How Much Further Can the WTO Go? Developed Countries Issues

A lack of political leadership is often perceived as the main source of the repeated difficulties of the WTO. The paper argues that such a lack of leadership is a systemic problem for many years to come. The large industrial democracies have constitutional rules making particularly difficult trade liberalization in agriculture, and their governments rely on majorities which are increasingly thinner, hence less resistant to even tiny pressure groups.

Then the paper argues that bilateral trade agreements (“bilaterals”) do not offer a solution to such a lack of political leadership. Firstly, it shows that the often mentioned recent increase in bilaterals grossly overestimates the true evolution. Secondly, it stresses the fact that, so far, the push behind these bilaterals comes mostly from the small countries, not from the large ones. Lastly, it shows that the 2006 initiative of the European Commission – the first proactive move of a large country – would launch a race to bilaterals so costly that they are unlikely to be sustainable in the long run.

Lastly, the paper argues that improving the efficiency of the WTO negotiating process can offer an appropriate solution to a lack of leadership. It highlights six sources of reform which have one common goal – shooting at shorter Rounds – and which would “flexipline” the WTO process, that is, discipline it – by focusing on the core WTO business of market access and relying on formulas for negotiating market access in goods – and make the WTO process more flexible – by reassessing the value of binding tariffs, relying on plurilaterals for negotiating market access in services, re-interpreting the Single Undertaking principle, and mellowing the bilaterals by more WTO-friendly rules of origin.