Abstract
WTO rules were constructed largely based on neoclassical theory with a complete set of markets and without endogenous technological progress. In that world, free trade is Pareto efficient. But under more general and relevant conditions, free trade may not only not be Pareto efficient, it may exacerbate existing disparities across countries.
The resurgence of industrial policies, contravening WTO strictures, represented an important challenge to the existing rules-based framework before Trump. But since the beginning of Trump’s second term, new questions arise: While it was recognized that asymmetries in power affected both the writing of rules and their enforcement, there has been no real attempt to enforce the rules against the US. Yet enforcing the intellectual property rules during the pandemic resulted in vaccine apartheid and untold unnecessary hospitalizations and deaths. Do we really have a rules-based global trade system today? Is this ersatz rules-based “system” anything more than a fig leaf for the unbridled exercise of power? Or is an imperfect rules-based system still better than the law of the jungle? Can we create a better G-1 system? What might that look like?
