Rebuilding the World Trading System

In Rebuilding the World Trading System, Andrew Stoeckel answers those questions. He goes back to basics. The market economy is the only system capable of generating what people want. But markets need the proper rules to function efficiently and deal with external effects - whether these markets are domestic or international. Having the right set of trade rules is pointless unless there is compliance. Both aspects need fixing, but the second helps fix the first.
Compliance with domestic rules is different to what is possible internationally. In a world of nation-states where sovereignty over borders is respected, nations cannot tell others what to do. They will act in their self-interest. But governments cannot make decisions in the national interest if it is not measured. That task needs expertise and, given the constraint of respect for sovereignty, is only meaningful with a proper domestic transparency process. Doing so makes it obvious that the gains from removing barriers to trade primarily accrue to the country removing its barriers. It is the best antidote to the poisonous mercantilist 'exports good, imports bad' thinking.
Arguing for a WTO rules-based system, as the G20 does, is just hollow words without advocating an effective way to ensure compliance. Retaliation over trade barriers by others is not practical since a nation primarily hurts itself when it restricts trade - it 'shoots itself in the foot'.
Although a proper domestic transparency process is essential to identify what is in the national interest that people accept, it is rare. But when done correctly, it also changes the politics of protection in several ways. First, by informing and educating governments and the public about good policy. Next, it exposes narrow vested interests, weakening their influence. Third, by helping build coalitions for reform by identifying those bearing the burden of protection. Fourth, by creating a more predictable policy environment, encouraging investment. And finally, by creating an environment conducive for better rules to evolve as things inevitably change.