The rapid, if sometimes unsteady expansion of international trade from the late 1980s came to an abrupt end from 2009 as many large developed economies adopted more ‘protectionist’ policies to address balance of payments problems exacerbated by the 2008-2009financial crisis. This U-turn brought a halt to an extraordinary period of rapid trade expansion due to much greater international specialization, especially with the spread of ‘international value chains’ in production.
Free trade agreements
Freetrade agreements (FTAs) are generally presumed to promote trade liberalization. While FTAs typically reduce some barriers to the international trade in goods and services, various provisions strengthen private monopolies and corporate power.While FTAs may increase trade and trade flows, the overall growth gains generated are typically modest in many other areas, especially with the more recent FTAs following the major trade liberalization of earlier decades.
FTAs are typically opaque, especially on the worker and consumer interests affected. Not surprisingly then, FTA outcomes are often poorly understood by the public, and often misrepresented by ostensible experts. Already, most US FTAs include ‘non-trade measures’, some of which have raised costs to consumers, e.g., by further strengthening intellectual property monopolies typically held by powerful transnational corporations.Hence, there have been growing doubts that some FTA provisions – e.g., those strengthening intellectual property rights (IPRs) or investor-state dispute settlement (ISDS) rules unaccountable to national judiciaries – actually enhance international trade, economic growth or the public interest.Thus, FTAs frequently do much to strengthen the power of the most influential transnational corporations of the dominant partners involved.
Unsurprisingly, FTA processes are increasingly widely seen as corrupt.While many beneficiaries from the transnational elite remain committed to yet more FTAs as means to extend and expand their influence and interests.Public trust and hope have declined as people have become aware of some of their most onerous provisions and consequences. Not surprisingly then, Western publics have turned against politicians seen as part of the ‘trade liberalization’,‘globalization’ or ‘globalist’ establishment, who support FTAs regardless of rhetoric or party affiliation. ‘Brexit’ and the Trump election in 2016 are often seen as exemplifyingsuch global reactions.
Meanwhile, trade liberalization has undermined existing productive and export capacities and capabilities without generating new ones in their place, i.e., causing retrogression, rather than enhancing progress. After decades of denial by ‘free trade’ advocates, it is now widely agreed that many US manufacturing jobs have been lost to offshore relocation even thoughlabor-saving automation bycorporations has been much more significant in general. FTAs are also being blamed for the US’s persistently large trade deficits.Such effects have set back not only economic development, but also food security, especially in Sub-Saharan Africa.
More people now realize that trade expansion compatible with welfare and development aspirations can happen without FTAs, e.g., through unilateral measures. This was evident when the US trade embargo on Cuba was dropped, and will happen if US trade relations with Iran improve. Similarly, without the need for an FTA, US-Vietnam trade should expand rapidly once decades of discriminatory legislation and onerous conditions imposed following the end of the Vietnam War in 1975 are removed without the need for an FTA.
Even if a comprehensive and balanced assessment of the costs and risks of an FTA finds the potential for improved net economic welfare for all, typical provisions never compensate losing participating economies and stakeholders. All FTAs, including bilateral ones, are typically incapable of lifting all boats simultaneously, but compensatory mechanisms among countries are rarely part of FTAs. They are hardly ever negotiated, and often seen as inducements if included, rather than what is needed to ease transitions generated by freer trade.
The one size fits all approach typical of many FTAs has varied effects on different partners in plurilateral and multilateral arrangements. Furthermore, no provisions will ensure that losing countries will be compensated by countries which gain more from the FTA. For the poorest developing countries, tariff revenues are typically among the easiest to collect, and when removed, fiscal capacities are greatly diminished with no replacement.
And whilecountries can compensate losers in a national economy with accompanying measures, nothing in FTAs themselves will ensure such compensation, let alone adequate compensation for those who lose out. National compensatory mechanisms often exist in the form of institutions and policies in developed economies, but are rarely found in developing countries where there often is a presumption that such mechanisms are prohibitively expensive and only affordable to developed economies. Compensation for such losers is virtually unheard of in developing countries, and has been declining in developed countries, as they are hardly ever mentioned, let alone advocated by the conventional wisdom in recent decades.
