President Donald Trump has set fire to the post-World War II international order with the trade system as the central target of his flamethrower. He has cut off US funding to the World Trade Organization (WTO)<fnref n="1" /> and unilaterally instituted (and in some cases, later revised or revoked) tariffs<fnref n="2" /> on countries around the world creating chaos not only in the trade domain but also in stock and bond markets as well.<fnref n="3" /> It remains unclear whether the existing trade system has been burned down or just substantially damaged. It also remains to be seen what the long-term impact of the Trump trade policies will be on international cooperation more broadly.

This article offers some preliminary thoughts on what a reconfigured trade system might look like, building on two fundamental assumptions: (1) that over the next several years, support for international trade will grow as the value of the trade system becomes better understood and evidence of what happens in the alternative becomes more clear; and (2) that the American people will tire of trade chaos and economic dislocation—and thus seek a President in 2028 who promises to restore a cooperative approach to trade, rebuild international institutions that promote coherent management of economic interdependence, and work alongside other nations to address transboundary challenges (such as climate change, biodiversity protection, and pandemic response) in an effective manner. It argues for building on the most successful elements of the Bretton Woods structure of the 1940s but with substantial regearing of the current system’s core principles and practices to address the WTO’s manifest shortcomings and to better align global economic governance with today’s politics and priorities. And it proposes that the new system be managed through a recast International Trade Organization (ITO) that would aspire to be broadly inclusive but with an expectation that it would likely be plurilateral (at least initially) rather than fully multilateral—given the difficulty that has emerged in recent years in getting some countries to agree to basic reforms.

In reimagining the sort of trade system needed to promote human flourishing across the globe in the years ahead, the Marrakesh Mandate, found in the opening paragraph of the agreement that created the WTO, offers a useful starting point. It calls for a trade system that expands international economic exchange in a manner that raises living standards, promotes full employment, and supports economic development (especially in countries just beginning to engage in the international marketplace).<fnref n="4" /> But it makes clear that efforts to advance economic outcomes should not be the only goal of the trade system. Indeed, while the Marrakesh Agreement does not turn its back on the logic of specialization in production, David Ricardo’s comparative advantage, or economic efficiency<fnref n="5" />, it advances sustainable development as an over-arching framework for international trade.<fnref n="6" /> This mission—never fulfilled or even taken seriously in the WTO era—offers the promise of a new trade dynamic with a wider policy lens that could deliver gains across a spectrum of issues. These new underpinnings would create the potential for a revitalized trade system that would be more economically, environmentally, and politically viable. With a more sustainability-oriented and people-centered foundation, a regeared ITO would be positioned to galvanize broader public support across the world and contribute to a restructured international order that would be fit-for-purpose in the 21st century going forwards.

<footnote n="1">Emma Farge, “U.S. Pauses financial contributions to WTO, trade sources say”, *Reuters* (28 March 2025), online: <reuters.com> [perma.cc/8EB2-K6YQ].</footnote>

<footnote n="2">Tayla Minsberg, “A Timeline of Trump’s On-Again, Off-Again Tariffs”, *New York Time* (13 March 2025), online: <nytimes.com>.</footnote>

<footnote n="3">See e.g*.*Domenico Montanaro, “The short history of Trump’s tariff chaos-and more than happened this week”, *NPR* (7 March 2025), online: <npr.org> [perma.cc/VGL8-VA59]; Naomi Rovnick, “Investors seek new tariff-proof market niches as Wall St chaos hits Europe”, *Reuters* (30 April 2025), online: <reuters.com> [perma.cc/2BBG-TMZM]; See also Phil Gramm & Larry Summers, “Gramm and Summers: A Letter on Tariffs From Economists to Trump”, *Wall Street Journal* (30 January 2025), online (article): <wsj.com> [perma.cc/6ZPJ-BU4Y].</footnote>

<footnote n="4">*Marrakesh Agreement Establishing the World Trade Organization*, 15 April 1994, 1867 UNTS 154 [*Marrakesh Agreement*].</footnote>

<footnote n="5">David Ricardo, *On the Principles of Political Economy and Taxation*, 3rd ed (Kitchener: Batoche Books, 1817). See also World Bank Group, “Trade Has Been a Powerful Driver of Economic Development and Poverty Reduction” (12 February 2023), online: <worldbank.org> [perma.cc/R2UC-SPXX]; Brad McDonald, “Back to Basics: Why Countries Trade”, (2009) 46:4 Fin & Dev, online: <imf.org> [perma.cc/GTL5-TYDS].</footnote>

<footnote n="6">*Marrakesh Agreement*, s*upra*note 4, Preamble at para 1.</footnote>
# I. Remaking Trade for a Sustainable Future

A reconfigured trade system designed to promote sustainable development would build on important elements of consensus that have emerged in many countries and in the global political arena over recent decades about the importance of weaving together strategies for progress that encompass economic, environmental, and social priorities.<fnref n="7" /> Recognizing that advances in material well-being and economic growth, while important, must not be seen as a higher priority than other goals—including movement toward an environmentally sustainable future, commitments to worker protections and human rights, and progress toward fundamental fairness and more inclusive economic outcomes—would provide a critical signal of transformative change in the priorities and underpinnings of the system.

