Academic

Future of the WTO- Liberal Ideas and Domestic Politics (Gregory Shaffer)

I don't think the WTO as a forum for negotiation is dead, unless one believes in resurrection. To me, our generally pessimistic comments raise a series of important issues, but do not mean the end of multilateralism. States still have incentives to engage in multilateral negotiations. The world may have "deglobalized" these last months with economic collapse and a concomitant collapse in trade flows, but countries will remain too economically interdependent to not engage in multilateral negotiations, including trade agreements, down the road. Yes, negotiations with a small numbers of players and with a dominant economic hegemon go more quickly. But they are not conditions for multilateral agreements.

The key challenge now is not simply explained by realist concepts, such as shifts in the distribution of power and their impact on relative gains for countries in competition with each other. The perception of absolute gains still matters. And domestic politics still matter for the formation of national positions (a liberal internationalist position). If export-oriented interests mobilize in countries, including the BRICs, they will push for reciprocal market openings. Brazil, for example, pushed hard for a conclusion of the Doha Round because its agricultural export interests had much to gain. The key challenge now is that domestic interests are not mobilized in key WTO members. They never were in the US and the EU for this round, which limited what US and EU negotiators could do. And as I wrote in my first post, this is not a propitious time to see new domestic mobilization for trade liberalization.

That brings us to the role of ideas, including perspectives of WTO legitimacy as a forum for liberalization, which has not been addressed in posts so far. It is no coincidence that the GATT was signed after WWII following the Great Depression, and that the Uruguay Round was concluded and the WTO created following the Berlin Wall's collapse and the discrediting of socialism. Yet we are now seeing shifts in domestic opinion that will be less favorable to trade liberalization.  Trade negotiations for further liberalization thus do not bode well in the near term. In other words, the economic crisis is not just about political priorities shifting away from trade; it is also about shifting perceptions regarding the benefit of open markets. This loss of faith in liberal markets will affect the constellation of domestic pressures on government negotiators.

Market power matters in affecting WTO negotiation outcomes, as we have all shown in our work. But so does the mobilization of domestic interests and ideas about trade liberalism. Thus, in my view, while the WTO as a negotiating forum is indeed deadlocked, it is not dead in the sense that it is forever gone. We just need to be realistic about what it can accomplish in these times. Acting as a useful shield against protectionism is not insignificant.

Full post as published by The University of Chicago Law School Faculty Blog on February 24, 2009 (boomark / email).