Meanwhile, real incomes for employees, especially the less skilled, are likely to be further depressed due to greater international competition following trade liberalization. Thus, while trade liberalization may have the potential to improve the welfare of all,and to accelerate growth and structural transformation in developing countries, such outcomes do not necessarily follow, and are rarely the case,but can be ensured with complementary policies, institutions and reforms.
Trump trade strategy?
Obama’s confidence and faith on the free trading activities cannot be denied. He argued that the international trade engagement serves as a very good platform for the economics expansion of the nation. President Obama touted the Trans-Pacific Partnership Agreement (TPPA) as his top foreign policy priority for 2016, by asserting US dominance in the region at the expense of China. One would expect this antipathy to China to be shared by the Trump administration, but apparently, its antipathy to all trade agreements negotiated by its predecessors takes precedence.
The final push to seek congressional support for the TPPA despite strong opposition from the major presidential candidates made clear that the main US rationale and motive for the deal had little to do with trade liberalization per se. The decision by the Obama administration to push ahead with the TPPA may well have cost Hillary Clinton the presidency in the 2016 election as she came across as insincere in belatedly opposing the agreement, which she had previously praised and advocated. In the major swing states like Ohio, Michigan and Pennsylvania, election analysts suggest that concerned voters opted for Trump instead.
It is widely expected that the Trump presidency will increase trade protectionism by the US, and consequently by others in response or retaliation, possibly triggering serious trade conflicts, with difficult to predict consequences.If President Trump sticks to his campaign rhetoric, all plurilateral FTAs, the multilateral World Trade Organization (WTO) and even some earlier bilateral FTAs, deemed to have been poorly negotiated, are part of the problem. He has already cited both the Trans-Pacific Partnership Agreement (TPPA)and the North American Free Trade Agreement (NAFTA) as disastrous for the US,scrapping the former and vowing to renegotiate the latter.
The President’s objection to the TPP and NAFTA has focused largely on loss of manufacturing jobs exclusively blame on cheap manufacturing imports, often brought in by the very same companies which have relocated production capacities abroad. Trumphas insisted that the US’s major trading partners have long been taking advantage of the US. Changing such trade terms and conditions is thus expected to be a top priority for his administration, and central to his economic strategy to ‘Make America Great Again’.
Trump made good on his campaign promise to take the US out of the TPPAwith a presidential order soon after his inauguration on 20 January 2017. Under the terms of the TPPA, US withdrawal has effectively killed the agreement. Ironically, the Obama administration had claimed that the TPPA would enable the US to write economic rules for the region instead of China, Trump’s favorite bogey. Thus, even presidential one-upmanship can inadvertently escalate trade conflicts.
While freer trade in recent decades has improved consumer welfare with cheaper imports, changing international specialization has seen some deindustrialization in the North and even the South, as well as some industrialization of the South in recent decades, with important employment consequences which have fueled some of the current discontent over ‘globalization’. But Trump’sannounced alternative of negotiating ‘fair’ bilateral trade deals favorable to the US has not given much comfort to prospective trade negotiation partners. Trump’s almost singular focus on ‘not losing jobs abroad’ does not recognize that technological change, particularly automation, has been the major cause of job losses in recent years. Many jobs remaining in the US have different, usually higher skill requirements, with fewer employees producing more goods using less labor-intensive techniques.
The notion of ‘fair trade’ has always been subject to self-serving interpretations by those espousing it, including the governments concerned. Meanwhile, however, the so-called ‘fair trade’ movement associated with civil society in the North has been claiming to help poor developing country producers by ensuring better prices for their farm produce although studies suggest that they have failed to significantly and sustainably improve producers’ incomes. But when Trump seeks fair trade agreements, he obviously means something quite different, i.e., better jobs and incomes for manufacturing workers in the US.
