What is the WTO?

Author

Professor of International Relations, American University School of International Service

Disclosure statement

Stephen J. Silvia does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

What exactly is the WTO, and would it matter if the U.S. left it? As an international trade scholar, I’d like to start with the history.

History of the WTO

Creation of the Geneva-based WTO in 1995 was the culmination of a 50-year effort spearheaded by successive U.S. governments to establish and secure a rules-based multilateral trade regime.

Before World War II, European powers imposed harsh trade restrictions against countries outside their empires, which hurt U.S. exporters substantially. This also contributed to Japan going to war to carve out an “East Asian Co-Prosperity Sphere” and Nazi Germany attacking eastward to obtain “living space” – that is, vassal territories – nearby.

When disputes arise, such as the Trump steel tariffs, impartial panels adjudicate using WTO rules and permit injured countries to sanction violators. The U.S. ranks among the most frequent and successful users of this, which has helped keep markets open for American exporters.

What would happen if the US left

If the U.S. were to leave the WTO, other countries could freely raise tariffs against it. And the U.S. would lose access to the dispute settlement mechanism, which would make retaliation the only response available.

This would inevitably raise prices and reduce choice for U.S. consumers, undercut the competitiveness and profitability of companies that rely on imports and slow economic growth. The WTO’s demise would also raise the odds of violent conflict among states.