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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