While Trump’s main preoccupations have been with US manufacturing jobs and the related international goods trade, he is also expected to more generally promote US corporate interests, e.g., on intellectual property, financial liberalization, investor rights and dispute settlement. With the global economic recession of the last eight years associated,with the slowdown of trade expansion, Trump’s apparent trade strategy has become the subject of much debate and speculation including dire predictions. Many are concerned that Trump has criticized many existing FTAs, but his appointment of many pro-FTA senior officials to the new administration seems to contradict his trade rhetoric. These appointments haveraised hopes among some that the new administration will be more pragmatic and less dogmatic in addressing trade issues.
Trump’s trade policy paperfor the presidential campaign was written by Peter Navarro and Wilbur Ross. They view economic policy as integrated, including tax cuts, reduced regulations as well as policies to lower energy costs and cut the chronic US trade deficit. According to the plan, reducing the US trade deficit will put more money in the hands of American workers who will then be able to afford higher prices for US made products. As American products become more competitive over time, prices will fall, raising consumer welfare. The paper outlines how and why US growth will increase under a Trump administration, with millions of new jobs and trillions in additional income and tax revenues.
One view is that President Trump can implement most of the policies advocated without obstruction by either the US Congress or court system. Internationally, no country will take on the US for a “very simple reason: America’s major trading partners are far more dependent on American markets than America is on their markets”. Navarro and Ross argue that the US has been losing out through its international economic engagements, mainly due to badly negotiated trade deals and poor enforcement resulting in large US trade deficits. They claim that because the US does not use a value-added tax (VAT) system, everyone else has an unfair trade advantage, that, they believe, the WTO should have rectified. As the world’s largest economy, consumer and importer, the US has the leverage to correct this by pulling the US out of the WTO. And as the WTO would become irrelevant without the US, the damage would be minor.
Trump’s key trade appointments appear to have confirmed expectations of a significant departure from recent decades of bipartisan embrace and espousal of ‘free trade’.Ross will now be Commerce Secretary while Navarro will head the National Trade Council. Additionally, former Reagan official Robert Lighthizer has been appointed the next US Trade Representative (USTR). Lighthizer has been variously described as ‘protectionist’ and ‘pragmatic’, suggesting that he is less ideologically driven than his colleagues.
Trade War Threat Grows
While trade rules generally favor the powerful when they are negotiated, such arrangements may have different consequences, and even become dysfunctional or counter-productive over time. Hence, a more aggressive Trump administration may well secure some better, more appropriate and up-to-date deals for US corporate interests through bilateral deals, especially with weak partners. Some such options favoring US companies might only incur minor disruptions, while others could undermine the US as well as world economies, possibly precipitating another, possibly worse global recession.
Besides renegotiating or rejecting bilateral and plurilateral deals, the US could also bring more cases before the WTO. The US and Europe wrote most GATT rules after the Second World War, and WTO rules for the Marrakech treaty. The US has since used the WTO dispute settlement mechanism to great effect and satisfaction for two decades. Only recently did the Obama administration begin disrupting its functioning by blocking the appointment of panel judges after losing a case. Even after losing such cases in the past, the US has almost never subsequently revised its trade rules and practices. Trump has long threatened higher duties to ensure compliance and more favorable deals. While trade lawyers continue to debate the legality of and scope for such actions, most trade economists argue that US consumers will pay a high price to thus save relatively few jobs.
President Trumphas insisted that the US has long been suffering from poor trade deals made by his predecessors. He has announced that renegotiating or withdrawing from these deals will be a top priority for his administration for whom trade policy will be key to US economic revival under Trump. The new administration has promised ‘tough and fair agreements’ on trade to revive the US economy and to create millions of mainly manufacturing jobs. Hehas reiterated his commitment to renegotiating NAFTA, signed in 1994 by the United States, Canada and Mexico. And if NAFTA partners refuse what the White House deems to be a ‘fair’ renegotiated agreement, “the President will give notice of the United States’ intent to withdraw from NAFTA”.
In the area of trade, Trump may be constrained by his own party’s ‘free trade’ preferences, while the minority Democratic Party is likely to remain generally hostile to him. Hence, many informed observers doubt his ability to unilaterally decide on and impose trade policies, as the US President is subject to many checks and balances, as well as conditions and constraints.
