Wednesday, April 13, 2011

The World Is Still Not Flat

. Wednesday, April 13, 2011

In fact the competitive playing field is highly tilted. Rorden Wilkinson looks at the history of the GATT/WTO at concludes:

The article argues that if WTO performance is measured as the institution’s capacity to act as a strategic device to maintain and exacerbate the advantages of a group of industrial states over their less powerful and developing counterparts (an aim that is much closer to the institution’s intended purpose), then it has actually been quite successful, albeit undesirably so.

I.e., if you think of the WTO as an egalitarian, technocratic institution seeking Pareto-improving bargains, then you'll be disappointed. But if you think that politics actually matters, and by politics I mean power and interests in competition, then this is not surprising at all. Powerful states, particularly the US, have used GATT/WTO to lock in trade relationships that suited their domestic political economies. Specifically, to reference crude trade econ models, the US pushed for liberalization where it had a comparative advantage (industry first, then technology), and protectionism where it did not (agriculture). It got both. These patterns persist in WTO rules to this day. Wilkinson's account is another reminder of how US power and influence has not only shaped the development of the international system since WWII, but how it continues to matter today.

Wilkinson concludes that this is bad on normative grounds, as it does not level the playing field for developing countries, and he is correct. But remember that the international institutional arrangements stemmed from the domestic political environment in powerful democracies, especially the US. Given that, the alternative to a global trading system that is organized around powerful domestic interests in industrialized states is a closed (or more closed) system. It's not obvious that this result would be better for developing countries. Indeed, at Doha it is the developing countries that are pushing for more liberalization from the developed countries, particularly in agriculture and intellectual property, and not the other way around. Given the growth in countries that have integrated into the global trading system, it seems that the some liberalization is better than none for both developed and developing. Pushing too hard for more equal patterns of liberalization could undermine the political consensus in favor of open trade in more developed economies. That wouldn't be good for developing countries.

Via Emmanuel


The World Is Still Not Flat
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