Abstract
The deadlock in the WTO Doha Round has been accompanied by an increased focus on the negotiation of preferential trade agreements, including so-called ‘mega-regionals’. This paper discusses possible implications for—and possible responses by—excluded countries that have little prospects of participating in most of the mega-regionals. A number of complementary avenues are identified through which such countries might attenuate the potential downsides of preferential trade liberalization among large countries, as well as some proposals that would expand the scope to pursue cooperation on regulatory policies in the WTO as opposed to PTAs.
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Notes
Membership in the WTO has expanded steadily since it was established in 1995, standing at 160 as of December 2013, following the expected accession of Yemen at the December ministerial in Bali.
For example, India wants better access to services markets, but seeks to expand its ability to support domestic agricultural production. Brazil wants more liberalization of agricultural trade in OECD countries, including bio-fuels, but also wants to protect industrial activity from import competition. For much of the DDA, China took the position that it already made major commitments as part of its 2001 WTO accession. For most large firms in the OECD agriculture does not matter, while further liberalization of manufactures is important for only a limited number of industries given that average tariffs in major markets are low and firms appear to perceive the probability of governments raising tariffs to be low. While high peak tariffs remain for some products, the tariff agenda was not enough to mobilize a critical mass of OECD firms. Subjects that might do so—such as the prospect of significant liberalization of services trade—were never the focus of serious talks in the DDA. Services were taken up outside the WTO in 2012 with the launch of negotiations among a smaller group of countries on a Trade in Services Agreement (TISA). See Wolfe (2013) for a detailed discussion.
Trade openness ratios were calculated from the World Bank Global Economic Prospects database.
Brazil and India are much smaller players in global commerce, ranking 22nd and 20th respectively in terms of merchandise trade volumes in 2010. India is a bigger player in trade in services, ranking 5th for both exports and imports, but still behind China, which ranks 3rd after the EU and the US.
See the Global Trade Alert database at http://www.globaltradealert.org/.
Freund and Ornelas (2010) survey recent empirical research on the relationship between PTAs and the WTO.
At the time of writing (November 2013), RCEP involves 16 countries: the 10 members of ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam) and six countries with which ASEAN has a free trade agreement (Australia, China, India, Japan, Korea, and New Zealand). The TISA includes Australia, Canada, Chile, Chinese Taipei, Colombia, Costa Rica, Hong Kong China, Iceland, Israel, Japan, the Republic of Korea, Mexico, New Zealand, Norway, Panama, Paraguay, Pakistan, Peru, Switzerland, Turkey and the US. The TPP spans Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the US and Vietnam.
In practice the ability to participate is conditional in the sense that countries that did not join the talks early on will find it more difficult to be accepted in the ongoing negotiations on the substance of an agreement—once the talks have advanced and the outlines of an agreement agreed among participants, new countries will likely have to wait until the ‘original’ TISA countries have finalized an agreement and then negotiate their accession.
As mentioned in the Introduction this negotiating strategy has had some positive results in addressing some of the perceived ‘development deficit’ that motivated the design of the DDA, including more duty-free, quota-free (DFQF) access, the Aid for Trade (AFT) initiative and the Enhanced Integrated Framework for the LDCs. See Hoekman (2012).
Examples are tariff escalation or the elimination of support for cotton production in OECD nations. As the latter have made clear that any deal on agricultural policies or tariffs will need to be balanced by market access concessions by BCI, there is little that small developing nations such as the cotton-4 (Benin, Burkina Faso, Chad and Mali) can do beyond advocacy.
In part such additional costs will be low because the US has PTAs with most of the other TPP countries.
TISA is an exception.
The options discussed in what follows are process-oriented as opposed to substantive in the sense that the focus is not on specific policy areas and issues that arguably should be priorities for WTO members to address. There are many papers that do the latter—see, e.g., Baldwin (2014) and Mattoo and Subramanian (2009). Rather than enumerating my own list of issue areas, the aim of the next section is to focus attention on processes and approaches that WTO members could use to help them identify areas for potential cooperation, opportunities to make existing agreements more effective and to improve the common understanding of initiatives that are pursued outside the WTO.
This observation pertains to the implementation of agreements, not necessarily to their negotiation. A premise of the “single undertaking” approach in WTO negotiations is that a package deal that involves a number of policy areas and thus associated issue linkages will ensure a Pareto-improving outcome. See, e.g., Sebenius (1983) and Conconi and Perroni (2002).
Such a role is played by other international organizations for other types of data—e.g., the ICC for data on trade finance and the World Bank for firm- and household level survey data.
The waiver permits WTO members to discriminate in favor of LDCs through granting preferential market access for services or in the application/enforcement of regulatory regimes.
This section draws on Hoekman and Mavroidis (2013) which undertakes a comprehensive comparison and assessment of the PA and PTA approaches to cooperation between subsets of WTO members.
Sometimes the Information Technology Agreement (ITA) is inaccurately depicted as a PA. It is not. It is a critical mass agreement that is implemented on a MFN basis through tariff commitments (bindings) of signatories. The same is true for other sectoral agreements for goods (e.g., so-called zero-for-zero agreements for certain chemicals, agricultural machinery, medical equipment, scientific equipment, and construction equipment) and services (e.g., the agreements on basic telecommunications and on financial services).
The dairy and bovine meat agreements were terminated by decisions of the General Council on 31 December 1997 and 17 December 1997 respectively.
The genesis of the Civil Aircraft Agreement was an effort by the EU and the US to agree on more specific rules on permissible support for aircraft production and trade than those that applied under the GATT. Signatories to the Civil Aircraft Agreement agreed to eliminate import duties on a specific list of civil aircraft-related products on a MFN basis (because the products involved are covered by the GATT).
Horn et al. (2010) distinguish between WTO+ and WTO-X obligations in PTAs: the former cover matters that fall under the current mandate of the WTO but where commitments in the PTA-context are more comprehensive (e.g., deeper than MFN tariff cuts); the latter refer to policy areas currently not addressed by the WTO (e.g., cooperation on macro-economic policies).
An example would be a PA on trade facilitation that involves signatories committing to specific actions that ensures reciprocal “green channel” treatment for goods (such as risk assessment practices, collection and sharing of data on consignments). This implies better market access conditions for signatories of the PA, but this is conditional on having put in place an agreed set of procedures, having made the necessary policy reforms and investments, etc. As non-members satisfy the preconditions for establishing the capacity to implement the specific commitments required for club membership they should be able to participate and benefit from the provisions of the PA.
They suggest a minimum coverage of 40 % of world trade as opposed to the norm of 90 % that empirically has defined the feasibility of critical mass agreements in the GATT/WTO.
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I am grateful to three anonymous referees, Axel Dreher, Petros Mavroidis, Marcelo Olarreaga, Robert Wolfe and participants in conferences and seminars at the European University Institute, Seoul National University, Stanford University, Vanderbilt University, the World Trade Institute, and the WTO for helpful comments and suggestions on earlier versions of this paper.
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Hoekman, B. Sustaining multilateral trade cooperation in a multipolar world economy. Rev Int Organ 9, 241–260 (2014). https://doi.org/10.1007/s11558-014-9187-3
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DOI: https://doi.org/10.1007/s11558-014-9187-3