The role of the WTO is to avoid a ‘prisoners’ dilemma’ problem in international trade.
- What is game theory?
- Explain the prisoners’ dilemma in words àhow would you explain this to someone in year 11 of high school? [Practice explaining things intuitively, you’ll need this at work].
- Explain the prisoners’ dilemma using a two-by-two (2x2) matrix.
- Apply the example to international trade using two countries choosing to set high (H) or low (L) tariffs.
better off and the other strategy makes another country better off), WTO can negotiate to align their incentives.
- President Donald Trump has long criticized the role of WTO and threated that US would leave WTO. Some argue that:
- WTO has done a poor job in lowering the trade barriers.
- WTO has sent American production and jobs overseas.
- If US leaves WTO, US can establish new trade agreements with other major nations.
How would you respond to the arguments above?
- This seems not be the case. The major economies such as UK, Canada, Japan has confirmed their support to WTO and its reform. If US leaves the WTO, other countries can raise the tariffs and other trade barriers against the US.
https://www.wto.org/english/news_e/news19_e/dgra_29jun19_e.htm
- Large economies (e.g. US) can threaten the WTO, but leaving the international trade system can be costly for them. Discuss the costs of leaving WTO for US.
- WTO rules encourage the protection of intellectual property rights.
The debate:
- Pharma companies need patents to incentivise production.
- Patents make vaccines expensive by limiting supply. This hurts the poor.
- The proliferation of the disease in highly unvaccinated poor communities leads to new variants, like Omicron.
Are TRIPS a good idea? What about IP of things not related to health, but can foster economic growth or sustainable development?
