World Trade Law: not the trade law of the world?

WTO was born on two premises. First, it is a wealth creation concept due to efficiency and comparative advantage (for comparative advantage concept, refer to my paper on AEC). Free traders promise you to be richer not rich when you join free trade. Second, free trade promises that everyone/every country benefits absolutely from the world trade by the grand postulate ‘comparative advantage’. This postulate says develop the best industries you have, even if those industries are less efficient than similar industries in the rest of the countries in the world. The two premises, HOWEVER, presuppose the existence of an equal playing field. Joseph stiglitz already knew this much better than us. During his study and career in IMF and World Bank before 1998, he concluded that Free Trade is disadvantageous for many developing and underdeveloped countries because of unequal playing field. He was particularly concerned with the issue of information asymmetry. This work won him Economic Noble Laureate in 2001.

Now, my main contention is that World Trade Law concept fails to address unequal playing field issue. My first premise is that unequal playing field is an axiomatic situation, a reality, some realist would say. It is a situation we are born with, just like being born black, chinese, disabled, and women. I am trying to borrow the concept from human rights regime. Human rights discipline dissects protections of inalienable and alienable rights based on which situations human are innately born with. If human are born as a women, certain traits of women rights, which are conditions women are born with, become inalienable and vice versa. Since the unequal playing field is an innate circumstance, conceptually, the question is whether it is fair for such that we impose equal burden to everyone/every country or we should equalize the unequal playing field? This is conceptually very troublesome! The World has not decided on this matter, and as a matter of fact would not want to decide on this matter. On the one hand, developed countries say that unequal playing field is a situation everyone is born with, not a result of their bad deeds, including economic resources; therefore, it is not fair to ask U.S or E.C. to sacrifice this advantage for developing states to one point where developing states can compete on the same level as the developed states. This situation is similar to discrimination for stewardess jobs based on height. Caucasians are generally higher than Asians; therefore it is acceptable that airline companies do not hire Asians stewardess simply because they are Asians (not tall enough). On the other hand, developing and under developed countries say those innate circumstances should be remedy before the free trade is implemented, since the TWO PREMISES of free traders presuppose equal playing field. It is unfair to ask the Asians to compete with the US or EU for steward/ess jobs by measurement of height. The same principle applies to all industries with less cutting edge advantages not because developing countries are less efficient in production, but rather because of unequal playing field. In reality, developing countries such as China, wins the market competition by imposing awfully bad labor rights and environmental protection so COSTS can be squeezed. This means all products from China can be cheaper to compete with US’ products. China claims she did not exploit the environment in such severe manner as US did for 300 more years (subsequent to industrial revolution), therefore china retains the right to exploit the environment, while US has to start remedying the damaged environment. The US claims that this equal playing field should exist in market so China has to take EQUAL responsibility for preservation and protection of the environment. China says when she actually needs the environmental resources so dearly, she was required not to exploit the environment in 1980s (the booming of China economy). If the US wishes China to conserve the environment, preferential treatment and advantages have to be granted to China PROPORTIONALLY. This is similar to the following analogy. There are 10 breads to be divided for 2 persons. One is poor, while one is rich. Equality is to give the poor and rich 5 breads each, while proportionality means giving the poor 7 and the rich 3.

Above-like issues cannot be settled because there is no understanding as to what concept of equal playing field is required: innate circumstances are advantages, therefore no effort should be required to equalize such playing field OR innate circumstances are injustice, therefore efforts must be put to equalize such unequal playing field? Nonetheless, my first premise stands on the vagueness of the equality concept: is it congruent or proportional?

Second premise, assuming we come to an agreement to unequal playing field is unjust since it is innate circumstances, how can WTO principles draw a line between when positive discrimination for disadvantaged countries are enough? When enough is enough? If WTO is to create an equal playing field than current policies must discriminate advantaged countries (such as US and EU) in unequal manners to equalize the unequal playing fields. Now the biggest “catch” is how to determine to what point WTO will stop granting such positive discrimination. How to assess? Who to assess? In a simpler analogy of bread above, do we divide the breads into 8-2, 7-3, 6-4, or 9-1? This is a very delicate and complicated question no one can come out with a clear cut answer. The difficulty lies in states’ compromise to what industries (assuming US and EU are happy to do so) they should give up for other countries’ positive discrimination, foreseeability of such industries’ business potential, occurrence of urgent needs of the industrial products, and when do they stop granting such positive discrimination. Is it even possible to stop at that point of time?

All in all, the two premises I offered above paint you an ugly picture of the WTO reality. The accomplishments of the two dilemmas above are really strenuous since there are numerous political, business, and vested interest in local industry. Global Financial crisis adds up more salt to the open wound. WTO principle are currently dominated by superpower, striving very hard to maintain status quo as to information asymmetry and unequal playing field to be able to expose natural resources and economic disability of many third world countries and developing countries. As long as they maintain information and technological gaps, WTO is not a trade law of the world; it is a product of economics tyranny which is designed to pierce the economic wound of many countries in the world softly and sophisticatedly. The needle is too soft that when it gets under our skin, we do not realize it until it nearly kills us all by rupturing our vein.