The Case for a New Round: Has it Been Made?

Abstract

The failed World Trade Organization (WTO) Ministerial meeting in Seattle left the way ahead on multilateral trade policy not entirely clear. Unlike the situation following previous failed Ministerials, which foundered on questions of content and pace, the Seattle Ministerial collapsed on questions of the desirability, as well as content and pace, of future liberalization. In short, the case for a new round has implicitly been called into question. The paper concludes that, while there is still considerable untapped potential to expand trade, a number of important questions have been raised as to whether, and under what conditions, this would translate into income and welfare gains sufficient to warrant the commitment of scarce policy resources at this time. Moreover, insofar as the income and welfare gains from a new round would depend heavily on the integration of currently marginalized developing countries into the trade system, the discussion of "trade and development" suggests that there are simply no grounds for optimism that these gains could be realized except in the longer term and subject to considerable improvement of so-called "enabling conditions." This does not necessarily leave the trade system in bad shape, or its policy making necessarily in hiatus – quite the contrary. Accession of China, Taiwan and the states of the former Soviet Union alone would generate benefits of the same order of magnitude as a new round, and with fewer of the caveats that attach to getting developing countries in general into the trading system. The development of case law by the Dispute Settlement Body is pushing the envelope both on implementation of commitments and the refinement of WTO law itself. And incremental changes to the institutional framework are well suited to a Ministerial meeting process. At the same time, this affords a window of opportunity to develop the intellectual basis for further liberalization and for the direction to take in further developing the architecture of the multilateral system, and dealing with the WTO’s governance issues.

Keywords: WTO, trade liberalization, trade, development

JEL Classification: F13