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  Félix Peña

INTERNATIONAL TRADE RELATIONS NEWSLETTER
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A CHALLENGE FOR THE FUTURE OF THE WTO:
How to articulate the global, regional and interregional trade agreements?

by Félix Peña
January 2012

English translation: Isabel Romero Carranza


 

There are at least three possible scenarios regarding the future of the WTO. The first one would involve the prevalence of a certain "institutional inertia". The second possibility is that of a "re-foundation" scenario. Finally the third one would involve a "metamorphosis" of the WTO.

This metamorphosis would imply continuing and furthering those accumulated assets considered as valuable and effective. It would not necessarily involve casting aside the Doha Round. However, it would require concentrating the efforts, ingenuity and political will on the renewal of the agendas and working methods. It would require a great deal of flexibility to help preserve predictability, needed to encourage productive investments and the development of a denser network of transnational productive chains.

The main challenge will be to link together, within the multilateral institutional framework, the multiple efforts that are being made at a global, regional and interregional level. This would mean to turn into compatible what is usually perceived as contradictory. It would imply accepting the complexities of the world trade agenda and of the means needed to deal with relevant issues as something positive and natural.

That being so, the key issue will be to define operational mechanisms that enable to preserve a reasonable degree of collective disciplines, transparency and connectedness between the different forms of trade agreements in which the WTO members participate. Among other reforms, it would require assigning priority to an in-depth revision of Article XXIV of the GATT 1994.


In principle, there is a relative consensus regarding the following three issues involving the current and future situation of the World Trade Organization (WTO).

The first issue is related to its role as a relevant multilateral institution for the world trading system. On this regard it should be noted that there are no qualms regarding the WTO as a necessary institution in the architecture of global economic governance. What is more, the assets acquired in its course since the creation of the GATT are fully acknowledged. These are considered as valuable international public resources that need to be preserved. Among others, the following contributions that can be attributed to the multilateral world trading system are highly valued: a safeguard against protectionist tendencies -overt or, more frequently, covert- that tend to heighten in times of international economic crisis such as these, with their subsequent impact on world trade; the guarantee of reasonable transparency in trade policies applied by member countries; and an institutional framework to reestablish the reciprocity of national interests affected by behaviors that are considered contrary to the agreed rules.

The abovementioned are contributions that help maintain a reasonable degree of collective disciplines in the world trading system. This is probable the most valued role of the WTO in a world which is starting to show tendencies that in previous historic contexts have led to chaotic situations. (On this regard refer to the article by Sergei Karaganov listed in the recommended reading section of this newsletter).

The second issue over which there is a certain agreement is the acknowledgement that the WTO has to continue to act as a multilateral forum where to negotiate the opening of the markets to world trade, devising ground rules to facilitate the internationalization of the production of goods and services within multiple forms of transnational networks, and generating mechanisms that are functional to the establishment of close links between trade, economic development and environmental sustainability. All this within a context of strong asymmetries in relative economic power, capabilities to compete at a global scale and degree of development of the member countries, which makes it hard to reach the articulation of national interests needed to adopt those decisions that are considered essential.

The third issue refers to the need to adapt the WTO to the new realities of the international system and global economic competition. There is a strong contrast between the current economic reality and world power distribution, and the conditions that prevailed when the GATT was created -the period where the core principles and regulations that still rule the world trading system were originated- and even with those present in 1994, when the WTO was created. On this regard, the concept of a world trading system driven by a restricted group of developed nations with similar visions has become outdated. The main problem lies in the difficulty to find agreement on the most sensitive issues of the global negotiating agenda between the ever-growing number of member countries -currently 157- with visions, realities and interests that seem so different at times, in order to adopt decisions that are effective, efficient and legitimate. (See the October 2011 and the August 2009 editions of this newsletter on http://www.felixpena.com.ar, respectively).

The Doha Round experience illustrates this point. It has not been possible to reach agreements to conclude it, nor to change the methodology of the multilateral negotiation, for example, by reviewing the principle of "single undertaking" and adopting other criteria such as that of "critical mass" that would open the door to the use of instruments such as plurilateral agreements, particularly for the most sensitive issues and sectors of the negotiating agenda.. The recent Eighth WTO Conference exemplified the "no way out" scenario in which the member countries find themselves now. (See the December 2011 edition of this newsletter on http://www.felixpena.com.ar/, and the Bridges Weekly Trade News Digest, Volume 16, Number 1, 11th January 2012, on http://ictsd.org/i/news/bridgesweekly/123034).

