So the WTO has finally ruled that the tariffs imposed by the Bush administration on imported steel are illegal. This is an important moment, not least because the WTO is a body that successive US administrations have championed -- unlike the UN General Assembly.
For an adminstration that preaches the cause of free markets and deregulation -- the US Treasury Secretary John Snow was singing the praises of the US economic model at a press conference in London this week -- the Bush White House moves in mysterious ways. Not to put too fine a point upon it, the imposition of tariffs on imported steel drove a coach and horses through the free market `Washington Consensus' policies that the Clinton and both Bush administrations had been urging on the rest of the world.
The EU was right to take the case to the WTO, and the WTO is right to rule against the US.
The WTO is the successor `policing' body to the rather awkwardly named GATT, or General Agreement on Tariffs and Trade (sometimes known as the General Disagreement on Tariffs and Trade).
GATT was one of the `Bretton Woods institutions' set up after World War II, and named after the Bretton Woods, New Hampshire, conference of 1944 which planned the postwar economic order.
The need for such an order was plain. Not only were the high unemployment and associated protectionism of the interwar years bad in themselves: they were generally considered to have contributed to the rise of fascism and the outbreak of the 1939 to 1945 war.
On the whole, for all the strains imposed upon it, the Bretton Woods system of fixed but adjustable exchange rates worked well until it broke down in the early 1970s; this was under the strains of the inflationary financing of the Vietnam War and then the oil crisis of 1973 to 1974.
* Began as the GATT, a product of the Bretton Woods accords establishing a post World War II economic order.
* The GATT fell apart during the 1970s as a result of the 1973 to 1974 oil crisis.
* Fears of protectionism in the early 1990s prompted the creation of the WTO on Jan. 1, 1995.
*The WTO has 146 member countries and is headed by Director-General Supachai Panitchpakdi.
The combination of these events gave birth to the phenomenon of `stagflation' -- inflation and recession simultaneously. World leaders were so concerned that, led by the then president of France Valery Giscard d'Estaing, they embarked on a series of annual economic summits whose main purpose was to keep the leaders together and ward off temptations towards protectionism.
With the collapse of the 1990s US boom,the prolonged recession in Japan, and stagnation in continental Europe, fears of protectionism have revived.
The imposition of US tariffs on steel imports was, and is, a protectionist move, and would probably have received more attention if it had not been overshadowed by the aftermath of Sept. 11 and then the Iraq War. This is a very important moment in world economic affairs, and Washington's response to the WTO ruling -- an appeal against it -- is not encouraging.
The world economy is delicately poised at the moment, not least because we have yet to see solid evidence of a sustainable recovery.
US Treasury Secretary Snow and US Federal Reserve chairman Alan Greenspan are trying to talk up the US recovery, but at the moment it is largely talk. As it demonstrated even before it was elected, this is a ruthless US administration, and US President George W Bush will stop at little in order to be re-elected. But let us hope that, after Iraq, he will draw the line at trade wars.