Rodrik re-inventing the WTO’s wheel

There is a definable ‘public good’ in the transparent and well-ordered regulation of the global trading system, just as there is in the global financial system. In trade-related policies, there are also strong ‘local public goods’ (as Rodrik describes them) reflected in domestic political economysettlements that couple wealth distribution through institutions of government—such as administered markets or the progressive income tax system—with support for private endeavor, interest and reward.

The post-WWII trading system overcame the conflict between sovereign control at home and cooperation abroad by forming a contract between sovereigns that exchanges reciprocally binding obligations on the character of domestic regulation. The obligations have a wide scope: thresholds for regulation, obligations on transparency, requirements for specific elements of due process and even on the role of courts, enforcement agencies and criminal penalties (in IP rights enforcement). It’s hardly a new technology that Rodrik and Rogoff are debating here.

The challenge now facing this system, as the unhappy history of Doha reveals, is that although you don’t need a central government to run a ‘club‘, a collaborative, club-like, organization runs into the limits of collaboration, especially as its membership changes. The balance governments strike between an interest in global order and domestic policy discretion differs from government to government. The largest, most rapidly growing and still poor economies of the BRICs, for example, strike a somewhat different balance than the mature, wealthy and older economies of Europe and Japan. They may still all subscribe to the same club, but only if it has modest rules for members.

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