The answer is NO according to an interesting paper (Is the WTO Passé?, World Bank Policy Research Working Paper (WPS 7304), June 2015) co-written by Kyle Bagwell, Chad Bown and Robert Staiger. This paper sheds new light on the relevancy of the WTO as an engine of trade liberalization. It is a survey of economic literature addressing various trade agreements (WTO and Preferential Trade Agreements (PTAs)) and their relative role in trade liberalization from the “terms-of-trade” theory perspective.
Here is the main conclusion of the paper:
“The WTO is not passé. Subject to some caveats, it receives strong support from economic principles. (…) However, creative adaptations to the GATT/WTO’s historically successful principles of reciprocity and nondiscrimination could seemingly be re-deployed - albeit in a more guided and targeted way - to address these challenges.” (p 96)
“[I]important differences may make PAs [Plurilateral Agreements] more appealing than PTAs from the perspective of the multilateral system. First, PAs are “open” (…), whereas PTAs do not typically have an open accession process for potentially interested trading partners. (…) Third, problems arising between PA signatories would be addressed through litigation taking place under the WTO, thus more likely completing the contract in a coherent way, as opposed to the potential fragmentation of international jurisprudence that might otherwise arise under PTA dispute settlement provisions. (…) (p 98)
Here are other interesting findings:
“[E]ven where positive preference margins exist, exporters may not utilize available preferences because of both the resource costs (to sourcing inputs from less efficient suppliers in PTA markets) and bureaucratic costs (to proving legal compliance) due to rules of origin and local value-added requirements needed to gain access to the lower preferential rates.” (p 10)
“Despite the explosive increase in PTA adoption, the WTO estimates that overall, excluding (including) intra-EU trade, 84 percent (70 percent) of world merchandise trade still takes place on an MFN basis.” (p 10)
“[W]hen the home government imposes an anti-dumping duty, a link is forged to a future retaliatory anti-dumping duty of the foreign country.” (p 42)
“Staiger and Sykes show that governments of large countries indeed have incentive to impose discriminatory tax and regulatory policies against foreign imported products once import tariffs are bound. The model thus provides an interpretation of the national treatment principle as a guard against such opportunistic behavior.” (p 55)
“In total, our survey of research in this section provides support for the shallow integration approach of the GATT/WTO when externalities are pecuniary and travel through the terms of trade. (…), we also note that the case for shallow integration can be weakened when governments possess private information, and arguments for deeper integration may also emerge in settings where international externalities travel through other channels.” (p 56)
“[W]hen there are bargaining frictions (as in McCalman, 2002, and McLaren, 2002) so that a building block role for PTAs is possible, no such building block role has been found, but a stumbling block role has again been shown to be possible.” (p 67)
“[T]he literature surveyed above establishes that the potential for third-country externalities is there, and suggests that the problem could become more substantial with the increasing focus of new PTAs on deep integration. Maintaining a cautious view of PTAs in light of this potential seems warranted.” (p 70)
