Saturday, May 14, 2005

WTO: Mutually Assured Mercantilism

Pascal Lamy, former European Commissioner, has been chosen to lead the World Trade Organisation (WTO) from september on.

Often, the WTO is being opposed by the so-called antiglobalists, who accuse it from being an undemocratic institution promoting unlimited free trade, which is in their eyes a bad thing.

In reality though, the antiglobalists should know the WTO is on their side. The WTO is not just a platform on which states negotiate. It is more than that. Many mechanisms are provided to ensure that it can effectively impose measures on states. Imposing fines is one of the more better known. The WTO can therefore be seen as an embryonal world government.

Whereas the WTO has been until now a platform where mainly big companies lobby for their own good, this might change. The protests of the antiglobalists have pushed the political agenda more towards the imposition of WTO - labor regulation.

But until now, the WTO has mainly forced states to open up their borders? On the contrary. It slowed opening up of borders. The WTO can be seen as a ‘mutually assured mercantilism’ – mechanism. States propose to each other a list of fields in which they are willing to commit liberalisations. After, a trading takes place. Because of that, many proposed liberalisations are lost. The whole idea of the WTO is that trade is seen as a ‘zero-sum-game’, which means that one cannot benefit from trade but through harming others.

The world is becoming a more competitive place, with competiting currencies, competing trading blocs and competiting regulations. This globalisation process is to the benefit of consumers, but it puts pressure on bureaucrats. The WTO shouldn’t be underestimated as a tool for them to prevent the world from these blessings.


Anonymous said...

I don't think that the WTO is on the side of the anti-globalists. In fact the WTO is guided by two principles that can result in aworld of free trade: the principle of most favourite nation and the principle of national treatment. On top of that is the vision of reciprocity. This way it is possible to overcome special interests that are opposed to market opening. In fact, the problem with the WTO is not with it's own principles but with all the exceptions.
Take systems of general preferences, like the European Everything but Arms initiative. This is a unilateral measure. Europe opens it markets for the poorest country without forcing them to do the same. What is the result? Those poor countries do not liberalise their economies. And the opening of markets for poor countries does not go very far. For one thing poor countries often have to comply with very complex and onerous rules of origin. Instead of complying they just choose not to use their preferential treatment. And when exports from poor countries rise too much, preferences simply will be withheld.
Instead of abolishing the WTO we should abolish the exceptions to it's principles.

Pieter Cleppe said...

The principle of national treatment means you have to open your borders for every service that one of the citizens desires to achieve. For that you don't need an institution as the WTO, which is not just a platform. Countries just have to open their borders, that's all.