Another view is that existing legislation allows the president considerable leeway. Presidential fiat may well be extended in radically new ways by the incoming president with, or perhaps, even without the support of a Republican controlled Senate and Congress. But as such ambiguity can be interpreted to grant the president broad authority over trade policy, Trump may use this to the fullest. But the exercise of such authority,by using measures which nevertheless remain unlikely to achieve expectations generated by his presidency, may well trigger reactions as well as counter-reactions, which can easily spiral out of control, with dire consequences for all concerned.
Trump and his key trade appointees often appear to see trade as a zero sum game, implying that the only way for the US to secure its interests would be at the expense of its trading partners. Their rhetoric also implies that previous administrations of the most powerful country in the world has previously negotiated trade deals to thedetriment and disadvantage of the US – a view almost no one else agrees with. Thus, Trump’s belligerent rhetoric threatens either trade war or acquiescence to the US as the only options available as well as the only means to change the status quo which his administration is intent to replace. But by this logic, future deals even more favorable to the US can only be achieved with weaker partners, e.g., through bilateral treaties, or those with ulterior motives for accepting even less favorable terms and conditions.
Of course, the real world is more complicated than a relatively simple one of competing national interests. For example, while US corporations and consumers may benefit from relocating production abroad, American workers who lose their jobs or experience poorer working conditions will be unhappy. Clearly, there is no singular national interest despite nationalist or populist rhetoric and slogans to the contrary.
Trump’s rhetoric so far implies an opposition of American workers to the ‘globalist’ US elite, with scant mention of consumers who benefit from the lower costs or prices of imported goods and services, the main source of support for trade liberalization and‘globalism’. The unequal effects of freer trade have long been recognized,even by neoclassical international trade economists (Samuelson 2004) except for the cheerleaders of globalization who insist that freer trade lifts all boats – a myth belied by the experiences of increasing numbers of American workers and others in recent decades.
Meanwhile, US protectionists – anxious to blame trade liberalization and globalization for the ills of the American economy – have been in denial about the labor-displacing effects of automation. They also fail to recognize how deregulation in ‘laissez faire’ American capitalism has exacerbated volatility, instability, insecurity and inequality. In contrast, ‘managed’ capitalism has been more likely to ensure less disruptive and painful transitions due to trade liberalization and automation, e.g., by government provision of appropriate and effective retraining schemes.
Trump has also threatened to impose tariffs of as much as 45% on imports from China and Mexico! As such tariff imposition is prohibited by the WTO, an across-the-board tariff hike is unlikely in the near term as long as the US chooses to negotiate within the parameters of continued WTO membership. As long as this continues to be the case, the Trump administration is likely to consider deploying WTO trade remedy actions on imports from China, Mexico and other countries by claiming they are being dumped or subsidized. This has already happened, e.g., with solar panels and wind turbines from China. The effect of this has been to raise the costs of renewable energy, thus undermining the global warming mitigation effort.
Part of the attraction of this option is the fact that WTO trade remedy rules have long been widely abused for protectionist purposes. A country can impose a high tariff on an import from another country by claiming its price has been artificially depressed or subsidized by the government in order to export – or ‘dump’ – them at a price lower than its cost of production or domestic price. Similar actions can be repeated with impunity. No deterrent penalty can be imposed by a WTO dispute settlement panel against an offending country that wrongfully raises tariffs even if the aggrieved exporting country has lost considerable earnings in the interim. Such ostensible trade-remedy actions are more easily abused than the blatant erection of tariff walls. Nevertheless, these may, in turn, trigger retaliatory counter-actions by aggrieved governments, generating trade warfare through a spiral of protectionism.
However, instead of imposing duties on specific products, as allowed for by WTO rules, emergency authority may be invoked to impose broad-based tariffs on exports from specific countries, as Trump has threatened to do, probably by invoking US legislation to take action against currency manipulation. Such an escalation risks causing significant economic damage, especially if it provokes retaliatory actions. Such a spiral can easily spin out of control, with no guarantee of eventually achieving a superior outcome for all. Thus, even a relatively minor trade dispute can spin out of control to become very disruptive, with possible global implications.
