The University of Chicago Law School Faculty Blog

Future of the WTO: Limited Options

Anu's post provides a thoughtful guide for the potential of global governance and multilateralism outside the WTO structure.  Since I share her view that the WTO is unlikely to be the forum for "new, meaningful trade deals" in the immediate future, I just want to add two short comments.

First, Anu's post recognizes that the underlying structural conditions, including the diffusion of economic power and the divergence of economic interests among the powerful states, make cooperation through the WTO very difficult.  She writes: "[i]n the multi-polar world where interests diverge, coercive power against equals is rarely available and where an increasing number of powerful states guard vigorously their sovereignty, the best multilateral governance that can be accomplished will be voluntary."  At the same time both Anu and Greg--in previous posts--are sensitive to the fact that domestic preferences matter, and interdependence has increased the demand for coordinated solutions to global problems, suggesting that the "stakes are too high to give up on multilateralism altogether."

A hard-core realist might argue that if the underlying structural environment for cooperation on trade issues does not exist, norms, domestic preferences and the creations of new institutions (or modification of existing institutional rules) cannot sustain meaningful multilateral attempts at global governance.  But this might overemphasize the role of structure and minimize other factors.   Contrary to the purely realist story, norms about free trade, domestic preferences and institutions sometimes matter; the issue is how the underlying structure conditions the influence of these factors on international outcomes.  As Anu noted in the portion of her post quoted above, we happen to be in a world in which the structural issues among the powerful states are entrenched and limit the influence of domestic preferences and norms on outcomes.In other words, it may be a temporary phenomenon, not a permanent one.

Second, Anu's G-10 proposal appears to reflect the constraints of the current international political environment.  Though it wisely focuses on the distribution of economic power and state interests, she acknowledges that the proposal "may end up being little more than a status symbol and a talking shop."  This might be all we can do now at the multilateral level until the economic interests of the powerful states begin to converge and make it possible for meaningful global governance.  In the meantime, regional or bilateral trade agreements may represent the "second-best" way forward.   

Future of the WTO: "Death" of the WTO and Hegemonic Stability Theory

Thank you to Richard for the provocative and interesting comments about the death of the WTO and hegemonic stability theory (HST).  Let me address the WTO issue first and the HST question second.

While I am certainly extremely pessimistic about the immediate prospects for breaking the gridlock at the WTO or producing tangible results from the Doha round, I am not sure that it is completely helpful to think in terms of the WTO's life or death.  Perhaps it is better to ask if the structural and political conditions under which the WTO can succeed as a negotiation venue still exist.  I think the answer is no.  If the internal economic differences among the great powers is more pronounced today than in the past, to see any multilateral progress we would need a greater convergence of economic interests.  As Anu noted, "China exports primarily manufactured goods, India services and Brazil agricultural products.  Russia's economy, if admitted to join the club, depends on natural resources."  Moreover, as Richard points out, the China, India, Brazil and Russia share of the WTO's GDP is growing and might approach "multipolarity" in 2025.  If Anu and Richard are correct and about the internal characteristics and my tentative claim about the necessity of shared economic interests among great powers is true, it appears that the WTO's lacks the underlying conditions for success as a negotiation venue.

Future of WTO (Daniel Abebe)

Anu's very helpful post presents the WTO's challenges quite clearly: how can the WTO in its current form function effectively in light of the rise of new economic powers?  While this post agrees with Anu's analysis, it tentatively locates the problem not only in the failure to modify the WTO's institutional rules to the current distribution of economic power but also in the variation in economic development of the emerging states and the size of their economies.  Anu mentioned the fact that there are “too many trade powers with too divergent preferences” complicating the WTO’s efficacy.  This is correct and also produces a puzzle.  If we assume that the great powers are “great,” in part, because of the size and development their economies, why should we see tremendous variation in preferences among these similar great powers on trade issues?  A realist story would predict that the great powers would collude and coerce the developing countries and, if unsuccessful in economic coercion, they would perhaps exercise military coercion as well.  As Anu described, this is not working in today’s WTO.  It leads me to ask the following questions:  First, how does the increase in the importance of international trade in the post-Cold War affect great power competition?  Second, how should we see this competition reflected in international institutions like the WTO?

What does international relations theory tell us about these questions? Historically, due to the dominance of realist thought the distribution of power has been measured in material terms, i.e., the combination of military resources and economic wealth.  Throughout the twentieth century, this has produced crude measurements of the "power" of the United States and its allies (NATO/the European Union) and the capabilities of the Soviet Union and its satellite states.  Realism has led to predictions about the difficulties of cooperation among states, the irrelevance of domestic politics and the epiphenomenal nature of international institutions and international law.

Student Blogger - Chicago’s Best Ideas: Daniel Abebe and Jonathan Masur, "The Two Chinas and the Problem of Global Warming"

Update: Audio of this talk is now available, and video is embedded after the jump.

Preventing global warming requires lowering carbon production, and China produces a high level of carbon emissions. China gains a significant advantage to its economic growth from its continued use of fossil fuels, but the harms from global warming will fall disproportionately on other countries. Thus, some writers advocate giving side payments to China as part of an international agreement to reduce global warming. Their analysis treats China as a "black box"; the input is money, the output is reduced carbon emissions. But when we open the box, the situation is not so simple. The box really has two Chinas inside.

In the most recent edition of Chicago's Best Ideas on January 14, Professors Daniel Abebe and Jonathan Masur presented "The Two Chinas and the Problem of Global Warming," based on their paper "Climate Change and Internal Heterogeneity." The first China is Eastern China. Eastern China is prosperous, having experienced a blistering growth rate around 10 percent annually over the past couple decades. Most of China's major cities dot the Eastern coast, and the cities are hubs for finance and manufacturing. The second China is Western China. Western China resembles a developing country and is still mostly agrarian. Per capita GDP is half what it is in the East (9,967 yuan versus 19,813 yuan). The interplay between the two gives the Chinese Communist Party (CCP) incentives to not accept a climate-change treaty.