## Principle 1: Sustainable Development as the Over-Arching Trade System Mission

Going back to the *1987 Brundtland Report*,<fnref n="8" /> which popularized the concept of sustainable development, provides a critical starting point for addressing one of the core critiques of the trade system of recent decades: that it had been captured by neoliberal economics<fnref n="9" /> and a belief in *market fundamentalism* that rose to prominence in the 1980s. But the limits of this theory and its narrow focus on economic gains have become plainly evident as various market failures emerged in recent decades.<fnref n="10" /> In particular, the push for trade liberalization and open markets without regard to the resulting dislocation suffered by many smaller companies, communities, and workers has proven to be problematic—and resulted in political blowback from both the Left and the Right and deep dissatisfaction in the Global North as well as the Global South.

In addition, as trade created new industrial powerhouses, it magnified pollution impacts and other harms that economists call *uninternalized externalities*. In the absence of robust national regulatory structures in many developing nations, this economic growth resulted in rapidly increasing greenhouse gas (GHG) emissions and other forms of pollution across the Global South and to some degree in the Global North as well.<fnref n="11" /> The parallel inability of the member nations of the WTO to work together to hold companies and countries to agreed-upon sustainability standards has been a major reason for the global failure to adequately address the build-up of GHGs in the atmosphere, preserve biodiversity, and advance other sustainability goals.<fnref n="12" /> As a starting point, a revitalized ITO must be designed to advance (and not undermine) the world community’s commitment to a ramped-up response to climate change and to an environmentally sustainable future more generally.

The first core principle for the new trade system must therefore reflect not only a fundamental commitment to sustainable development, but also a recognition that trade-driven economic progress cannot come at the expense of other societal values and policy aspirations. In this regard, alongside environmental vitality and social cohesion, peace and security deserve special mention. In emphasizing the value of a balanced portfolio of policy goals, the reconfigured trade system proposed here would correct the late 20th century narrow framing of trade as all about economic growth and business efficiency which translated into gains for a narrow set of interests (most notably multinational companies and a small number of nations led by China). It would restore the broader original vision that undergirded the 1940’s international trade system that emerged out of the ashes of World War II. In that Bretton Woods moment, the leaders proposed a framework of rules and principles for global commerce (as embodied by the *Global Agreement on Tariffs and Trade<fnref n="13" />* (*GATT*)), as well as institutional structures (including the World Bank, International Monetary Fund (IMF), and a never-realized ITO) to knit countries together and promote peace and security alongside economic cooperation.<fnref n="14" />

In fact, the trade system sketched out by Cordell Hull, America’s 47th and longest-serving Secretary of State, sought to advance economic cooperation as a foundation for the post-war international order. He recognized that “if we could get a freer flow of trade […] so that one country would not be deadly jealous of another, and the living standards of all countries might rise […] we might have a reasonable chance for lasting peace.”<fnref n="15" /> To be clear, Hull saw economic benefits for all from a carefully structured trade system where countries got the benefit of selling what they produced best beyond their borders. But he was not primarily seeking to advance opportunities for *comparative advantage* or economic efficiency. Rather he proposed a flexible framework that encouraged nations to open their markets and expand trade but also to maintain their ability to address domestic priorities such as jobs and inequality. For the structure of cooperation he inspired, Hull won the Nobel Peace Prize.

As students of history will know, with a spirit that the current *America First* mantra echoes,<fnref n="16" /> the United States (US) Senate declined to ratify the proposed *ITO Charter*—leading to the demise of the international institution that was meant to have implemented the *GATT*. But as noted above, this article proceeds from an assumption that the not only will the global community tire of the current US administration’s non-collaborative approach to trade, but so too will the American people—creating a political opportunity for a new ITO offering a revamped approach to global economic governance.

<footnote n="7">The importance of these three prongs of sustainable development has been recognized going back to the Brundtland Commission in the 1980s. The tripartite logic has generated widespread discussion and has been seen as offering a broadly accepted paradigm shift that goes beyond the narrow economic growth theory of the 20th century. See e.g. Jeffrey D Sachs, *The Age of Sustainable Development*(New York: Columbia University Press, 2015); Ben Purvis, “Three pillars of sustainability: in search of conceptual origins” (2018) 14:3 Sustainability Science.</footnote>

<footnote n="8">World Commission on Environment and Development, *Our Common Future*(Oxford: Oxford University Press, 1987), online: <sustainabledevelopment.un.org> [perma.cc/YPS6-XUY9].</footnote>

<footnote n="9">“The 1970s marked a profound transformation of the trading system, which became more formalized and technical as well as motivated by economic and ideological concerns rather than the political ones that had inspired the founders of the regime. The political and economic landscape had also changed: the 1980s were the decade of the Reagan—Thatcher revolutions, of the Washington consensus, market fundamentalism, and neoliberalism. Embedded liberalism and the Bretton Woods model gave way to neoliberal thoughts and to a push for broad-based trade liberalization (now caricatured by many as hyper-globalization).” Elena Cima & Daniel C Esty, “Making international trade work for sustainable development: toward a new WTO framework for subsidies,” (2024) 27:1 JIEL 1 at 5, citing Elena Cima, *From Exception to Promotion: Re*-*Thinking the Relationship between International Trade and Environmental Law* (Leiden: Brill, 2022) at 19.)</footnote>

