What’s the best scope for WTO negotiations?

Former USTR Charlene Barshefsky makes the case for emphasizing sectoral agreements rather than trade rounds at the WTO:

The longer the time-spread between global developments and WTO agreements, the less relevant the WTO will become. That, to me, suggests a policy, as we pursued in the 1990’s under President Clinton, under which parties use the WTO the way it was meant to be used – and that is as a forum for continuing negotiations among the members on issues of growing concern, so as to handle these issues in a rapid and effective manner. In the 1990’s, we concluded global agreements on telecommunications market opening, financial services market opening, information technology (which brought to zero tariffs on all information technology products), and duty-free cyberspace. These were all done under WTO auspices in a sectoral fashion, in a timely way.

The last global round of trade talks was launched in 1986. This round will not conclude until year-end 2007, at the earliest. Had we not pursued these critical sectoral agreements when we did, global telecom and financial services markets would not be nearly as open to the United States as today. Would that have made make any sense, when financial services and telecom are perhaps the most critical aspects of wealth creation?

If we keep waiting for meaningful trade liberalization in large rounds, which can be held up by any issue countries wish to interpose, then we risk the future of the WTO. I believe Doha will conclude. Once it concludes, the WTO must take a hard look at its own responsiveness, and its own role as a regulator, if you will, of global economic behavior, and move toward the negotiation of agreements with the greatest salience.

The most relevant academic piece I’ve found on this topic is a chapter in Economic Development and Multilateral Trade Cooperation by Philip Levy (PDF available online). In his introduction, he writes:

What is the appropriate scope of a negotiating round? Is it generally possible to reach agreements sector by sector? If it is possible, is it advisable?

This paper will attempt to bring existing economic theory to bear on these questions. In the next section, we will review the traditional case for package deals in trade rounds, bolster that case with some theory and then challenge it with the apparent success of sectoral negotiations. We will argue that track record of the sector-by-sector approach is less attractive than it seems and that its successes may well have had negative effects on future negotiations beyond the unfortunate procedural precedent.

Pointers to additional literature on this topic would be much appreciated.

2 thoughts on “What’s the best scope for WTO negotiations?

  1. Richard Baldwin

    Here the same guy illustrates what I call the “Cherry Picking Stumbling Bloc”, i.e. if you allow nations to take some of the good stuff, you can’t package good and bad (politically) and thus you can’t get the deal done.
    Levy, Philip. 1997, “A Political-Economic Analysis of Free-Trade Agreements,” American Economic Review 87(4), September.

  2. Richard Baldwin

    Also related is the old literature about whether labour & environmental standards should be included in trade trades. For example:

    Issue Linking in Trade Negotiations: Ricardo Revisited or No Pain No Gain

    University of Toronto – Rotman School of Management; University of Toronto – Institute for Policy Analysis
    University of Colorado at Boulder – Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)
    Review of International Economics, Vol. 13, No. 2, pp. 185-204, May 2005

Comments are closed.