The WTO is said to be in a funk – unable to conclude the Doha Round even as its members liberalise unilaterally and regionally. CEPR's newest Policy Insight argues that tactics used to get consensus at the last Round pushed the organisation into decision-making’s “impossible trinity” (consensus, uniform rules, and strict enforcement). A Doha package with something for everyone may be found, thus defeating the impossible triangle. The big-package tactic, however, won’t help the WTO confront 21st century challenges in a timely manner; for that, at least one of the triangle’s corners must be modified.
Three new leaders face the challenge of food and fuel subsidies: Sisi, Modi, and Jokowi
Jeffrey Frankel09 September 2014
Subsidies for food and energy are economically inefficient, but can often be politically popular. This column discusses the efforts by new leaders in Egypt, Indonesia, and India to cut unaffordable subsidies. Cutting subsidies now may even be the politically savvy choice if the alternative is shortages and an even more painful rise in the retail price in future. Ironically, it is India’s new Prime Minister Modi – elected with a large electoral mandate and much hype about market reforms – who is already shrinking from the challenge.
In few policy areas does good economics conflict so dramatically with good politics as in the practice of subsidies to food and energy. Economics textbooks explain that these subsidies are lose-lose policies. In the political world, that can sound like an ivory tower abstraction. But the issue of unaffordable subsidies happens to be front and centre politically this summer, in a number of places around the world. Three major new leaders in particular are facing this challenge: Sisi in Egypt, Jokowi in Indonesia, and Modi in India.
WTO dispute settlement is well-known for its high-profile cases – e.g., US-EU clashes over bananas, hormone-treated beef, genetically modified organisms, subsidies to Boeing and Airbus, etc. – some of which cover annual trade in the billions of dollars. Are the trade stakes from such disputes representative of the WTO caseload? This column presents evidence from a newly available data set and reveals some surprising facts about the prevalence of both large and small WTO disputes.
WTO disputes are now a media mainstay. During one week-long stretch in May, reporters from The New York Times, Wall Street Journal, Financial Times, Le Monde, Frankfurter Allgemeine, and even USA Today published articles about ongoing disputes.
The proliferation of trade ‘clubs’ indicates that governments are keen on engaging in trade liberalisation. This column argues that the creation of new trade clubs under the umbrella of the WTO is inevitable. Such issue-specific (plurilateral) agreements keep the cord with the WTO tight, while allowing countries to cooperate on issues outside of WTO’s grounds.
Why the US and EU are failing to set information free
Susan Ariel Aaronson14 July 2014
The internet promotes educational, technological, and scientific progress, but governments sometimes choose to control the flow of information for national security reasons, or to protect privacy or intellectual property. This column highlights the use of trade rules to regulate the flow of information, and describes how the EU, the US, and their negotiating partners have been unable to find common ground on these issues. Trade agreements have yet to set information free, and may in fact be making it less free.
Tim Berners-Lee, the architect of the World Wide Web, taught us that the internet we have is a function of the choices we (users, companies, policymakers, etc.) make about information flows. For example, in 1995, Berners-Lee chose not to patent his work on the World Wide Web because he feared patenting it could limit its universality and openness. He continues to advocate this. In March 2014, he called for an online bill of rights and created a new organisation to ensure that the web would remain the “web we want” – open, free, and neutral.
With the rise of mega-regional trade agreements, the world trade system resembles a jigsaw puzzle. This column discusses the difficulties involved in consolidating free trade agreements at the regional level, and argues that piecing together the blocs around the world will be even more challenging. A potential way forward is to return to the most widely used modality of trade liberalisation – unilateral actions – but this time involving the multilateralisation of preferences rather than unreciprocated reductions in tariff rates.
Jagdish Bhagwati (1991) famously described the maze of overlapping free trade agreements (FTAs) as akin to a ‘spaghetti bowl’. Several decades later, with the rise of mega-regionals like the Regional Comprehensive Economic Partnership and the Trans-Pacific Partnership (TPP), the fragmentation of the world trade system more closely resembles a jigsaw puzzle. How do we solve this mess? One approach being pursued is to consolidate bilateral FTAs into regional blocs, and then to try and link the blocs up globally – or at least hope that they will eventually.
TTIP, the multilateral trading system and Latin American countries
Anabel González29 May 2014
Mega-regional negotiations will underwrite global governance on 21st-century trade issues and facilitate the proliferation of global and regional value chains. This column writes that Latin American countries would gain from a strengthened and effective WTO to help mitigate the friction and fragmentation that may result from the mega-regionals.
A lot is happening in trade negotiations in almost every corner of the world. Countries have been quite active at the bilateral and regional levels for some time – the WTO has been notified of 432 regional trade agreements.
Supply chains, mega-regionals and the WTO: New CEPR book
Bernard Hoekman19 May 2014
The World Trade Organisation is one of the most successful instances of multilateral cooperation post-WWII. Yet WTO negotiators have yet found a way to break the recent deadlock on key elements such as the market access and rule-making dimensions on the agenda since 2001. This column introduces a new CEPR book that suggests the adoption of a ‘supply chain framework’ that could help to mobilise greater support for concluding the Doha Round and provide a basis to use the WTO as a forum for learning from regional initiatives.
In December 2013, WTO members struck a multilateral agreement at their ministerial meeting in Bali as part of the long-running Doha Round. The Bali Trade Facilitation Agreement – the first such agreements since the WTO was founded in 1995 – is important in demonstrating WTO members can ‘get to yes’ despite their differences. While trade facilitation will benefit traders around the globe, the basic challenge confronting WTO negotiators remains.
Hitting where it hurts: Retaliation requests in the WTO
Diego Bonomo01 March 2014
When a dispute in the WTO does not reach any resolution, the offended member country can request the right to retaliate against the offender. This column reviews the profile of most common retaliation-requesting members. There is a preference among certain countries to either pursue retaliation, or resist compliance. The magnitude of requests and the means of retaliation are also discussed. Overall, requesting retaliation is an important tool of analysis, as it often reveals a country’s goals in the WTO disputes.
When a trade dispute being adjudicated in the WTO’s dispute settlement system reaches the end without resolution, the offended member country requests the right to retaliate – or as the diplomats call it – request the suspension of concessions and other obligations vis-à-vis the offender (Shadikhodjaev 2009).
From the WTO’s inception to the end of 2013, there have been 36 such requests related to 28 disputes. In five cases, typically with more than one dispute settlement number, there were multiple requests by different countries against a single offender. Those cases are:
World-leading trade lawyer, Gary Horlick, talks to Viv Davies about the 2013 WTO Bali ministerial conference and the post-Bali agenda. Horlick discusses food security, agriculture and whether mega regional trade agreements pose a threat to the future of the WTO. They also discuss the potential benefits of the post-Bali agenda for developing countries and the ‘trade transforming’ effect of SMEs and the internet. The interview was recorded in January 2014.