<footnote n="10">Neoliberalism and market fundamentalism-based policies can lead to increased pollution, rising inequality, and worker dislocation, often through deregulation. See e.g. Anders Fremstad & Mark Paul, “Neoliberalism and climate change: How the free-market myth has prevented climate action” (2022) 197:10 Ecological Econ; Ha Joon Chang, “Introduction to the Symposium on Free Market Fundamentalism” (2007) 5:2 Seattle J Soc Justice 497 at 498 (“It is well known that market fundamentalist policies have increased inequality, poverty, injustice, violence.”)</footnote>

<footnote n="11">Developing countries were responsible for 95% of total emissions increases in the last decade. Holly Rooper, *Emissions Growth in the Developing World* (Washington, DC: Climate Leadership Council, 2024), online: <clcouncil.org> [perma.cc/7LLH-BLS4].</footnote>

<footnote n="12">Daniel C Esty, “Sustainability policies complicate the WTO’s work—and make it more indispensable than ever” (26 February 2024), online: <fortune.com> [perma.cc/S3ZV-XHRM].</footnote>

<footnote n="13">*General Agreement on Tariffs and Trade*, 30 October 1947, 58 UNTS 187 [*GATT*].</footnote>

<footnote n="14">See Elena Cima & Daniel C Esty, *supra* note 9 (The “vision of the multilateral trading system was perfectly in line with the new economic philosophy for the world economy (which came to be known as the Bretton Woods model) based on a delicate compromise between the creation of international rules aimed at trade liberalization and global economic cooperation on one side, and the recognition of every government’s need to respond to domestic economic and non-economic priorities on the other. The underlying idea was for international economic policy to be ‘subservient to domestic policy objectives—full employment, economic growth, equity, social insurance, and the welfare state—and not the other way around.”) (citing Dani Rodrik, *The Globalization Paradox* (London: Norton & Company Inc., 2011) at 69—70). See also John Howard Jackson, *Restructuring the GATT System* (New York: Council on Foreign Relations Press, 1990) at 52.</footnote>

<footnote n="15">Cordell Hull*, The Memoirs of Cordell Hull* (New York: Macmillan, 1948) 81. See also Elena Cima,*From Exception to Promotion. ReThinking the Relationship between International Trade and Environmental Law* (Leiden: Brill, 2021).</footnote>

<footnote n="16">See e.g. US, The White House, *President Trump’s America First Priorities*(Washington, DC, Jan 20, 2025) online: <whitehouse.gov> [perma.cc/QRH8-P2WR].</footnote>
# II. Recognizing the Value of a Carefully Designed International Trade
        Organization

Hull’s insights remain powerful. An international marketplace that creates a foundation for shared economic progress and a sense of common economic destiny provides powerful incentives for nations to work together rather than settle disputes through threats or violence. This concept of *doux commerce*<fnref n="17" /> dates to French Enlightenment thinkers such as Voltaire and Montesquieu—and proved to be a defining feature of life in the latter half of the 20th century where shared economic opportunities managed through carefully designed rules-based international institutions helped to reduce warfare significantly. While Vladimir Putin has dented this theory by attacking a major trade partner, the evidence from the past 80 years compared to the first half of the 20th century makes a strong case for Hull’s argument. But this trade cooperation logic has disappeared from recent political discourse not only in America but in many parts of the world.

It is now high time that the lessons of the past be relearned. A thoughtful review of economic history over the past century demonstrates that open trade and the provision of economic opportunities to the widest number of nations makes it easier to collaborate not just on peace and security but also on the delivery of global public goods.<fnref n="18" /> Thus progress on inescapably worldwide challenges such as climate change, biodiversity protection, cyber security threats, and pandemics is put at grave risk by a shift away from a trade system that promotes international cooperation. This logic drives home the value of putting sustainable development—with its 17 dimensions as articulated by the 2015 United Nations (UN) Sustainable Development Goals—at the heart of a revitalized international trade system. It offers furthermore a reminder that trade-driven economic progress should be valued, but trade should always be understood and structured as a means to multiple ends—and not as an end in itself.

## Principle 2: Recognizing Flexibility as an Essential Element of a Regeared Trade
        System

Cordell Hull’s insights must not only be re-captured but also adapted to our current circumstances. In this regard, a regeared ITO should be structured to produce positive-sum economic outcomes while preserving the national flexibility to address domestic political priorities. The potential for such an approach to deliver gains across multiple policy vectors can be found in the track record under the *GATT*-framed trade system across the fifty years after the end of World War II. During this time period, US Gross Domestic Product (GDP) rose more than 30-fold from $228 billion to $7.6 trillion.<fnref n="19" /> And at the same time, the wages of American workers rose dramatically, inequality narrowed considerably, and pollution levels (other than GHGs) fell significantly.<fnref n="20" />

Global growth followed a similar trajectory with many nations—in the developing as well as the developed world. For example, Organization for Economic Co-operation and Development (OECD) members saw on average 4% annual GDP growth in the 1950s and nearly 5% annual GDP growth in the 1960s.<fnref n="21" /> In more recent decades, a significant number of developing countries have experienced substantial growth—with China leading the way with its GDP rising from $735 billion in 1995 to $18 trillion in 2025.<fnref n="22" />

