New Trade Politics After the Doha Round

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New Trade Politics After the Doha Round

• Joost Pauwelyn
• Professor of International Law (HEID)
• Geneva, 5 December 2007

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• Havana Conference, December 1947

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• Opening of the Centre William Rappard

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60 years old  operating system 

• Reciprocal exchange of market access
  concessions 
• Domestic politics lead to protectionism
• GATT/WTO enables liberalization through an
  exchange of market access concessions
• Producer driven (replace import with export
  politics)
• Merchantillistic
• Mistrust of own government (replace open with
  closed politics)

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Frequency of WTO Agreements Addressed in the 79
Appellate Body Reports Circulated between
1996-2006
Source WTO Appellate Body, 2007
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 New Trade Politics 
London, 1946
Seattle, 1999
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 New Trade Politics 
New Delhi, 2005
Geneva, 1926
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Overview

• What has changed in last 60 years ?
• What consequences should we draw for the WTO ?
• Conclusions

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Reduction of Tariffs on Industrial Goods1931 to
2000
Source Findlay and ORourke, 2007
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Regional Trade Agreements, 1958-2004
Annual number
Total in force
Cumulative in force
New agreements annually
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Shares in World Trade 1947
Benelux (11)
Other (12)
Brazil
Canada
USA (25)
China
France (9.5)
India
UK (25)
Source Irwin Mavroidis
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Shares in World Merchandise Trade 2006
China (9.6)
Other (40)
EU (17)
India
Japan
Mexico
Switserland (1.6)
USA (16)
Source WTO
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FDI Inflows, Global and by Group of
Economies1980-2006 (billions of dollars)
Source UNCTAD
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What changed in 60 years ?

• CONVENTIONAL
• More members
• More trade
• Less tariffs
• More preferential agreements

• LESS CONVENTIONAL
• Country shares in world trade
• What is traded how
• International flanking policies
• Domestic forces against free trade

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Southern Democrats 1940s 2000s
John Edwards
Cordell Hull
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Consequences of these changes

• I. Is the WTO still needed ?
• II. Does trade liberalization continue to
  require producer-driven  closed politics  ?
• III. In the future, where can the biggest gains
  be made ?

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I. Is the WTO still needed ?
Market access fuel is running out
People support globalization
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The End of History ?
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The End of History ?
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The End of History ?
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A different role for the WTO after Doha

• From  engine  to  stabilizer  against
  resurgent protectionism (DSM)
• From  engine  to  clearing house  where
  liberalization agreed to elsewhere is bound

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Decomposing Tariff Reductions
Decomposing 20 pt. decline
Average Tariffs, 1983 and 2003
Regional
29.9
Multilateral
9.3
Unilateral
Source Martin and Ng, 2004
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A different process for the WTO after Doha

• From prisoners dilemma to assurance game
• From reciprocal concessions (mercantillism) to
  do yourself a favor (welfare analysis)
• From single package to variable geometry

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II. Does free trade continue to require  closed
politics  ?
London, 1946
Seattle, 1999
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 New Trade Politics 
Seattle, 1999 Hong Kong, 2005
Geneva, 1926
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Move back from  closed  to  open  politics

• Engage convince (rather than  cheat on )
  domestic politics
• Offer adjustment tailor-made policies
• From producer focus to consumer/values focus
• Support of open trade policy space  new
  embedded liberalism 

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New  Embedded Liberalism 
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New  Embedded Liberalism 
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New  Embedded Liberalism 
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III. Where are the biggest gains ?
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Impacts on Real Income from Full Liberalization
of Global Merchandise Trade
Source Anderson, Martin and van der Mensbrugghe,
2005
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A failed Doha Round doesnt cost China or India
much less so for Brazil
Source Simon Evenett, 2007
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Dani Rodrik (Harvard University) How to Save
Globalization from Its Cheerleaders (July, 2007)

•  the obstacles faced by developing countries do
  not originate from inadequate access to markets
  abroad or to foreign capital. The gains to be
  reaped by further liberalization of markets are
  meager for poor and rich countries alike it is
  lack of policy space and not lack of market
  access which is the real binding constraint
  on a prosperous global economy .

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Conclusions

• I. The world has changed since 1947
• II. The GATT/WTO did not (or little)
• III. Reform proposals focus on insider concerns
• IV. New trade politics must adjust to outside
  world
• New  embedded liberalism 
• Open politics Policy space
• Assurance game rather than PD
• WTO as stabiliser clearing house
• Low hanging fruit is gone