Mathias Döpfner is the chairman and CEO of Axel Springer, the parent company of POLITICO. The following excerpt is derived from his new book “Dealings with Dictators,” originally published in German by Handelsblatt in 2024.
We find ourselves on the brink of a trade war that targets Europe.
The World Trade Organization (WTO) had just managed to survive the first term of U.S. President Donald Trump. Now, with a new wave of “reciprocal” tariffs and retaliation threats looming, the global community faces significant geopolitical uncertainty and a fragile multilateral trading system. As we approach this year’s Munich Security Conference, it is essential to reassess an institution that has become obsolete.
Freedom and economic success are closely linked; one often serves as a prerequisite for the other. Generally speaking, less freedom in an economic system correlates with lesser success. The notable exception is China, which exemplifies a state-controlled turbo-capitalism that has exploited the WTO for years.
Disguised as a proponent of “free trade,” China has leveraged its WTO membership to extend its influence through unfair practices. The WTO, rather than being a solution, has significantly contributed to the problem by undermining genuinely free economies and facilitating the ascent of undemocratic entities. It fosters dependencies and has become a Trojan horse for unfree trade.
Established in Marrakesh in 1994, the WTO introduced rules for services and intellectual property, following the earlier General Agreement on Tariffs and Trade (GATT) formed in 1947 with 23 nations. By 1994, 128 countries had joined.
GATT emerged post-World War II to avert a recurrence of the tariff wars of the 1920s. What began as an effective collaboration between Western countries has evolved into the larger, ineffective WTO we see today, necessitating a complete reevaluation of its structure and purpose.
WTO members agree to abide by three fundamental principles in their international trade relations: non-discrimination, reciprocity in negotiations, and the removal of tariffs and trade barriers. Member states are required to extend the same benefits to one another. Non-discrimination mandates that any advantages or support given to one country must be automatically granted to all member states.
However, the WTO permits special provisions for countries that self-identify as “developing,” a classification that lacks a formal definition. Nations like China have labeled themselves as “developing” upon joining the trade alliance, receiving numerous benefits such as extended deadlines for commitments and easier market access. Most critically, it obligates other WTO members to consider the interests of these countries when implementing national or international measures—benefits that China has aggressively retained since its accession.
Moreover, China has consistently breached WTO rules, with a lengthy record of violations that includes forced technology transfer, substantial undisclosed subsidies, and competition distortion by state-owned enterprises.
Many foreign firms have had to reveal critical technological data to access the Chinese market, costing international businesses billions. Consequently, Chinese competitors in several sectors have rapidly matched and even surpassed industry leaders.
A striking instance, particularly for Germany, is the photovoltaic or solar power systems sector. This industry was non-existent in China until 2005, but by 2022, China’s share in all manufacturing stages exceeded 80 percent, fueled by copied innovations and extensive state subsidies.
China perceives Europe as an accessible marketplace. It skillfully acquires cutting-edge technology, often through less visible “hidden champions” compared to well-known companies like Daimler, Volkswagen, or Volvo. Unique features of Chinese antitrust laws, particularly its Anti-Monopoly Law, allow for the penalization of foreign innovators. Companies that hold patents and charge licensing fees can be labeled monopolists, as experienced by smartphone manufacturer Qualcomm, which faced nearly $1 billion in fines for allegedly excessive royalties.
Lastly, China has not liberalized its markets as much as often claimed. International firms were unable to fully penetrate its financial sector until 2021, and a lack of transparent regulations hampers business operations. Joint ventures between Chinese and foreign companies in the telecommunications sector have failed, alongside the bans on platforms like Facebook and Twitter since 2009.
Such scenarios would be unimaginable in reverse. Chinese firms operate largely unimpeded in Western markets, while the People’s Republic enforces its rules primarily to enhance its power. The WTO’s framework and its enforcers have proven either incapable or unwilling to address this imbalance, leaving its principle of reciprocity as little more than a hopeful notion.
In practice, the WTO is deteriorating, permitting double standards and allowing members to operate under disparate rules. Asymmetry prevails over reciprocity.
Carbon emissions from China have surged more than 200 percent since its WTO accession, overshadowing reductions from the rest of the globe. By 2021, China accounted for nearly one-third of global carbon emissions, surpassing the combined emissions of the United States, India, Russia, Japan, and Iran— the next five largest polluters.
Ultimately, the global climate crisis underscores the necessity of opposing autocratic regimes like China. The core issue of climate change extends beyond individual contributions, such as holiday flights; it lies in the lack of influence over the world’s leading carbon emitter, which pursues an entirely different political agenda. Moreover, our actions contribute to this situation by outsourcing undesirable environmental impacts to China and other nations.
From today’s perspective, allowing China to join the WTO was a significant misstep driven by optimistic trade policies. Well-intentioned yet misguided, this decision has intensified imbalances detrimental to democratic market economies over time.
The critical error was admitting a major nondemocratic economy, incapable of adhering to free trade principles, into the WTO. The most absurd decision was granting China developing country status—despite being the world’s second-largest economy—along with all the associated privileges and exemptions. This is akin to offering benefits to the most ruthless competitor. The competition could not be more unjust or detrimental.
The outcome of this policy experiment was predictable: while it initially generated growth and economic success for all involved, it ultimately skewed the balance, creating dependencies and unilateral advantages. The self-defeating actions of the United States and Europe have led to a decline in their relative economic strength and contributed to the erosion of the entire WTO.
As for the future, the WTO has reached a critical juncture. What remains is a dysfunctional and paralyzed entity—a mere shadow of its former self. This leads to the unyielding conclusion: the WTO should be dismantled.
“Dealings with Dictators: A CEO’s Guide to Defending Democracy” was published by Simon & Schuster in January 2025.