China, the Biggest Trade Cheater
‘Defensive’ tariffs have been proposed by the Trump administration to deal with ‘trade cheats’, with China specifically identified as the ‘biggest trade cheater’ in the world. In the public mind, China remains ‘the world’s workshop’, where hundreds of millions of lowly paid workers mass produce consumer goods while its artificially low exchange rate and production subsidies ensure their goods remain competitive internationally. While perhaps some of this was true over a decade ago, the situation has changed radically since then.
At the height of global trade imbalances over a decade ago, China’s trade surplus was more than ten percent of GDP. With the sudden slowing of world trade growth following the 2008-2009 financial crisis, growth of the US trade deficit with China slowed significantly. While the US still has a large trade deficit with China, China is also among its largest export markets. Such interdependence implies considerable scope for retaliatory actions between the governments of the world’s two largest economies, which can easily spin out of control, especially if one side invokes existing trade rules painstakingly negotiated over many decades, and the other side contravenes them while threatening to leave the WTO.
In 2014, services overtook manufacturing as the biggest component of China’s economy. Net exports were equivalent to 1.7% of growth, small compared to domestic consumption and investment. China will want to continue exporting to the US, but the structural transformation of its economy and greater demand for various services now generates more new jobs. Some of these structural changes are also taking place in the US.
Under US law, evidence of purported currency manipulation provides grounds to impose additional tariffs on imports from a country so deemed by the Treasury Department; once the Treasury Secretary cites a currency as being manipulated, the administration can impose defensive and countervailing tariffs against the country of the offending government issuing the currency. However, US trade negotiators have long complained that they cannot get enforceable currency rules into any FTA as they are perceived to be so easily prone to abuse.
Nevertheless, during the presidential campaign in 2016, both candidates pledged to take action against China for alleged currency manipulation. Both presidential aspirants attributed the US trade deficit with China to the latter’s alleged currency manipulation. Trump threatened to declare China a currency manipulator and to impose tariffs of up to 45 percent on Chinese imports during his first 100 days in office.
However, taking trade or other retaliatory actions against another country or currency union on the ostensible grounds of alleged currency manipulation would contravene WTO rules, allowing the aggrieved country/currency union to successfully take a case against the US to the WTO. As recognized by the previous administration, such actions are likely to trigger currency-related trade wars with most major US trading partners. Aware that this could trigger and exacerbate trade conflicts, the Obama administration had resisted pressure to do so. The Trump administration can easily revise this position on some pretext or other. Importantly, Navarro and Ross not only point at China for manipulating its currency, but also Japan and the euro, with the Germans getting special mention.
Washington has long claimed that China artificially depresses the value of its currency to benefit exporters. Although both Hillary Clinton and Trump accused China of being a ‘currency manipulator’ during the 2016 US presidential campaign, the current market consensus is that the Chinese renminbi has been reasonably aligned for over a decade. ‘Misalignment’ may have been the case a dozen years ago after China virtually pegged its currency to the US dollar for a decade in order to convey a sense of currency stability. The greenback had appreciated against the Japanese yen after mid-1995 following the decade-long strong or ‘high yen’ (endaka) period after the September 1985 second Plaza agreement.
While many developing countries, especially in East Asia, ‘manage’ their currencies for various reasons, the recent market consensus is that the renminbi has been reasonably aligned for some years, while the currencies of some other countries, including US allies in East Asia, are more significantly undervalued. While stable against the US dollar for about a decade before 2005, and arguably undervalued for some of that period, the renminbi has risen by 30-40 percent since then, prompting the IMF to repeatedly declare that it is no longer undervalued.
Indeed, weakening export demand and strong capital outflows have put tremendous downward pressure on the renminbi, forcing China’s central bank to use its US dollar reserves to intervene to support its currency. Thus, recent Chinese currency manipulation has kept the renminbi over-valued, rather than undervalued. This implies that the Trump team is proposing remedies on the basis of outdated analysis. Failure to make progress with wrongly prescribed measures may lead to even more aggressive or extreme efforts, that risk triggering economic war fare in which most, even ‘innocent bystanders’, risk becoming victims.
