Examining the systemic malaise from which the Doha Development Round and the WTO suffer, this working paper, produced for the Transatlantic Task Force on Trade, suggests that the problems of the multilateral system are related to profound shifts in the structure of the world economy.
The rise of important new economic players has eroded US and European dominance. At the same time, no one is prepared to lead the multilateral system, which is currently in disequilibrium.
Three possible future scenarios are discussed in this paper. First, an unpredictable mode of muddling through as a means to managing international economic relations. Another scenario, although unlikely, is that China, and possibly also India, may assume greater international responsibilities. Co-ordination between China and the US is a third scenario, although the question remains whether this is politically possible.
In the context of Doha impasse, PTA proliferation and risks of protectionist policies, the US and the EU need to rethink their policy approaches to trade liberalisation. It is imperative to return to the core argument of trade liberalisation – the biggest economic benefits do not come from exports but from removing barriers to one’s own market, thereby increasing competition, productivity and innovation.