Peter Sutherland, former Director-General of GATT/WTO and co-chair of the High-Level Expert Group on Trade wrote this week of his concern that bilateral trade agreements are threatening the credibility of the WTO.

The Doha Round of global trade talks appears to have died this year. While a small portion of the project may be saved, the essential reality is that this is a unique failure in the history of multilateral trade negotiations, which have transformed the global economy since World War II.

Successful multilateral trade negotiations have dramatically enhanced the lives of millions of people. Between 1960 and 1990, only one person in five lived in an economically open society; today, nine in ten do. A multilateral framework for trade negotiations gave weaker states far more balanced conditions than if were they forced to negotiate bilaterally with the likes of China, the US, or the EU.

However, an increasing rush towards bilateral agreements by the major trading countries and blocs is marginalising the WTO and even what has already been achieved in the incomplete Doha Round appears unlikely to be delivered in a final agreement.

The damage to the credibility of the WTO could have a serious impact not merely on trade, but on political relationships more generally. The continued success of the Dispute Settlement Mechanism depends ultimately on the credibility of the WTO itself; it will inevitably suffer collateral damage from a failure of multilateral negotiations.

The current rush to bilateral trade agreements has been accompanied by a rise in protectionism – there have been 424 new measures of this kind in the EU since 2008. The EU’s non-discriminatory tariffs are fully applicable to only nine trading partners. Everyone else has “exceptional” treatment.

We now have the prospect of a bilateral free-trade agreement between the EU and the US, an EU-Japan treaty and a “Trans-Pacific Partnership” to liberalize trade among the US and major Asian and Latin American economies. If any of these come to pass, a huge share of world trade would be conducted within a discriminatory framework.

It is not too late to reverse the apparently inexorable tide of bilateralism. But the only way to do so is by proceeding with WTO negotiations. Even if the Doha Round cannot be concluded, there may be other routes, such as implementing what has already been agreed. Another alternative might be to advance multilateral negotiations among willing countries in specific areas, such as services, with other WTO members joining later.  But if we are to move forward, the US, in particular, must reassert a constructive role in multilateralism as it did in the past. And now it must do so with China at its side.

WTO director general candidate Amina Mohamed also warned of the need to give the WTO a face-lift. She said, “my vision involves the need to upgrade and modernise the WTO agenda. There is a need to protect it from the onslaught of protectionist measures that have and may be introduced and to take stock of what has happened with the Doha Round of talks that seeks to cut farms aid and crack open markets.”

The nine candidates to replace Pascal Lamy will present themselves at a three-day meeting of the General Council that begins on 29th January after which the selection process will begin.

Read Peter Sutherland’s full blog “The Bilateral Threat to Free Trade – WTO has a credibility problem” here.

Summary

Peter Sutherland, former Director-General of GATT/WTO and co-chair of the High-Level Expert Group on Trade wrote this week of his concern that bilateral trade agreements are threatening the credibility of the WTO. The Doha Round of global trade talks appears to have died this year. While a small portion of the project may be saved, the essential reality is that this is a unique failure in the history of multilateral trade negotiations, which have transformed the global economy since World War II.

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