World Economic Doldrums Ending in 2014? An Unprecedented WTO Agreement Certainly Helps

World peace? Not yet. But more open trade? It seems possible.

The World Trade Organization was born from the ashes of World War II and the zealous trade protectionism that preceded it. As WEC characterized it, sometimes a nation became protectionist and limited imports, and sometimes protectionists became wild-eyed nationalists and inched their nations into war. WTO's champions strongly believe that no two nations with McDonald's franchises will ever declare war on each other; that trade and multinational presences assure peace; that WTO rules will reduce consumer prices by stimulating global competition, resulting in increasing consumer demand that will spur productivity. WTO idealogues believe that "free trade" somehow creates an entrepreneurial class that will champion democracy, eliminate abuses of human rights, save the environment, and nurture equitable economic development. Moreover, WTO members dislike variety in trade agreements: e.g., agreements that favor former colonies (Europe and its Caribbean banana growers), or further non-trade goals (protection of sea turtles or Russia's sugar prices to Cuba). Their clarion call is one set of rules for all the globe. WTO trade is "rules based." It prides itself on one set of predictable global directives (26,000 pages worth!) and contrasts WTO with the disastrous WW II trade system in which nations bargained prices, market shares, quotas, and volumes, and hoped the results would be good for all concerned.

Increasingly, the WTO has become the governor of world trade. It is a freestanding organization of 135 nations, beholden to no one but its members; parallel to the UN but granted power unprecedented in history. The WTO can set trade rules and order stiff penalties against member nations that break them

Compared to glacial climate-change talks, trade liberalization seems on track for improvement, with governments reaching a modest but (almost) universally agreed-upon goal to boost the flow of goods across borders. The WTO has been locked in the long-suffering Doha round of talks since 2001, so this agreement, unveiled this month in Bali, assist the to the global economy to the tune of an estimated $400bn to $1tn. If it comes to fruition, this will be a welcome shot in the arm for the weak global economy.