But upon closer examination, the picture becomes more variegated. As Branko Milanovic<fnref n="23" /> and others have demonstrated, the globalization of the 1990s and early 2000s translated into major gains for many segments of the world community, but real challenges for blue-collar workers in the Global North and limited gains the least developed nations, which have yet to engage in the international marketplace.<fnref n="24" /> Likewise, the benefits of trade, including those that bolstered the Global South, were not distributed broadly but rather concentrated in a relatively small number of hands with particularly significant gains going to a limited set of countries.<fnref n="25" />

<footnote n="17">See Charles de Secondat & Baron de Montesquieu, *The Spirit of Law* (originally published in French as *De l’espirit des Loix* in 1748); see also Albert Hirschman, *The Passions and the Interests: Political Arguments for Capitalism Before its Triumph* (Princeton: Princeton University Press, 1977).</footnote>

<footnote n="18">See generally Ernst Ulrich Petersmann*, Transforming World Trade and Investment Law for Sustainable Development* (Oxford: Oxford University Press, 2022).</footnote>

<footnote n="19">World Bank Group, “GDP (Current US $)—United States”, online: <data.worldbank.org> [perma.cc/25TJ-YNMH]; Christopher J Tassava, Economic History Association, “The American Economy During World War II”, online: <eh.net> [perma.cc/A6R4-FTYD].</footnote>

<footnote n="20">The decades post-World War II saw notable increases in hourly compensation for workers in the Global North, but wage stagnation in recent decades. See Jeffrey Frankel, “World Economic Forum, Longterm View on Wages in the United States” (2 January 2018), online: <www.weforum.org> [ perma.cc/77HE-BD6N]. See also Jeffrey Frankel, “Does Trade Fuel Inequality” (2 January 2018), online: <project-syndicate.org> [perma.cc/MW43-7TAG] (noting that in the US, inequality rose significantly in the 1980s).</footnote>

<footnote n="21">Stephen A Marglin, “Lessons of the Golden Age: An Overview” in *The Golden Age of Capitalism: Reinterpreting the Postwar Experience*(Oxford: Oxford University Press, 1990).</footnote>

<footnote n="22">See Irma Adelman, “Fifty Years of Economic Development: What Have we Learned?”, online (pdf): <documents1.worldbank.org> [perma.cc/2YFT-WN5U]; See also World Bank Group, “GDP (current US($)—China”, online: <data.worldbank.org> [perma.cc/EDC9-FUAS].</footnote>

<footnote n="23">See e.g. Branko Milanovic, “Global Inequality: A New Approach to the Age of Globalization” (Cambridge: Belknap, 2016); Branko Milanovic, “The Great Convergence”, *Foreign Affairs* (July/August 2023), online: <foreignaffairs.com> [perma.cc/B47V-4UK3]; Branko Milanovic, “Globalization and Inequality” (2012), online: <stonecenter.gc.cuny.edu> [perma.cc/6RTP-GS42]; Globalization, including production and trade, facilitated relocation of production and manufacturing to lower-cost regions and competition from low-wage workers abroad can impact wages for workers in the Global North. See, e.g., Robert Scott, Valerie Wilson et al., *Botched policy responses to globalization have decimated manufacturing employment with often overlooked costs for Black, Brown, and other workers of color* (Washington, DC: Economic Policy Institute, 2022). See also Richard Baldwin, “Globalisation, automation and the history of work: Looking back to understand the future”, *UN Trade & Development* (16 May 2019), online: <unctad.org> [perma.cc/D876-MLL9].</footnote>

<footnote n="24">For example, between 1990 and 2015, China and India saw a nearly 6-fold increase in GDP per capita. See Bernhard G Gunter, “Three decades of globalization: which countries won, which lost?”,*The World Economy* (11 January 2020), online: <onlinelibrary.wiley.com> [perma.cc/ST9Q-9L6Q]. Furthermore, increases in globalization trade also contributed to wage gaps between high- and low-skilled labor. See Uri Dadush & William Shaw, “Globalization, Labor Markets, and Inequality”,*Carnegie Endowment for International Peace* (2 February 2012) online: <carnegieendowment.org> [perma.cc/EJN9-FYT2]; See also Stefan de Vylder, *The Least Developed Countries and World Trade—Second Edition* (Stockholm: Swedish International Development Cooperation Agency, 2001), online (pdf): <cdn.sida.se> [perma.cc/U6BF-5XLB] (noting that least developed countries have had less success in leveraging globalization, even compared to other developing countries).</footnote>

<footnote n="25">Charles Gore & Michael Herrmann, “Globalization and the Least Developed Countries: Issues in trade and investment” (1 November 2015), online (pdf): <www.undp.org> [ https://perma.cc/H6WJ-CT2E].</footnote>
# III. Better to Bend Trade than End It

But the lesson from the recent trends should not be that trade is fundamentally bad. Indeed, trade benefits continue to flow in many directions. Nor should it be that the problems of wage stagnation for blue collar workers in the Global North would best be addressed by high tariffs. In fact, there is virtually no evidence to support this proposition.<fnref n="26" /> Rather than sweeping generalizations, what is needed is more thoughtful analysis of the limitations of the trade system and carefully targeted policy responses.

