Discussion Paper

No. 2012-66 | December 21, 2012
Multilateralism and Regionalism from an American Perspective: Parallels and Contrasts with the Langhammer Vision

Abstract

The paper discusses various milestones in the process of multilateral trade negotiations, pinpoints current challenges facing the world trading order, and proposes possible ways out of the persistent impasse. Hufbauer argues that the success of the multilateral approach is at least partly because the GATT departed from the strictly unconditional definition of the most-favored nation (MFN) rule in the late 1970s already. Regional agreements such as NAFTA complemented, rather than hindered, multilateral trade liberalization in the past. The political economy of further multilateral liberalization has become increasingly complicated since countries such as Brazil, China, and India have emerged as relevant players. Against this backdrop, Hufbauer expects regionalism to become the strongest vehicle for delivering liberalization in the future. This could still leave a bright future for the WTO as a “house of plurilaterals”, i.e., agreements on specific issues such as services liberalization with conditional MFN treatment of varying membership.

Paper submitted to the special issue
Multilateral Trade Liberalization and Regional Integration under Stress
Workshop in Honor of Prof. Dr. Rolf J. Langhammer

JEL Classification

F13

Cite As

Gary Clyde Hufbauer (2012). Multilateralism and Regionalism from an American Perspective: Parallels and Contrasts with the Langhammer Vision. Economics Discussion Papers, No 2012-66, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2012-66

Assessment



Comments and Questions


Anonymous - referee report
March 07, 2013 - 08:54

The paper is a highly personalised account of trade policy liberalization since the Tokyo Round in the 1970ies. Hufbauer contrasts his own preferences for a regional approach to liberalisation with the strictly multilateral approach favoured by Rolf Langhammer. Thus, the paper is a revival of the well-known Bhagwati – Bergsten ...[more]

... debate during the 1980ies.

Hufbauer is taking a strictly political economy stance when he argues that it was the GATT departure from the unconditional MFN-rule which has allowed trade policy liberalization to proceed. His basic assumption is that tariffs do no longer matter much for an expansion of trade. Hence trade policy negotiations had and have to focus on behind-the-border measures. However, as it appears impossible to reach global agreement on respective codes of conduct progress was and can only be achieved by regional agreements. With that perspective in mind Hufbauer suggests to remodel the WTO into a kind of clearing house for (regional) codes of conduct.

The current Doha-Round seems to demonstrate that multilateralism has reached a limit, but there are some (well-known) arguments against the view that regional approaches are appropriate to solve all trade problems. First, tariffs do still matter in some important areas such as agricultural products in particular in middle income countries. So far there is little indication for these trade impediments to be dismantled by regional agreements. Second, many regional agreements are overlapping and even contradictory, the famous spaghetti bowl.
It remains to be proven whether these existing agreements have actually created a better trading environment than hypothetical unconditional codes of conduct.
And thirdly, regional agreements tend to discriminate against third parties. While member countries of regional agreements gain, non-members may lose, and the overall outcome for world trade (and efficiency) remains doubtful.

The paper should however not be understood as a research report but rather as a contribution to the debate about the options for future trade policy liberalization which emerges from the stalemate of the Doha Round. In this sense the paper is taking an interesting political economy stance and should provoke further discussion and research.


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