Sridhar Vembu says the present WTO regime is destined to collapse. Here's why

Zoho CEO Sridhar Vembu also appeared to agree with the notion that the problem with the World Trade Organisation is that it has a 19th Century conception of trade.

Zoho CEO and Padma Shri awardee Sridhar Vembu on Tuesday said that the current World Trade Organisation regime is destined to collapse due to persistent and growing imbalances.

He was commenting on a Twitter thread shared by a finance professor from US's Peking University, Michael Pettis, on the failure of the World Trade Organisation to accomplish its goals.

Great thread.

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The present WTO regime is destined to collapse due to persistent & growing imbalances.

Economic resilience demands that we balance production and consumption more locally.

That is the basis on which we are investing. https://t.co/VNG0X6Vuss

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— Sridhar Vembu (@svembu) June 13, 2022

According to Pettis, although  the World Trade Organisation has been trying to smoothen the path of globalisation by lowering barriers to trade, it has not been able to succeed. That's because global trade has been increasingly dominated by a set of countries that run large, persistent trade surpluses and another set that run the large, persistent trade deficits that correspond to those surpluses.

Sridhar Vembu also appeared to agree with Pettis when he said: "The problem with the WTO is that it has a 19th Century conception of trade."

"It believes that capital tends to stay at home and that trade imbalances are largely the consequence of tariffs and other forms of trade interventions. It ignores the sources of trade imbalances in distortions in income distribution."

Pettis further added that economies only run large persistent trade surpluses because their workers receive too low a share of their production to allow them to consume enough to import in line with their exports.

Responding to this, Vembu tweeted, "Economic resilience demands that we balance production and consumption more locally. That is the basis on which we are investing."