The temptation for many member countries interested in moving forward the trade commitments already agreed within the WTO -in the access to markets as well as with other conditions-, is to dodge the rigidity that characterizes the multilateral ambit and try to reach their desired objectives through novel modalities of preferential trade agreement that take advantage of the ambiguities of Article XXIV of the GATT 1994. This is the reason why the number of negotiation processes and agreements has increased significantly.

The problem is that everybody is aware that this path could end up eroding the efficacy and even the legitimacy of the multilateral world trading system, something that the member countries consider not to be compatible with the requirements for global economic and even political governance. The risk of the fragmentation of the system within an international context that tends to be "toxic" is thus not to be underestimated.

As to the future of the WTO, there are at least three possible scenarios. A first scenario is one in which some sort of "institutional inertia" prevails. This would mean to continue working with the same methods and the same agenda of the last years. It would also imply placing the current Doha Round as the central axis of the strategy. This is not impossible. However, it is not advisable. The results could continue to be the same as those achieved so far. It could end up dragging the whole system towards irrelevance and illegitimacy.

A second scenario is that of a "new founding". It would involve a deep institutional reform but still capitalizing on the valuable assets acquired up to this point. It would be the equivalent of what is usually proposed for the global economic and financial architecture. This may be reflected by the expression "a new Bretton Woods". The drawback is that it would ignore the reality in the distribution of power that enabled to achieve the agreements that originated the current institutional scheme of international economic and financial cooperation. This was the outcome of a war, from which the United States emerged as the undisputed rule-maker of the time. This is not the picture of the current distribution of world power evinced, among other examples, by the growing difficulty of the G20 to translate into concrete facts its aspiration to lead the definition of a new international economic order.

A third scenario would be the "metamorphosis" of the WTO. This is what would be more advisable. It would also be the most convenient option for institutional frameworks that are facing difficulties and that play a key role in the governance of regional geographic spaces, such as the European Union and even Mercosur, conceived as the hard core in the governance of the South American space. (See the June 2011 edition of this newsletter, and the November 2011 issue on http://www.felixpena.com.ar/).

The idea of a metamorphosis would involve gradual advances in order to build something new based on the existing assets and through incremental steps. It would involve merging what apparently seems incompatible. It would require making the transition from one stage of the system to the next in a persistent but almost imperceptible manner. In time, the result would be something new but based on what preceded it. It would not imply a rupture with the past nor the temptation to start from scratch. However, it would involve a deep transformation. The new would be a continuation of the old but would not be the same. (On the metamorphosis as a method for social change, where it is difficult to establish the limits between the old and the new, refer to the article by Edgar Morin, "Elogio de la metamorfosis", in "El País", Madrid, 17 January 2010, on http://www.elpais.com/. For a recent example of metamorphosis of a complex national system, see the book by Ezra Vogel on Deng Xiaoping and China's transformation listed as recommended reading at the end of this newsletter).

In the case of the WTO, the transformation would entail continuing and furthering the accumulated assets that are considered effective and valuable -some of which were mentioned above -. It would not necessarily mean casting the Doha Round aside. However, it would imply concentrating all efforts, technical inventiveness and political will on the renovation of the agendas and negotiating methods. Additionally, it would require greater flexibility to face special situations in the case of developing countries; this without harming the necessary predictability to facilitate productive investments and a growing web of transnational productive networks.

Perhaps the main challenge would be to harmonize, within the multilateral framework, the multiple efforts that are being made today at a global, regional and interregional level. This would mean to try to make compatible what is usually perceived as being contradictory. Due to its evident geopolitical implications, an example in the right direction might be to place the recent Trans-Pacific Partnership (TPP) initiative within the perspective of the multilateral global system.

The transformation of the WTO would thus imply accepting the complexities of the world trade agenda and of the means needed to deal with relevant issues as something positive and natural. There wouldn't be a dominant topic (for example trade liberalization), nor a single way to deal with it. The global, regional and interregional would be components of a single multilateral system. As was pointed out by Jean-Pierre Lehmann in the article listed bellow as recommended reading, it would imply reconciling fragmentation with integration in a common vision and framework.
Being that the case, the key issue would be to define operational mechanisms that enable to preserve a reasonable degree of collective disciplines, transparency and connectedness between the different modalities of trade agreements signed by WTO member countries. Among other reforms, it would require assigning top priority to an in-depth revision of Article XXIV of GATT 1994.


