WTO’s annual World Trade Report for 2011 signals a turning-point for the soon-to-be-Doha-less Organization. It attempts to provide a rationale for abandoning WTO’s half-hostile stand-off with the more dynamic universe of preferential trade agreements (PTAs) and for embracing PTAs instead. Or, as the subtitle of the report puts it, in EU-ese, a rationale for moving “from co-existence to coherence”.
The Report’s re-casting of the WTOs agenda goes like this:
- Show that the tariff preferences in the nearly-300 PTAs are not that important and, indeed, aren’t being used much.
- Suggest that since PTAs don’t, after all, tread all over the WTO’s historic domain—the enforcement of non-discriminatory tariff treatment— it may be time to take a more positive view of them, deprecating old, tariff-focussed, “Vinerian” concerns about the dangers of trade diversion
- Conclude that the growth in the number of preferential agreements (the “extensive margin”) must therefore be due to incentives that WTO, too, can embrace: facilitating international supply-chains, for example
- Assert that growth at the intensive margin of the preferential regime—the deepening of economic integration—is taking place in policy domains that the WTO has either regulated or would like to pursue; for example, qualification and accreditation of services providers, or investment and competition policies.
- Call these intensive-margin growth trends by “embraceable” names such as WTO+ (deepening in domains already included in WTO agreements) and WTO-X (extension to domains that the WTO would like to cover).
- Speculate that the Organization might give-up trying to regulate Member governments’ participation in PTAs (the “hard law” approach) and offer, instead, to cooperate with Member governments’ observed interests in economic integration through preferential agreements that include WTO+ or WTO-X provisions
- Devise an agenda for this cooperation based on adding transparency to the PTA regime (“soft law” approach) and developing new WTO frameworks for non-discriminatory “critical mass” agreements that would allow WTO to integrate some of the WTO+ and WTO-X initiatives that are now found only in the preferential regime.
“Despite the enormous growth of PTAs, only a small fraction — around 15% — of global merchandise trade actually receives preferences. A major reason for this is that MFN tariffs are already quite low with more than half of global merchandise trade having applied MFN rates of zero. In fact less than 2% of world trade is eligible for preference margins above 10 percentage points. ” Extract from Pascal Lamy—launch of WTO World Trade Report 2011