In this regard, the assumption that all trade relationships involve zero-sum payoffs where fierce bargaining is the key to success is a fundamental mistake. The goal should be win-win outcomes with success measured across the multiple policy dimensions of sustainable development. We must furthermore confront those who might be willing to shatter the trade system (often with no picture of what comes next), with the facts about the economic progress the existing system has fostered despite its flaws—particularly for the Global South.<fnref n="27" /> The better path forward would be to build a new International Trade Organization that is aligned with current issue priorities and geostrategic realities—rather than abandon efforts at coordination or leave global commerce in a tangle of hundreds (or thousands) of bilateral trade compacts.

## Principle 3: ITO must be Designed and Implemented to Promote Sustainability

Creating a new trade governance structure that moves the world toward a sustainable future rather than undermining that process will require some modification of the existing WTO’s rules and procedures. But the changes required are actually quite modest.

The first step toward a trade system that is environmentally aligned is simply to establish the widely adopted recognized *Polluter Pays Principle* (*PPP*) as core trade system rule.<fnref n="28" /> Such a foundational expectation for business and thus for international trade would mean that no company’s business model could be premised on spilling harm onto others whether that might be through air pollution sent up a smokestack, effluent flowing into a nearby river, or greenhouse gases emitted into the atmosphere. The idea that, as economists would say, negative externalities must be internalized has emerged a starting point for business operations in a wide range of settings in recent years.<fnref n="29" /> If a rejuvenated ITO were to require that pollution harms be stopped or paid for, the trade system would immediately become a powerful force for sustainability.<fnref n="30" />

To implement this commitment, the new ITO would need to declare that whenever a government allows goods to be produced in its jurisdiction without regulation that eliminates pollution harms (or charges for such negative impacts) to enter the international marketplace, that government has implicitly subsidized the production of these goods.<fnref n="31" /> These subsidies would then need to be subject to existing *GATT* rules that permit countervailing duties to be imposed to eliminate the competitive advantage that the inadequate regulation might have enabled. In the proposed new subsidy regime, such duties should be authorized on a company-specific (not country-wide) basis to sharpen the incentive for corporate adherence to the *no uninternalized externalities* principle.<fnref n="32" />

A second step would be to refine the existing WTO subsidy rules to allow more flexibility for nations providing government support to production practices that promote sustainable development. As Elena Cima and I have proposed, reframing the subsidy rules around the sustainability impacts of specific programs of government support would go a long way toward making the trade system work for (and not against) sustainable development.<fnref n="33" /> Thus, subsidies that promote renewable power generation, clean production, or sustainable farming should be given a presumption of conformity with trade system rules. But on the other hand, government support for fossil-fuel-based manufacturing or production-based agriculture should be subject to countervailing duties or other trade penalties.

To implement this new framework, the ITO would need to work with countries, industries, companies, and other international organizations, such as the International Organization for Standardization (ISO), to establish the standards that would define the sustainability baseline required to export a product in compliance with the proposed *no-externalities* rule. These standards would need to be structured in an open and inclusive process that ensures outcomes that are scientifically based, analytically rigorous, and transparent. The negotiations would not, of course, be easy. But as Don Elliot and I have argued:

> now is the time […] [to take on] the remaining job of eliminating or internalizing all environmental externalities that cause harm to others […] [recognizing] that concessions to practicality and feasibility will need to be made […] [but that the required tradeoffs will be ever less significant] […] due to technological and scientific advances.<fnref n="34" />

The presumption in favor of sustainability-enhancing subsidies would be rebuttable—and subject to rules (or as trade policymakers like to say, *disciplines*) that would require that the government support to be: (1) transparent and carefully explained, (2) effective in advancing valid sustainability goals, and (3) proportional in that the sustainability gains clearly outweigh any trade distortions—and not be: (1) a disguised barrier to trade or (2) creating market-dominant entities that will use the government support to drive other competitors out of the marketplace.<fnref n="35" />

In addition, the move to establish a new subsidy structure and sustainability standards would need to be advanced in a manner that respects the fact that Global South nations come to the conversation from a different starting point. The proposed new sustainability rules and standards would therefore need to be paired with a commitment to capacity building for producers in developing nations.<fnref n="36" /> The *Villars Framework for a Sustainable Trade System*,<fnref n="37" /> a comprehensive structure of possible reforms, offers several suggestions in this regard. For example, those implementing *border carbon adjustment* strategies, such as the European Union’s Carbon Border Adjustment Mechanism (CBAM)<fnref n="38" /> might be encouraged to recycle the revenue collected to the nations whose products have been hit with tariffs to enable them to move their production practices toward the net-zero GHG emissions target that the EU seeks to promote. Alternatively, the International Trade Centre, a Geneva-based organization working in cooperation with the WTO and UN Trade and Development (UNCTAD), which aims to help small—and mid-sized enterprises become ready to engage in international trade, might be recommissioned as a Sustainable Trade Centre that aims to help these same companies meet the emerging structure of sustainability standards.

