This is a Talking Trade post with a sports metaphor. These can be tricky, as not everyone in the audience will know or understand the sport. But hang in there—I think it helps in understanding why the current global trading system is in crisis.
The current international system for global trade is built on a set of commitments, rules and procedures managed through the World Trade Organization (WTO).
Basically, a group of players (call them teams) got together in the period after the trauma of the Great Depression and World War II to create a new game. They wanted greater predictability from a pastime that had been going on for centuries, but had gotten more complicated with more teams competing than before.
The WTO Baseball League, if you will, was created by 24 teams but quickly expanded. It gradually added more teams, who created more and more rules under a process of collective decisionmaking. The specifics of the game were clarified by both formal and informal processes, so teams and players understood what behaviors were acceptable and which were considered problematic. The position of the umpire or referees was also given greater prominence and additional rules as the decades went by.
The entire League underwent a substantial transformation in 1995, with the introduction of an expanded set of rules, more clarity on the roles of the umpires, and even greater attempt to provide consistency across the game. The League was rebranded to reflect this change in emphasis.
But cracks were already starting to show. While the approval of rule changes by consensus worked well in the early days, by the time of the rebranding exercise, the League included 76 teams. The total number of teams has now ballooned to 164 with more waiting to join. Trying to get approval from all for new activities has become impossible.
Teams started discovering the power of the consensus rule and simply avoided allowing players to take the field at all. This has dramatically slowed the ability of the League to even hold games at all—often keeping play from happening for months or years on end.
While the WTO Baseball League has a head and a set of staff dedicated to supporting the game, the chief has limited power as the teams hold all the control. As with real baseball leagues, there are some teams that are richer or more powerful than others. Some teams are barely competitive at all.
The fan base or audience for WTO Baseball has also dwindled. There have been various proposals for ways to attract fans back into the seats, including additional outreach, marketing and PR. There has even been some tinkering with solutions to provide outcomes tailored to a subset of teams.
Given the lack of innovation taking place in the game, many teams discovered that there were alternative venues for playing baseball. They started joining other Leagues and tweaking the rules. All are playing baseball, but the conditions and the rulebook vary.
For example, some Leagues are quite small, with only two teams. Such Leagues might be highly ambitious, with a wide range of new rules in place and regular interactions to consider variations in the game. Other Leagues may be adjusting the game much more slowly, with only limited changes from WTO Baseball.
Many Leagues have been formed with neighbors, to make it easier to play regular games and address rule changes that make sense in the local or regional environment. The more localized games can attract a more enthusiastic fan base.
Increasingly, Leagues have been experimenting with more fundamental adjustments, such as making the whole field smaller to increase the speed of the game. Some have decided to feature only one element of the game in a League.
All these outside innovations are viewed with suspicion and often downright hostility by some in WTO Baseball. Changes are seen to be destroying the traditions and values of the game. Whole careers have been built on supporting the League.
Yet it is quite clear that the League, as a whole, has not been capable of fielding competitive games for some time now. Since the rebranding in 1995, the League has managed only three substantive outcomes: the Information Technology Agreement I and II (which dropped tariffs on technology products and arguably helped fuel the internet and digital revolution), the Trade Facilitation Agreement, and today’s announcement of the Domestic Services Regulation Agreement.
Note that all three covered only a subset of members. ITA includes 75 with the addition of Laos this week, the TFA is an unusual agreement but implementation of commitments stood at 70% of the membership earlier this year, and the services agreement applies to 67 members.
On the biggest issues of the day, such as the global pandemic and associated supply chain disruptions or climate change or digital trade, the WTO has not been an active part of the conversation. Worse still, there are no obvious pathways for the whole institution to engage.
Teams, or members, are actually tackling some of these issues. But they are not doing so within the WTO League. Instead, they are addressing the topics in other Leagues. They are building on the existing structure of the game and pushing the boundaries in new ways. Fans are in the stands at many of these alternative Leagues with growing interest in future games.
Of course, there are also challenges associated with lots of Leagues and adjustments and variations in rules. For example, if a League opts to shorten or lengthen the distance from the pitcher’s mound to home plate, players drafted to suit the local conditions may not be able to manage the transition back to WTO Baseball.
It was, in fact, precisely this local variation in the game that led to the creation of the WTO Baseball in the first place. It was a mechanism to sort out inconsistencies and agree on common platforms and approaches. Eventually, if the alternative Leagues forming now keep taking off, it may be necessary to reconvene at the WTO level to sort out rules once more.
But for now, unless and until the WTO League manages to adapt to the clear demands of many teams, it looks increasingly like trade will get handled in other venues. For teams that have no other League options or are simply not terribly competitive, this is especially problematic.
***This Talking Trade was written by Dr. Deborah Elms, Executive Director, Asian Trade Centre, Singapore. If you want to dive further into the baseball metaphor, read Moneyball by Michael Lewis or watch the movie starring Brad Pitt and Jonah Hill. Think, especially, of the problems Major League Baseball had adapting to whole new ways of selecting players and the strong resistance by scouts and others to the idea that past practices were no longer relevant in an era of big data.***