The World Trade Organization at Twenty

Abstract

It is almost always easier to see more clearly in retrospect. Some develop-ments, viewed from the vantage point of history, look more inevitable than they seemed when they began. 1 This brief essay examines the formation of the World Trade Organization (WTO) twenty years after its creation, explores the contributions it has made in its first two decades, and assesses how well it has met the expectations of those who established it. Since the end of the Second World War, trade has served as one of the engines pulling the global economy along the path of prosperity. Trade not only allows nations to benefit by focusing on producing goods and services in which they have a comparative advantage, but it also stimulates innovation and facili-tates the efficiencies of the global supply chains associated with multinational corporations, helping lift millions in developing countries out of poverty. 2 The devastating results of the policies that contributed to the onset of the Great Depression, including protectionist trade measures, have influenced eco-nomic thinking and policy significantly in recent decades. Following passage in the United States of the Smoot-Hawley Tariff Act of 1930, other nations quickly followed suit in sharply raising their own tariff levels, leading to a dramatic decline in world trade. This spread of tariff policies can be compared to a common occurrence at basketball games: when spectators in the front row stand up, those seated behind will soon follow. Some spectators see an advantage in being the first to stand up and the last to sit down. Indeed, the prompt to stand is more readily Porter_LAYOUT.indd 103 5/8/15 5:13 PM