Global Trade: Is Regionalism Killing the World Trade Organization?
Herman, Lawrence L., Ivey Business Journal Online
If an organization today must be nimble and agile, the World Trade Organization better watch out. And why not? Its bulk and slow pace frustrate many and have led countries to form fast-acting, regional trade blocs, in effect questioning the WTO's moral authority and its need to exist. As this lawyer and experienced international trade negotiator describes, the WTO must meet three organizational challenges if it is to regain its influence.
Regionalism and global norms
Regional trade agreements are cropping up everywhere, with new negotiations being announced almost every day in some part of the world. Are these regional deals undermining the paramountcy of the World Trade Organization? And what is the effect of these splinter agreements on the quest for a system of universally-applicable trade rules? This article looks at the impact of regionalism on the multilateral trading regime.
High hopes after the Uruguay Round
In the rush of enthusiasm after the conclusion of the Uruguay Round in 1994 it looked like the world was embarking on a new era. There were predictions that the newly-created World Trade Organization would be the paramount global institution - a beacon of stability and order in an otherwise chaotic world. But those days have passed and today, the WTO is beset with problems.
The legislative arm - the WTO General Council and its committees that oversee trade negotiations - seems incapable of moving forward. The current Doha Development Round is stalled. There is anxiety in Geneva about finding a formula for completing the Round by the end of 2006, two years behind the original schedule.
On the dispute settlement side, decisions by WTO panels are not enforced, as governments equivocate endlessly on implementing WTO findings, either through stonewalling or a seemingly interminable system of appeals.
Partly in frustration with this state of affairs, governments are turning away from the WTO and resorting to preferential trade deals between and among themselves. At last count, there were some 300 of these regional agreements either in force or in various stages of negotiation.
Regional deals are, of course, quintessentially preferential in nature. The European Union and the NAFTA are two leading examples, and there are hundreds of others, large and small. These kinds of agreements used to be the exception. But they are rapidly becoming the main feature of international trade in the 21st century.
What are these regional deals are doing to the fundamental role of the WTO and the principle of non-discrimination, the bedrock of the post-World War II international trading regime? Some observers are suggesting that the WTO will face a diminished role in the face of unrelenting regionalism. Let's look at this more closely.
Global norms and the WTO
The WTO Agreement is the successor to the 1947 General Agreement on Tariffs and Trade or "GATT", itself a product of post-Second World War multilateralism that spawned the United Nations, the World Bank and the International Monetary Fund.
For over thirty years the GATT worked tolerably well and, through successive trade negotiations was successful in dismantling tariff and non-tariff barriers, the latest two initiatives being the Tokyo Round (1974-1979) and the subsequent Uruguay Round (1991-1994).
The Tokyo Round was a milestone. It represented the first serious multilateral attack on non-tariff barriers, which were subjected to new rules and disciplines though a number of special agreements or "codes." These codes were eventually subsumed into the 1994 WTO Agreement coming out of the Uruguay Round.
The Uruguay Round built on the Tokyo Round achievements but radically re-structured the multilateral trading system. For one thing, the uncertain status of the GATT was corrected and the WTO itself, as its institutional successor, emerged as a true international body with a legal personality, permanent secretariat, complex committee architecture and norm-setting apparatus, and a powerful judicial arm to deal with trade disputes. …