A third step would be to create a general ITO presumption of flexibility (and presumed *GATT* conformity) for action undertaken in fulfillment of international efforts to respond to global climate change, such as government efforts to reduce greenhouse gas emissions in accordance with *Nationally Determined Contributions* under the 2015 Paris Agreement. Similar flexibility might also be allowed when countries believe that delivering essential domestic policies would put them at risk of being seen as violating their trade obligations. But at the same time, it would be useful to limit the use of the existing WTO *national security* exemption (*GATT* Article XXI) with a structure of disciplines (similar to those sketched out above in the sustainability context) to prevent this provision from becoming a basis for any country at any time to declare itself free from any trade system rule.<fnref n="39" />

<footnote n="26">Larry Summers, former Secretary of the Treasury, has warned that tariffs could lead to a recession, including over 2 million Americans losing their jobs. See e.g. Christopher Anstey, “Summers warms U.S. likely headed to recession, 2 million jobless”,*Fortune* (8 April 2024) online: <fortune.com> [perma.cc/VA24-Z4FE].</footnote>

<footnote n="27">“From 1990 to 2017, developing countries increased their share of global exports from 16 percent to 30 percent; in the same period, the global poverty rate fell from 36 percent to 9 percent. Not all countries have benefited equally, but overall, trade has generated unprecedented prosperity, helping to lift some one billion people out of poverty in recent decades.” World Bank Group, “Trade Has Been a Powerful Driver of Economic Development and Poverty Reduction” (12 February 2023), online: <worldbank.org> [perma.cc/2TM8-QHVY].</footnote>

<footnote n="28">The polluter pays principle was adopted by the OECD in 1972 as a principle for avoiding spillovers of harm or uninternalized externalities. See OECD Environment Directorate, *The Polluter-Pays Principle, OECD Analysis and Recommendations* (1992), online: <one.oecd.org> [perma.cc/TYK7-TJSC]. Then in 1992, the *Rio Declaration on Environment and Development* dedicated Principle 16 to the polluter pays principle, asserting that “National authorities should endeavour to promote the internalization of environmental costs and the use of economic instruments, taking into account the approach that the polluter should, in principle, bear the cost of pollution, with due regard to the public interest and without distorting international trade and investment.” See *Rio Declaration on Environment and Development,*UNCED, 1993, UN Doc A/CONF.151/26/Rev.1 (Vol I). Around the same time, the *Helsinki Convention* incorporated the principle with regard to pollution in the Baltic Sea. See *Convention on the Protection of the Marine Environment of the Baltic Sea Area*, 9 April 1974, 1507 UNTS 166, art 3. Since then, the Polluter Pays Principle has been referenced in a variety of instruments, such as the *2000 London Protocol*, *1998 Rotterdam Convention*, *2001 Stockholm Convention on Persistent Organic Pollutants*, and many others. See Jose Felix Pinto-Bazurco, “How to Enforce the Polluter-Pays Principle” (8 February 2022), online: <iisd.org> [perma.cc/N5AA-4Q6L] (noting the list of international agreements where reference to the PPP is documented). For an analysis of how the Polluter Pays Principle may apply in carbon pricing, see also Bob Ward & Naomi Hicks, “What is the polluter pays principle?” (London: London School of Economics and Political Science, 2022). For further analysis of polluter pays principle and sustainable development, see Candice Stevens, “Interpreting the Polluter Pays Principle in the Trade and Environment Context”, (1994) 27:3 Cornell Intl L J 577 (noting the specific context of the polluter pays principle in the OECD and challenges of internalizing costs to protect shared environments).</footnote>

<footnote n="29">See e.g. Busines Rountable, News Release, “Business Roundtable Redefines the Purpose of a Corporation to Promote ‘An Economy That Serves All Americans’” (19 August 2019), online: <businessroundtable.org> [perma.cc/6ZCH-9HZE]; see also EU, *Directive 2024/1760 of the European Parliament and of the Council of 13 June 2024 on corporate sustainability due diligence and amending**Directive*(EU*) 2019/1937 and Regulation (EU) 2023/2859*, [2024] OJ, L 2024/1760 online: <data.europa.eu> [perma.cc/RY72-WBSA].</footnote>

<footnote n="30">For an explanation of why the principle of internalizing negative externalities is the key to a sustainable future, see E Donald Elliott & Daniel C Esty, “The End Externalities Manifesto” (2021) 29:3 NYU Env L Rev 506.</footnote>

<footnote n="31">Daniel C Esty, *Greening the GATT* (Washington, DC: Institute for International Economics, 1994).</footnote>

<footnote n="32">See Elliott & Esty, *supra* note 30.</footnote>

<footnote n="33">Elena Cima & Daniel C Esty, “Making international trade work for sustainable development: toward a new WTO framework for subsidies” (2024) 27:1 J Intl Econ L 1.</footnote>

<footnote n="34">Elliott & Esty, *supra* note 30 at 512.</footnote>

<footnote n="35">Cima & Esty, *supra*note 33 at 15.</footnote>

<footnote n="36">Dan Esty, Jan Yves Remy, Joel P Trachtman and Trevor Sutton, *Villars Framework for a Sustainable Global Trade System, Version 2.0* (Remaking Trade for a Sustainable Future, 2024), online: <remakingtradeproject.org> [perma.cc/ZSB4-QEDM] [*Villars Framework*].</footnote>

<footnote n="37">*Ibid* at 91.</footnote>

<footnote n="38">See Goran Dominioni & Daniel C Esty, “Designing Effective Border Carbon Adjustment Mechanisms: Aligning the Global Trade and Climate Change Regimes” (2023) 65:1 Ariz L Rev 1. See also European Union, “Carbon Boarder Adjustment Mechanism” (28 March 2025), online: <taxation-customs.ec.europa.eu> [perma.cc/3PX7-UMFC].</footnote>

<footnote n="39">James Bacchus, *The Black Hole of National Security*, Policy Analysis no. 936 (Washington, DC: Cato Institute, 2022).</footnote>
# IV. Reciprocity—Properly Specified

President Trump has highlighted the need for *reciprocity* as a core principle of the trade system. He is right that countries must give as much as they take to ensure that trade generates widely shared benefits. As the recent political backlash in many nations against free trade and globalization have demonstrated, any strategic manipulation of the trade rules to the long-term advantage of one nation (or other narrow interests) threatens the *political sustainability* of the entire system.