Recommended Reading:


  • Berasategui, Vicente E., "Malvinas. Diplomacia y Conflicto Armado. Comentarios a la Historia Oficial Británica", PROA Amerian Editores, Buenos Aires 2011.
  • Burbank, Jane; Cooper, Frederick, "Empires in World History. Power and the Politics of Difference", Princeton University Press, Princeton - Oxford 2010.
  • De Groof, Bart; Geli, Patricio; Stols, Eddy; Van Beeck, Guy (eds.), "En los Deltas de la Memoria. Bélgica y Argentina en los siglos XIX y XX", Leuven University Press, Leuven 1998.
  • FUNCEX, "Revista Brasileira de Comércio Exterior", FUNCEX, n° 109, Ano XXV, Rio de Janeiro, Outubro/Dezembro de 2011.
  • Fukuyama, Francis, "The Future of History", en Foreign Affairs, January/February 2012, Vol. 91, Issue 1, ps. 53-61.
  • Golley, Jane; Song, Ligang (eds.), "Rising China. Global Challenges and Opportunities", ANU E-Press - The Australian National University - Social Academic Press (China), Camberra, July 2011, en: http://epress.anu.edu.au/.
  • Guardiola-Rivera, Oscar, "What if Latin America Ruled the World. How the South will take the North through the 21st Century", Bloomsbury Press, New York - Berlin - London, 2010.
  • Hacher, Sebastián, "Sangre Salada. Una feria en los márgenes", Marea Editorial, Buenos Aires 2011.
  • INTAL-BID, "Informe Mercosur. Período Segundo Semestre 2010-Primer Semestre 2011", BID-INTAL, Buenos Aires, Noviembre 2011, en: http://idbdocs.iadb.org/.
  • Karaganov, Sergei, "A revolutionary chaos of the new world", Russia in Global Affairs, Moscow, 28 December 2011, en: http://eng.globalaffairs.ru/pubcol/A-revolutionary-chaos-of-the-new-world-15415.
  • Kowalski, Przemyslaw; Lesher, Molly, "Global Imbalances. Trade Effects and Policy Challenges", OECD Trade Policy Working Papers, N° 120, Paris, November 2011, en: http://www.oecd-ilibrary.org/.
  • Lanz, Rainer; Miroudot, Sébastien, "Intra-Firm Trade. Patterns, Determinants and Policy Implications", OECD Trade Policy Working Papers, N° 114, Paris 2011, en: http://www.oecd-ilibrary.org/.
  • Lechini, Gladys, "Argentina and South Africa. Facing the Challenges of the XXI Century. Brazil as the mirror image", UNR Editora, Rosario 2011.
  • Lehmann, Jean-Pierre, "Managing diverging forces: integration versus fragmentation", Fung Global Institute Blog, January 9, 2012, en: http://www.fungglobalinstitute.org/.
  • Lewis Gaddis, John, "George F.Kennan. An American Life", The Penguin Press, New York 2011.
  • Mantero, Luciana, "Margarita Barrientos. Una crónica sobre la pobreza, el poder y la solidaridad", Capital Intelectual, Buenos Aires 2011.
  • Meléndez-Ortiz, Ricardo; Bellmann, Christophe; Cheng, Shuaihua (eds.), "A Decade in the WTO. Implications for China and Global Trade Governance", Interntional Centre for Trade and Sustainable Development (ICTSD), Geneva, December 2011, en: http://ictsd.org/.
  • Olivera, Julio H.G., "Economía y Hermenéutica. Una selección de veinte artículos sobre temas de Teoría Económica", Compilación y nota introductoria de Luis Blaum, EDUNTREF, Buenos Aires 2010.
  • Spektor, Matias, "El Regionalismo de Brasil", Plataforma Democrática, Working Paper n° 16, Julio de 2011, en: http://www.plataformademocratica.org/.
  • Tolstoi, León, "Resurrección", Editorial Juventud, Barcelona 2010.
  • Vadell, Javier A.; Taiane Las Casas Campos (organizadores), "Os novos rumos do regionalismo e as alternativas políticas na América do Sul", Editora PUCMINAS - Estudos em Relacões Internacionais PUC Minas, Belo Horizonte 2011.
  • Vogel, Ezra, "Deng Xiaoping and the Transformation of China", The Belknap Press of Harvard University Press, Cambridge, MS - London 2011.


Félix Peña Director of the Institute of International Trade at the ICBC Foundation. Director of the Masters Degree in International Trade Relations at Tres de Febrero National University (UNTREF). Member of the Executive Committee of the Argentine Council for International Relations (CARI). Member of the Evian Group Brains Trust. More information.

http://www.felixpena.com.ar | info@felixpena.com.ar


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