geneva, and then the work is quite, quite intense.
WONG: Intense like 70- to 80-hour weeks. The panel has around just a couple of months to make a decision, and this ruling, by the way, is final.
HILLMAN: And if at the end of the day the appellate body says there was a violation, then what it does is recommend that the country bring its measure into compliance. In other words, fix the problem.
WONG: Fixing the problem might mean reducing tariffs on specific products or lifting a ban on certain kinds of imports. And for a while, the system of settling disputes worked. Jennifer says countries would generally follow the WTO rulings, even the U.S.
MA: And the U.S. did lose at the WTO. Like, several years ago, the state of Washington had to end a preferential tax rate for aerospace manufacturing. This came out of a long-running dispute between the U.S. and the EU over subsidies to companies like Boeing and Airbus.
WONG: Quinn Slobodian is a professor of international history at Boston University. He points out that when it helped found the WTO, the U.S. signed onto a system where it wouldn't always get its way.
QUINN SLOBODIAN: It was a moment where America, the world's most powerful country, saw it somehow in its own interest to cede part of their sovereignty to this international institution.
MA: However, the U.S. would eventually grow unhappy with the WTO. Quinn says a big factor here is China, which joined the group in 2001 and became an economic powerhouse. And yeah, China was part of the same economic club, but it was also claiming exemptions from free trade rules on the basis of it being a developing country. Jennifer says these frustrations came to a head during the Obama administration, and so the U.S. blocked the reappointment of some members to the WTO appeals panel. Then, during the first Trump administration, the U.S. started blocking all new appointments to the appellate body. In late 2019, the group stopped functioning because it didn't have enough members.
WONG: This paralysis continued through the Biden administration, although it had been in talks on reforming the WTO appeals panel. That work didn't get done before Biden left office.
MA: Where does this leave other countries? Well, historian Quinn Slobodian says governments have been busy making trade deals without the U.S. In fact, Quinn says he thinks the future of international cooperation looks more like this - a bunch of regional agreements.
WONG: Wailin Wong.
MA: Adrian Ma, NPR News. Transcript provided by NPR, Copyright NPR.
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