The tariff crisis is full time for WTO reform

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FT editor Roula Khalaf, chooses his favorite stories in this weekly newsletter.

The writer is a great consultant in the IMF in the International Control Innovation Center, former Executive Director and former consultant in the World Trade Organization

“Freedom Day”, as US President Donald Trump recognizes the announcement of tariffs last week, a deadly blow to the existing international trade system managed by the World Trade Organization.

Established on two fundamental principles – “National Treatment” and “Mostlong Nation” (MFN) – WTO – WTO, forecasting for trade and therefore designed to invest. National treatment guarantees that once a clear custom is imported, they receive the same treatment as “products”. The MFN rule requires the exceptions of free trade zones, to extend the terms of trade equal to all WTO members.

Trump’s action, this is already a decreased and outdated framework, and the rules-based system threatens to transform bilateral transactions into a chaotic Internet. However, chaos stretches an opportunity: a chance to finally push through long-lasting reforms that can finally modernize and revive global trade management.

The famous word belonging to Winston Churchill comes to mind: “Never let a good crisis go in vain.” In this spirit, we should seize the moment and try to rebuild the confidence in the reest of WTO’s outdated work – so far Sactero SacrosanCT consensus procedure.

Although the WTO managed to make a decision on the voting, the consensus is coming to them instead of practice. However, those who do trading talks are a chance to make concessions in others and develop their interests. Their instinct is to oppose the initiatives to win the bargain arm.

Except for all decisions outside this perverted logic, the experience of requiring consensus for all decisions, especially for new trading talks, paralyzes progress in the WTO for two main reasons.

First, this is equal to the rights and positions of all WTO members – it does not reflect the levels of very different participation in global trade. Second, rising geopolitical tensions, not a tool for cooperation, reaching an obstacle, reaching a growing consensus.

If we are serious to revive the WTO, we must have courage to reset the consensus rule in accordance with the truths of the world trade. One of the possibilities set up two large rules, making decisions that require at least 65 percent of the voting members representing 75 percent of the world trade.

If we move in this direction, it would be fair to strengthen special and differential treatment, which means to give special rights to developing countries.

It is difficult to start the reforms that confidence in such a low EBB between WTO members. However, we can begin to restore confidence in determining the avenues for change.

Another choice is a standard feature of the Independent Assessment Department in the WTO – a standard feature of Bretton Woods institutions and all regional development banks. This will ensure that the reforms should not be taken into account in the least critical problems when not guaranteed the safe passage.

The idea is not new and the cost should not be a big obstacle. For example, in the IMF, the Independent Assessment Department operates in only 0.5 percent of the operating budget, but it is very effective. If the WTO wants to fit and be responsible, consider a similar approach.

The increase in the forward path is not necessary to be one of the revenge and chaos. Cool-headed politicians must have a “freedom” announcement by confirming the announcement of Trump’s “Freedom”. The start of the WTO reform and modernization process can deny markets, not confusion, not ahead.