However, dealing with alleged currency manipulation does not address the underlying problem of the international monetary system which confers the US with an ‘exorbitant privilege’ due to the ‘original sin’of other economies. With greatly liberalized capital accounts in recent decades, many ‘emerging market economies’ have experienced large and sudden capital outflows following protracted accumulation of eventually massive inflows. In East Asia, they have often resorted to the expensive – and contractionary – practice of so-called ‘self-insurance’, by accumulating huge foreign exchange reserves, often in the form of US Treasury bonds, in case of the need for emergency deployment.
This has involved substantial opportunity costs for emerging economies as these reserves could have been used more productively instead of holding them in low-yielding bonds. Thus, besides seignioragegains – to the currency issuing government due to the difference between the face value of the currency and the production costs – for the US, emerging countries are, in effect, helping to finance US deficits and expenditure.
Threatening Trade Multilateralism
The year 2015 proved especially challenging for economic multilateralism, especially in relation to development concerns, despite the September Sustainable Development Goals summit setting an ambitious Agenda 2030. The preceding JulyAddis Ababa third Financing for Development (FfD) conference delivered little real progress to ensure adequate ‘means of implementation’, threatening to make the SDGs little more than an ambitious ‘aspirational exercise’. Later, the December United Nations Framework Convention on Climate Change (UNFCCC) Conference of Parties (CoP) in Paris produced a non-binding, aspirational agreement of national voluntary commitments.
The mid-December 2015 WTO biennial ministerial meeting in Nairobi proved to be another setback as the US and its allies sought to kill the Doha Round of trade negotiations, thrusting the WTO itself into existential crisis. The US and many other OECD countries have been increasingly unwilling to make any meaningful concessions in multilateral economic negotiations over the last decade. Ending the round inconclusively will allow them to renege on commitments made in 2001 to get developing countries back to the negotiating table after the Seattle ministerial disaster. Meanwhile, unsurprisingly, most developing countries want the Doha Round to continue to a successful conclusion, hoping to finally realize the 2001 promises to rectify the previous Uruguay Round outcomes, which have undermined development and food security prospects.
Meanwhile, more and more OECD countries have become increasingly unwilling to make meaningful concessions in recent multilateral economic negotiations. 2015 saw a renewed US initiative to broaden the trade negotiations agenda by bringing back issues previously taken off the Doha Round trade negotiations agenda. The Obama administration undermined trade multilateralism by its unwillingness to honor the compromise which initiated the Doha Development Round after the Seattle WTO ministerial failure and 9/11. In December 2015, Obama’s United States Trade Representative (USTR) Michael Froman threatened the already painfully difficult Doha Round of WTO trade negotiations by insisting on introducingTrans-Pacific Partnership Agreement (TPPA) issues into the Doha Round negotiations agenda. To make his case, US Trade Representative Michael Froman cited the TPPA, concluded in October 2015, and ongoing US-European Union negotiations for a Transatlantic Trade and Investment Partnership (TTIP).
These ‘new issues’ included some which had been kept off the WTO agenda from the outset of the Round after the Seattle ministerial walkout of 1999 and the 9/11 al-Qaeda attack on the US. With EU support, the US effectively forced the rest of the membership to revisit issues previously dropped from the WTO agenda after strong opposition from the South as part of the compromise to restart WTO trade negotiations. Thus, by insisting on reinstating rejected issues, the OECD countries demonstrated their willingness to torpedo the already difficult negotiations, making agreement virtually impossible. In such ways, trade negotiations are being undermined by powerful corporate interests and the governments they influence.
However, the Doha round of trade negotiations has been stalled for years, and with the election of Donald Trump as the new US President on a trade protectionist platform, most observers believe that they will never be concluded, at least over the next four years. Although the new President has scrapped the TPPA, it is still quite possible that an amended, and probably more onerous and even more pro-US version will eventually be approved. In these circumstances, trade agreements in the near future, involving the US and probably Europe as well, are even less likely to be supportive of developing country interests, let alone help realize development aspirations.