But reciprocity should not be judged at the individual product level. That Europe imposes a 10 percent tariff on US cars does not mean that the US should put the same tariff on European-made cars coming into the US market. The benefits of trade arise from the fact that nations specialize in producing different things, so tariff rate comparisons on a product-by-product basis make no sense.

Looking at single products in isolation can lead, moreover, to tariffs that backfire in a big way. Slapping border taxes on imported aluminum, for example, might reduce competitive pressure on domestic US producers—and increase their profits. But the US industry produces only about 15 percent of the aluminum used in American products. Because the domestic producers have limited capacity to expand, the real impact of the new tariffs simply raises the cost of imported Canadian aluminum (representing about 2/3 of all imports) and drives up the price of all American products made from aluminum ranging from cars to Coke cans. These tariffs will therefore burden American families with higher costs and damage the competitiveness of US manufacturers selling products that incorporate aluminum.

Nor should reciprocity be judged at a bilateral level in terms of trade between any two nations. In fact, while Mexico runs a trade surplus with the US of about $170 billion, it often has a trade deficit more generally. Mexico should therefore be understood as meeting the standard for give-and-take and sharing fairly the benefits of trade judged comprehensively. Moreover, Mexico’s exports to the US include millions of cars—many of which are co-produced in US factories supporting hundreds of thousands of American jobs. Without this division of labor, the US auto industry would be less competitive and sell far fewer cars both at home and abroad. In addition, one must always keep an eye on the bigger picture. The security benefits the US gets from having peaceful and economically vibrant neighbors on its borders are worth a great deal—far more than any policy leverage or other gains to be anticipated from the tariffs imposed on Canada and Mexico.

## Principle 4: Reciprocity Should be Determined by Reference to a Nation’s Global Trade
        Surplus

In terms of reciprocity, what really matters is whether a nation runs a global trade surplus (covering both goods and services) with *all* other countries. Persistent overall surpluses signal that a nation is taking more from the system than it is giving—and may be engaged in what trade policymakers call *beggar-thy-neighbor* actions such as currency manipulation to improve competitiveness, the provision of hidden subsidies to their own producers, or the imposition of non-tariff barriers to trade that block foreign competition. Discouraging this sort of non-cooperative behavior should be the central focus of trade policy.

A number of nations (including Germany, Switzerland and Vietnam) have significant trade surpluses that need to be addressed. But China stands apart in this regard with a global trade surplus that has risen dramatically over recent decades to $992 billion in 2024. The scale of this persistent surplus is seen by many as an existential threat to the trade system—reflecting industrial policies and an over-arching economic approach that suppresses wages and domestic consumption in order to promote production and export-led growth. Some rebalancing is now urgently required.

Each of the nations with persistent surpluses should be given a transition period (of maybe five years) within which to bring its global trade into balance. To do this, China and others would need to clear away obstacles to imports and regear their economies to promote domestic consumption. Failure to rectify the structural surplus over the specified timeframe would subject the nation in question to punitive tariffs or even suspension of trading rights within the proposed ITO.
# V. Deep Trade Requires Shared Core Values

Perhaps the most fundamental challenge that a reconfigured trade system must address is the reality that an open trade system cannot function without a foundation of *trust* and good will—but these depend on shared values and mutual respect. The very idea of generating win-win outcomes makes no sense if some of the parties are perceived to be investing their *winnings* in efforts to undermine the political stability and future vitality of other parties. Thus, where societal values diverge significantly, deep economic integration cannot be sustained.

As with any structure of law, trade rules cannot be drafted in a manner that will cover every contingency. There will always be circumstances that arise which do not quite fit within the rules as specified. In such cases, finding an acceptable path forward or a reasonable basis on which to settle a dispute depends on the goodwill of the parties and a commitment to following over-arching norms that derive from a long-term shared interest in a collaborative relationship built on mutual respect and equitable treatment. Where parties have a broad base of common values, such a commitment can often be found. Where parties diverge on core principles and fundamental values, sustaining the relationship will not be easy. It is not clear, in this regard, how China (or Russia) and the West can succeed with any project of deep economic integration given their divergent approaches to democracy and the organization of their respective societies.

As EU Petersmann suggests, it may be the case that national sovereignty, democratic politics, and global integration cannot all be accommodated simultaneously.<fnref n="40" /> Given the current geostrategic situation, it appears that deep economic integration is the element that will have to give—and that the trade system that gets rebuilt will need to sacrifice full multilateralism in favor of a plurilateral structure of like-minded nations with a high degree of shared goals and underlying values. Thus, the proposed International Trade Organization should aspire to broad inclusiveness but given the deep divergence in core values, the system may need to start with a narrower group of nations that have sufficiently similar political and economic systems such that the foundation of trust required for open trade will be present.

