The WTO sits on the edge of Lake Geneva in a building that once housed the International Labor Organization and the United Nations High Commissioner of Refugees (UNHCR). We said a few words about it in Chapter 1. It has the distinction of coming under criticism from all points along the political spectrum. This criticism began with the political left in the 1990s who were outraged by certain rulings that affected environmental policies and spread to labor interests who were concerned about trade and wages in manufacturing. It has now moved to the political right in the form of new economic nationalists who, at times, appear to be bent on destroying the institution and its rules-based global trading regime.

Few WTO critics take the time to try to understand it. Despite many flaws, it is an international trade institution that embodies the important principle of multilateralism. As such, it is a response to the tendency toward zero-sum thinking and distributive bargaining discussed in the preceding chapter. What exactly is multilateralism? International relations scholar John Ruggie emphasizes that “multilateralism refers to coordinating relations among three or more states in accordance with certain principles.” Understanding these principles is important.

In his investigation of multilateralism, Ruggie begins with Nazi Germany and Albert Hirschman's National Power and the Structure of Foreign Trade discussed in Chapter 1. He emphasizes that the trade relations pursued by the Nazi government were bilateralist. Here is his description:

This is not multilateralism. In the WTO, any bilateral agreement on trade in a particular good is generalized to all members through what is known as the most-favored nation (MFN) principle. If Japan lowers a tariff on Indonesia's exports of lumber, it must also lower its tariff on the exports of lumber from all other member countries. MFN is a core principle of multilateralism that allows countries to escape the confines of bilateralism.