Tag Archives: trade liberalization

A New WTO Deal

WTO Director General Roberto Azevedo presides over the meeting in Bali, Indonesia.

WTO Director General Roberto Azevedo presides over the meeting in Bali, Indonesia.

After years of stalled negotiations, the World Trade Organization concluded its first trade deal in more than a decade last week. The agreement, signed in Bali, Indonesia, could increase the value of global trade by $1 trillion and create as many as 20 million jobs, according to a report by the Peterson Institute for International Economics. The Bali package would harmonize border standards, making international trade less cumbersome—a process known as “trade facilitation.” It also includes provisions permitting developing countries to expand subsidies to their agricultural sector and provides support for developing countries to implement the trade facilitation provisions. But the agreement has widely been critiqued by development experts, who observe that the key provisions of the Doha Development Agenda—liberalization of agricultural trade, access to essential medicines, and other pro-development trade policies—were not included in the current agreement.

Bali was widely seen as a “make-or-break” moment for the World Trade Organization, which has been stalled since the Doha Round was launched 12 years ago. In the meantime, bilateral trade negotiations have proliferated, threatening to make the WTO less relevant. The agreement is seen as an important boost for the WTO, helping to repair its image in international trade circles. But parties remain very far apart in addressing the most important questions in the Doha Round, and it remains unclear whether or not the WTO will be able to translate the progress it made in the Bali Agreement into a broader consensus on the more complicated—and politically challenging—questions it still must address, including farm subsidies, tariffs on industrial goods, and liberalization of trade in services.

What do you think? Does the conclusion of the Bali Agreement signal a shift towards a more multilateral approach to trade liberalization? Or does the agreement represent the limits of the WTO and reinforce the trend towards bilateral negotiations?

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Negotiating Free Trade

TTIPThe establishment of the World Trade Organization in 1995 marked the high point in multilateral negotiations to liberalize international trade. While it was originally envisioned that the WTO would continue to liberalize trade through a successive series of rounds of talks, the ability of the WTO Member States to reach consensus—and growing public opposition to the WTO—left the organization stalled. Instead, states have generally opted to pursue bilateral talks directly with one another.

The United States and the European Union were last week engaged in just such a negotiation, with the aim of establishing a new Transatlantic Trade and Investment Partnership. According to officials, a new EU-US trade agreement could be worth more than 2bn euros (approximately $2.7 billion) per day, with as much as 80 percent of these gains realized from harmonizing regulatory policy.

But this is the stick. Whose regulatory policy should reign supreme? Each of the two trade partners maintains extensive regulations governing public safety and protecting human health and the environment. But the regulations often focus on different areas, and agreement on the most controversial aspects of regulatory policy (such as genetically modified organisms) remains elusive. Critics of the WTO and other free trade agreements warn of the “downward harmonization” of standards, meaning that regulations could tend to favor the lowest level of protections, weakening environmental and health standards.

What do you think? Would a new trade agreement between the United States and the European Union provide beneficial economic growth for the two trade partners? Would the new agreement undermine existing environmental, health, and safety standards? Or can the US and the EU reach agreement that would liberalize trade while maintaining strong regulatory standards?

All Diplomacy is Local

Pascal Lamy, Director General of the World Trade Organization

Pascal Lamy, Director General of the World Trade Organization

In an interesting piece published in The Globalist yesterday, Pascal Lamy, the director-general of the World Trade Organization argued that all negotiating is domestic. Lamy asserts that, particularly in the context of the global financial crisis, there is little reason for optimism regarding global diplomacy. According to him,

The “Westphalian shield” allows all nations to dismiss any requirements coming from the global system to safeguard humanity’s longer-term survival as acts of interference in its internal, national affairs. The shield of sovereignty was not to be pierced.

This is an interesting concession from the man who oversees the World Trade Organization and, at least until recently, had been desperately trying to bring the United States, the European Union, and other major economies to agreement on a new round of trade liberalization. Indeed, Lamy’s argument raises a couple of interesting questions for students of global politics.

First, how do domestic politics and international diplomacy interact? There’s a rich literature on two-level games in international relations dealing with this topic, suggesting the relationship is not as simple as we might like to think.

Second, what is the basis for cooperation in international negotiations, particularly international economic negotiations? For liberal IR scholars, the gains from trade outweigh the costs, so we should prefer liberalization to non-liberalization. But the failure of the WTO to conclude the Doha Round (and the Seattle Round before that) suggests that states do not always behave in ways that the theory suggests they should.

Finally, how does the sovereignty of states, the “Westphalian shield” as Lamy terms it, undermine the prospects of international diplomacy? Realist IR scholars have long asserted that the presence of sovereignty creates an anarchic international system in which cooperation is difficult to maintain. In this context, collective goods problems frequently emerge. What’s interesting about Lamy’s position is the degree to which he appears to have embraced the realist framework.

What do you think? Does the anarchic system of the international system undermine the possibility of cooperation in economic relations between states? If so, how can we explain the general trend of greater cooperation and coordination between states since the end of World War II? Does the global financial crisis affect the calculation of states in new ways? Let us know what you think.