## Principle 5: *Most Favored Nation* Treatment
        Only for Those Whose Values Align

The principle of non-discrimination between domestically produced goods (or services) and imported products in a future trade system will need to be reconfigured to apply only to those who have committed to a common set of Core Principles (see box 1 below) that would define eligibility to participate in the ITO envisioned in this article. Thus, the *GATT* *Most Favored Nation* (*MFN*) principle of extending the lowest tariff rate and other trade benefits to all WTO countries would no longer apply. *MFN* treatment would only be extended to those who meet the Core Principles commitments. The Principles would need to be carefully negotiated and thoughtfully structured to ensure flexibility in the details reflecting the diversity of nations but clarity on the fundamental elements to which adherence is considered essential.

In fact, what might emerge is a Trade Club (akin to—and perhaps intersecting with—my Yale colleague Bill Nordhaus’s proposal for a Climate Club<fnref n="41" />), within which like-minded countries trade on a fully tariff-free basis. A second tier of nations might be invited to participate in the Club but on a less-favored basis that reflects their shortcomings with regard to the Club’s Core Principles as discussed below. For example, those who fall short of the required GHG emissions reductions and other environmental expectations (such as biodiversity conservation and adherence to safe waste disposal rules) or social standards (including worker pay and rights or human rights obligations) would face *border sustainability adjustments* designed to eliminate any competitive advantage that they might have otherwise obtained from their failure to adhere to the established standards.

A third tier of nations who would likely be seen as cross-wise with the core values of the Club—and thus given even more limited access and terms for trade with Club members—with sensitive sectors (such as semiconductors, artificial intelligence, and advanced communications equipment) entirely excluded.

These Club entry requirements will likely challenge some nations (including President Trump’s America) and might result in their exclusion from the proposed ITO. This outcome, while perhaps inevitable, should not be welcomed as it will make cooperation on other inescapably global agenda items harder to achieve. Indeed, leaving China out of the Club would make it harder to achieve a successful global response to climate change. But the threat of being left out might, over time, induce China to modify its approach to human rights, rethink its stance on Taiwan, and adopt a greater degree of democratic governance. The same incentive to avoid being an outlier within the community of nations and excluded might also have a salutary effect on other nations that have diminished the effectiveness of the trade system by their behavior in recent times.

The goal should be to bring an ever-broader number of nations together in the spirit of cooperation that John Maynard Keynes, Harry Dexter White, Cordell Hull, and the other founders of the post-war international order advanced. But insofar as the success of the institutions they designed can be traced in part to the shared values of the couple of dozen nations that built the Bretton Woods system in the 1940s, it may well be that starting with a small number of like-minded nations will be unavoidable. Indeed, it may turn out that building a new trade system with a more limited number of members will turn out to be easier than undertaking reforms within the fractious WTO of today and its 166 diverse members.<fnref n="42" /> As has become apparent, shared values are fundamental to trust and to fully functioning institutions. In this regard, commitment to the set of shared Core Principles identified above might well prove to be central to overcoming the limitations of the existing trade system with its dysfunctional approach to establishing a consensus for action.<fnref n="43" />

<footnote n="40">See Petersmann,*supra* note 18.</footnote>

<footnote n="41">William Nordhaus, “Climate Clubs: Overcoming Free-Riding in International Climate Policy” (April 2015) 105:4 American Econ Rev 1339.</footnote>

<footnote n="42">See e.g. Richard Baldwin, “The World Trade Organization and the Future of Multilateralism” (2016) 30:1 J Econ Perspectives at 95.</footnote>

<footnote n="43">*Villars Framework*,*supra* note 36 at 70.</footnote>
# —

To establish global reciprocity and reconfigure the trade system, the US should not pull back from trade and pummel friend and foe alike with haphazard tariffs. Rather it should commit to a collaborative effort with others in the global community—perhaps led by the middle powers of the West and the nations of the Global South who have experienced significant trade-led growth and who have come to recognize the need to strengthen the trade system (and to worry about the system fracturing)—to remake the international trade system with new economic underpinnings and recast rules that would promote over-arching reciprocity and fairness, discipline those who violate agreed-upon standards, and advance the commitment to sustainable development found in the *Marrakesh Agreement* that launched the WTO in 1995. A reframed and reinvigorated WTO would offer a mechanism for encouraging international cooperation and delivering the economic gains, broad prosperity, peace, and security Cordell Hull imagined.

To start the rebuilding process, an international conversation should be launched on the five core principles laid out in this paper—with an expectation that this initial framework will be reworked and refined as negotiations proceed:

1. Sustainable development as the over-arching trade system mission
2. Recognizing flexibility as an essential element of a regeared trade system
3. ITO designed and implemented to promote sustainability
4. Reciprocity determined by reference to a nation’s global trade surplus
5. *Most favored nation* treatment only for those whose values align

Finally, one might add to Petersmann’s tripartite incompatibility dilemma<fnref n="44" /> discussed above a parallel trilemma—how to accommodate: (1) profoundly divergent societal values across countries, (2) absolute national sovereignty, and (3) provision of essential global public goods that enable a successful response to worldwide challenges such as climate change. Indeed, while this article provides a starting point for a reconfigured trade system that promotes sustainable development, it ultimately provides just one step towards a sustainable future.

<footnote n="44">Petersmann, *supra*note 18.</footnote>