Trade agreements and trade policy

The assessment that WTO’s attempts to deal with protection have been essentially directionless is one I agree with, but it is not mine. I am quoting from the paper presented to the “Alternative Frameworks” project workshop in December by Professor Peter Lloyd, a distinguished international trade economist.

I am skeptical that WTO’s rules on border—or behind-the-border—trade measures will have a stronger sense of direction any time soon because, as the Doha experience proves, there is no global consensus that open markets, free of most government intervention and support are a globally desired goal. Even Australia’s Prime Minister now reflexively scorns the moderate and sensible ‘Washington consensus‘ in the name of his claimed democratic socialist faith.

Alhough I share Peter Lloyd’s disappointment with lack of principle in WTO agreements, the content of any trade agreement matters much less than the content of trade policies. The beneficial impact of agreements on policies is due less to their content (it’s all too easy to wriggle out of most WTO obligations) but to the process by which they are made. This process tends to promote a re-examination of trade policies and objectives; that may be a good thing in itself. Even narrow agreements (FTAs) or those lacking ambition or commitment (GATS) are able to provoke some domestic dialog on the impact of trade policies on welfare, income distribution and on international collaboration to promote global growth.

It’s a weak defense of the trade agreements (hence, my reluctance in offering it) because governments are not compelled to undertake this domestic dialog in order to make trade agreements. But it is every negotiator’s experience that having that dialog—it’s not as simple as it sounds—is the best guarantee of a successful negotiation with well-defined objectives and ‘resistance points’. So there are in-built incentives for this preliminary examination of trade policy.

A still more common danger is that the dialog will be a ‘corporatist’ one; limited to powerful coalitions of sectional interest and close relations with government. Consider some of the case studies on participation in WTO from my 2005 book (with Andrew Stoler and Patrick Low), now disseminated through the WTO website. For example, this “case study” on French trade policy formation, or this one from Venezuela on agricultural trade policy, or this from Kenya on the organization of consultation.

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