How Discriminating
The 2009 Ministerial Conference of the World Trade Organization is in its last day in Geneva. So far, the conference has been notable for its lack of news. True, we saw the footage of the riots on Geneva’s streets on opening day, but it now seems that the damage was done by a fairly small group who had infiltrated a larger, more peaceful demonstration. While I can argue with the anti-WTO protesters, that isn’t the point of this post. (Though I wonder how many protesters think about how globalization has produced the clothing they wear, the cellphones they talk on, the food they consume …)
WTO Ministerial
The lack of headlines may be good news. The usual speeches are being made about finishing the Doha Round next year, speeches copied from any previous Ministerial. What intrigued me, however, is that Trade Ministers from several countries expressed concern about the proliferation of regional or bilateral free trade agreements, while progress is stalled on multilateral talks. This is something that has long bothered most trade negotiators. If you are a negotiator, you have a bias to want to actually negotiate something, to finish an agreement to show the world and burnish one’s reputation. The easiest way to accomplish that is to have a small negotiation on a limited number of issues. Which argues against the multilateral marathons such as the Uruguay Round, the Tokyo Round and currently the Doha Round. It is the big rounds that may produce the most good, but they are also the toughest to complete. So, whenever a round seems to stagnate, the cry goes up that we must turn to doing smaller bilateral agreements. Doha has been stalled for a while, so the smaller agreements proliferate.
That’s not necessarily a bad thing, and much good can come from a bilateral FTA. But the smaller deals are also what economists call a “second-best” solution. If you can’t get the best, you go for the second best. Now, some of the Ministers have raised the question of how to integrate bilateral or regional FTAs into a multilateral system. Good question. Each FTA is, necessarily, a departure from the twin principles that have given us our wonderful growth in world trade: the most-favored nation concept and the idea of national treatment (i.e., that a country should treat all foreign partners equally, and that they should be treated on the same terms as domestic entities). Bilateral and regional agreements are discriminatory by definition because not all their benefits are available to everybody else. So how do we end the discrimination? How do we promote the vaunted “level playing field” or even “fair trade”? Seems to me, we do that by applying the same rules to everybody, by making the benefits of all these bilateral agreements available to all on a multilateral basis. Some Ministers are beginning to think about how to do that, how to arrive at multilateral agreements that subsume the benefits of the smaller agreements.
Which brings us back to doing multilateral trade rounds. So, when will the protesters, who see the WTO and its negotiations as discriminatory, come to realize that they are in fact anti-discriminatory?
