Future of the WTO-- Power Diffusion and Regionalism/Bilateralism (Richard Steinberg)

Daniel’s next-to-last paragraph captures well my claim about hegemonic stability theory and the demise of negotiated liberalization at the WTO. My point is not about rigid adherence to one of the variants of HST from the 1980s—it is rather that the US-EU hegemonic duopoly that ran the WTO from roughly 1973-95 is unable to do so anymore. Anu’s post this morning and Daniel’s middle paragraphs rebut the rigid versions of HST from the early 1980s. GATT/WTO evolution has been more subtle: from a hegemonic structure (in the 1957-73 period) to hegemonic duopoly (from 1973-1995) to tripolarity now. [I disagree that the GATT/WTO was ever a US-EU-Japan tripolarity; Japan was never a demandeur, never a real player, even in the old Quad days.] The contemporary deadlock may be due to a divergence of transatlantic interests, as suggested by Daniel, but it is also because the developing world is growing in power (now through coalition behavior; later due largely to catch-up rates of growth). The result is that liberalization is now taking place more through regional and bilateral venues than the WTO. And this is my point about consistency with the structuralist framework of HST.>

But the more complete view would remember Putnam: trade negotiations are a two-level game with the state negotiator in the middle. In so far as it is possible for a US or EU negotiator to craft a domestic coalition favoring liberalization, where is that negotiator more likely to generate a deal with benefits for export-oriented producers—at the WTO or within a regional or bilateral context? The answer is clear. Due to power diffusion and interest divergence in the WTO, and the relative power of the US and EU in their respective bilateral negotiations with third countries, regional and bilateral venues offer better outcomes for US and EU negotiators. This would explain why, since 1995, no significant deals have been struck at the WTO, while the US has struck deals on about 15 FTAs and the EU has enlarged, added about ten FTAs, and is converting the 70+ Lome >country preferences into FTAs.

What about ideas, norms, cognitive power of language? Greg: Is this the last, best hope for generating optimism about the WTO-- an ontological shift? I guess I am ultimately just a materialist at heart, at least in trade policy. Money runs the show. Cash is king. The beauty of the market, comparative advantage, the culture of multilateral liberalization are powerful ideas that dominate in much of the academy, USTR, Treasury, CEA, most of the WTO Secretariat, and (in my view) the Appellate Body. But not at USDA, DG-Ag, labor unions, environmentalist organizations, farmers in India, etc. Material facts drive interest groups more than abstract ideas. The fact that the door to my office is now closed is a material fact, not a social construction, and Archer Daniels Midland’s opposition to agricultural subsidy reductions is not a social construction either. And that brings us back to the domestic politics/two-level game argument above.>

So, "dead" or alive, cup half full or half empty, deadlocked or gridlocked, all the exceptions, provisos, and footnotes duly noted—I find it hard to be very optimistic about the WTO’s future as a venue for trade liberalization.>

But let us, for the sake of argument, all converge around a middle position— that the WTO is not “dead” (which I stated initially as a rhetorical vehicle for getting attention paid to the seriousness of the shift there), that the Appellate Body will lead us through a period of negative harmonization, that we can get a few small deals here and there at the WTO, etc. etc., but that the days of deeply liberalizing moves at the GATT/WTO are over. In that case, would WTO deals matter—in the sense that they would result in significantly more open markets than otherwise? The debate between Rose, on one hand, and Goldstein, Rivers, Tomz, on the other, suggests to me that WTO rule development at the pace we have been discussing will be of little economic significance. If Goldstein, Rivers, and Tomz had to crunch and parse as hard as they did to find a modest (significant) relationship between openness and the major GATT/WTO deals of the Golden Age, then one can only imagine how small (and perhaps insignificant) an effect future WTO deals—on the order we are discussing-- are likely to have. >

In contrast, regional and bilateral deals are where the action will be and that action may have significant and substantial effects on trade liberalization and patterns of trade. If so, what will the new patterns look like? Will we see competition between blocs? Cooperation between them? What will be the implications for multilateralism? Can the bilateral and regional deals be multilateralized, saving the WTO? Or will they destroy it? Will the WTO go away with a bang, or with a whimper, or will PTAs save the World (Trade Organization)?