The world economy enters a new phase of prolonged recession without any breakthrough in sight. Not only globalization can lead the world economic growth but also globalization itself can no longer expand its fronts any further. Nevertheless, international community seems no longer capable of creating new global initiatives. DDA is dead and TPP and TTIP are fading away. There are many reasons to worry about protectionism in the face of the structural changes and appearance of nationalistic politics in both the USA and Europe.
From economics point of view, however, the nationalistic approach may be only a rational attempt to avoid economic and political costs associated with the internationally cooperative approach. The real worry is that the nationalistic approach would increase trade disputes among trading partners. It would accelerate the recent increasing trend of discriminatory measures by major trading countries.
So, it’s time to recognize what the international community has achieved in this regard, the WTO. The current WTO is more competent as the supervisor of code of conduct for trade policy than as a marketplace of international trade. We have witnessed the value of the WTO as a stabilizer of international trade during the global financial crisis in 2007-2008. It is time that the international community has to be content with the current role of the WTO in defending the world economy from protectionism.
Author: Hongyul Han, Professor of Economics, Hanyang University, Korea.
Download Valdai Paper #60 in English (PDF)