From Dunkel to Donald: Full reversal of USA on multilateralism | Donthi Narasimha Reddy

Post World War II there was no way colonialism could continue, which enabled Western economies to grow by plundering natural resources in other countries. Their leadership realised that free countries will exercise their right and choice to choose their trading partners and what to export and what to import. Quickly, a General Agreement on Tariffs and Trade was formulated. Western economies that have been built on extraction and externalisation of costs started feeling the pinch of this freedom. Each of them had to negotiate with each of the other countries to whom they wanted to sell their goods, made from minerals and goods imported from other countries. However, this was taxing them, delaying the achievement of their targets and impacting their economy. Thus, the words protectionism and multilateralism began making rounds. Each country which was negotiating the best form of trade relations was branded as protectionist, simply because it did not serve their economic interests. It took almost five decades for the Western economies to realise their goal in the form of World Trade Organisation.

In the 1980s and 1990s, global parleys were dominated by trade talks largely pushed by the United States. There was lot of opposition, cajoling and subtle arm twisting over the text in the General Agreement on Trade and Tariffs. When the trade talks appeared to be collapsing, a certain Dunkel Draft emerged in 1991. This later resulted in the agreement and emergence of World Trade Organisation. United States was the principal force behind the years of trade talks, WTO and a rule-based system of trade. In the years leading upto the formation of WTO, India was seen as the main obstacle by USA. A declassified CIA document said, “India would probably benefit from more liberalised world agricultural trade, especially if export subsidies in developed countries are reduced”. India didn’t jump into WTO talks out of enthusiasm—it was a strategic response to a crisis, shaped by domestic economic pressures (basically balance of payments crisis), pressure from International financial institutions (conditionalities over loans), shifting global trade dynamics and an amenable leadership (in the form of P. V. Narasimha Rao and Manmohan Singh).

Indian leadership viewed trade liberalization as a tool for growth, efficiency, and global integration. To secure loans from the IMF and World Bank, India had to liberalize its economy. This meant deregulation, reduction of tariffs and import quotas and opening up to foreign investment. These were core principles of the global trading system, and aligning with them meant moving toward WTO norms. India initially resisted some aspects (especially related to agriculture, intellectual property (TRIPS), and services (GATS)) but ultimately signed on in 1995, recognizing potential access to global markets and legal protection for its exports through WTO dispute mechanisms.

By the 1990s, globalisation, liberalisation and privatisation concepts began gaining currency. Seeing India as a potential obstacle, USAID and British DFIC poured money into India to remove domestic hurdles to transformation of Indian economy into a globally dependent consumerist economy. Reform policies have been brought, in every sector, using these concepts to ward off criticism. These 3 concepts were effective in repelling arguments of caution, negotiation and protectionism. In India, both the national parties, BJP and Congress, walked the tight rope between globalisation and nationalism, but ultimately linking entire Indian economy to global trade.

Without naming the WTO, towards whose establishment US has spent millions in 1980s and 1990s, US has rejected the rule-based trading system, which its creation. President Trump implemented extensive tariffs, referred to as "Liberation Day tariffs," were framed as a declaration of economic independence. These have been criticized for undermining the WTO’s role in regulating international trade.

In March 2025, the U.S. suspended its financial contributions to the WTO, which accounted for approximately 11% of the organization’s budget, straining the WTO’s capacity to function effectively.? While specific counts of Trump’s references to the WTO are unavailable, his policies and public statements have placed the organization under considerable pressure, leading to debates about its relevance and effectiveness in the current global trade environment. USA was bullish when it wanted WTO and equally bullish when it did not want it as well. Liberal economists are most probably in a quandary, with multilateralism tossed away by the champion.

Now, the US of A, the champion and the principal benefactor of multilateralism and globalisation has reversed its approach, simply because, as Trump says other countries are taking advantage of the US by imposing high tariffs. World Trade Organisation was established as a rule-based trading system, with an in-built democratic process of negotiation and dispute settlement mechanism. Yet, despite this, developing countries found that trade was never free, with developed countries dictating the terms of trade. WTO was built to cater to the needs of Western economies, most specifically USA. As part of this, WTO never included crude oil and many other forms of goods, including waste. Military weapons and defense equipment are not subject to WTO trade disciplines. Many minerals, nuclear materials and technology and space technology are also not covered. Digital trade and e-commerce are now being contemplated. Overall, developed countries wanted a system of trade, which is advantageous to their exports. But, the other world has fought back and built a system which allows rule-based trade. Thus, this system is not working as per US expectations. The recent Trump’s declaration of liberation day tariffs on 2nd April, 2025, is a fall back by the USA on protectionism and bilateralism primarily to continue the dominance of their dollar economy.

(Author: Dr. Narasimha Reddy Donthi is a researcher, columnist, adjunct professor, campaigner and an environmental justice activist. He is a columnist too. He advises the Climate Action program for Centre for Earth Leadership and Sustainability (CELS))