Writing in Newsweek, Daniel Altman argues that the future of free trade lies with bilateral and regional trade talks, and says "good riddance" to the WTO. I think he elaborates on his views in this book, but I haven't read it yet so I'll focus on the Newsweek piece. Some key passages:
... trade negotiations would actually go much further if the WTO simply closed down its talks altogether.
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... it’s not as though trade negotiations have been paralyzed during the past 10 years. Countries have been signing free-trade agreements, both in pairs and at the regional level, more rapidly than ever before. And this is where the future of free trade lies: in pragmatic regional deals, not utopian global ones.
...
In practice, getting all 153 members to agree to lower trade barriers has been akin to teaching puppies synchronized swimming. A few countries have always taken an obstructive stance, either on principle or to push their own priorities. Canada, for example, has insisted that its unique system of supply management be enshrined in any global deal. And France won’t even entertain the idea of reducing its massive farm subsidies without major concessions from poor countries.
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The majority of nations can simply leave the obstructionists behind and move forward with regional trading partners. Eventually, most of the world’s trading nations will arrange themselves into just a few big blocs.
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... the big blocs will have a very strong economic motive to start talking to each other.
This is how global trade talks will work in the future. Trade barriers will fall, just as the WTO hoped, and with the same result that should have been its goal all along: its own obsolescence.
In a nutshell, he says that the WTO process involves too many countries, some of whom are resisting trade liberalization. The trade liberalization process would work better, he argues, if those in favor of free trade went forward on their own, creating large trade blocs, which would eventually force the hold outs to go along.
Here are a few thoughts on this.
First off, it's no doubt true that it's easier to reach agreement among just a couple countries than it is among 153. I don't know if that justifies calling smaller deals "pragmatic" and global deals "utopian," though. We are currently operating under a complex and detailed set of global rules that all the major trading countries agreed to not very long ago. So, it can be done, and has been done in the recent past.
Second, he seems to want to draw a distinction between "regional" and "global" trade deals. But just to be clear, what's going on now is, for the most part, not regional economic integration agreement, such as the EU, NAFTA and MERCOSUR. Rather, it is a spaghetti bowl/noodle bowl involving a massive web of agremeents between and among hundreds of countries. It is not clear how this will result in trade "blocs" that could negotiate with each other in the future. More likely, it will just lead to preferential treatment for some countries at the expense of others, and lots of confusion in customs administration.
And speaking of "preferential treatment," it is important to recognize that just because an agreement has "free trade" in the title, that doesn't necessarily mean this is what it achieves. There's a pretty good argument that what these bilateral and regional trade agreements accomplish is preferential and discriminatory trade, not free trade, with more trade diversion than trade creation. So while it's easier to get them signed, they may not be anywhere near as valuable as a global deal would be in terms of economic welfare benefits.
Along the same lines, Altman suggests that one of the hold-ups with a global deal is certain countries resisting trade liberalization, for example France and agriculture subsidies. It is true that bilateral and regional deals avoid these issues, but these are important issues, and perhaps they shouldn't be avoided. If you go with bilateral and regional agreements that don't address subsidies and other hard issues (e.g., anti-dumping) that must be dealt with multilaterally, you create a system where international trade rules allow these kinds of measures to undermine trade liberalization. There's no question that some of these issues are difficult. But sticking to the easier issues seems a bit like "free trade lite."
Turning back to his suggestion of negotiations between trade blocs, the idea that a few regional trade blocs will eventually negotiate with each other is an old one. Putting aside the earlier objection that regional trade blocs is not what we are seeing with the current trade deals, let's assume that these blocs do develop. If we want these blocs to negotiate with each other, it would be very helpful to have some sort of forum where they could talk about the trade that occurs not just within their region, but world-wide. Some kind of organization to support these talks, and to enforce the new world-wide rules, would also be useful. It occurs to me that what might be good in this regard is some kind of ... hmm, what to call it? ... I know, a World Trade Organization!