If the US imposes non-WTO compliant tariffs on fellow WTO members China and Mexico, it would effectively repudiateits own earlier commitment to the entire system which it had the biggest role in designing. If others retaliate or emulate the US, trade barriers would start going up all over the world, reversing the trade liberalization of recent decades without necessarily restoring already decimated earlier productive and export capacities and capabilities. The consequent disruption would be uneven in impact, probably most adversely affecting those least able to resist and rehabilitate such capacities and capabilities, leaving the world as a whole worse off.
There is a widespread and growing expectation that Trump’sadministration will undermine multilateral trade negotiations under WTO auspices despite all the concessions already made to US demands and interests, not only by developing countries, but also by Europe. Trump’s preference for bilateral agreements benefiting the US is also likely to undermine trade multilateralism, albeit for different reasons.By undermining WTO multilateral trade negotiations, bilateral and plurilateral trade agreements are, in fact, the very anti-theses of what they purport to do, namely advance trade liberalization (Bhagwati 2008).
With Trump’s trade policy team recommending US withdrawal from the WTO, further progress on the Round will be increasingly difficult to envisage. Its economic strategy paper from mid-2016 assumes that WTO membership will confer little benefit to others without the US remaining a member. Thus, the new US stance may well involve ‘blackmailing’ the rest of the membership by threatening to withdraw from the WTO. Ending the Doha Round inconclusively will also enable the North to renege on commitments made in 2001 to get developing countries back to the negotiating table after the Seattle ministerial disaster.
Not surprisingly, many developing countries still want the Doha Round to continue, hoping to finally realize the 2001 promises to rectify the previous Uruguay Round outcomes, which have, inter alia, undermined food security and development prospects. By undermining WTO negotiations, bilateral and plurilateral trade agreements are the very anti-theses of trade multilateralism. The TPP is also being used to undermine existing and potential regional cooperation in Southeast Asia and Latin America.
International trade and hence trade policy are subject to rules. After the International Trade Organization – envisaged in 1944 at the Bretton Woods conference and in the 1948 Havana Charter – was rejected by the US Congress, the General Agreement on Tariffs and Trade (GATT) was eventually agreed to as a compromise. With the 1994 Marrakech Agreement, GATT became part of the new WTO. With the WTO’s ‘single commitment’ requirement, its rules imply that member countries agree not to unilaterallyimpose new tariffs or import quotas.
Nevertheless, the WTO and other existing multilateral institutions can still do much to facilitate greater trade in the interest of all, if given a chance to succeed, although the conditions for trade liberalization ‘lifting all boats’ necessarily requires complementary national as well as international mechanisms, arrangements and policies to ensure ‘no one is left behind’.Thus, instead of pursuing trade liberalization in the blind hope that everyone’s welfare will necessarily improve as a consequence, future multilateral trade negotiations may prioritize sustained economic progress, including full employment, for all instead.
Thus, a host of pressing and unresolved global challenges – both within and between developed and developing countries – point to the ever greater importance of renewed international cooperation for achieving the Sustainable Development Goals (SDGs). At times like these, it seems especially worthwhile to review the relationship between international trade and development with a view to improving its governance in order to enhance prospects for sustainable development for all. Concluding a truly progressive trade agreement would not only meet developmental aspirations,but would also advance national, public, consumer and producer interests besides helping ensure a more balanced and robust global economic recovery.But unless the US – and the EU – re-embrace the spirit of compromise which started the DohaRound of trade negotiations, the WTO and multilateralism more generally may never recover from the setbacks of the last decade and a half.
The CPB World Trade Monitor shows that growth in the value of world trade has decreased sharply since 2009 after a long period of possibly extraordinary growth often associated with globalization and trade liberalization.
Definition of ‘Seigniorage’. The Economic Times. Retrieved from http://economictimes.indiatimes.com/definition/seigniorage
The Paris Agreement claims to replace the generally less ambitious, but legally binding Kyoto Protocol from the end of the last century, which was resoundingly rejected by the US Senate. While most developing countries made commitments in line with climate justice criteria at Paris, most OECD economies fell short, typically after failing to meet their commitments under the Kyoto Protocol. Even if fully realized, the Paris voluntary commitments will not be enough to avert climate change disaster as average global temperatures will still rise by over two degrees Celsius above pre-industrial levels.