Time to Move Towards Establishing a WTO-plus

December 17, 1999 |

In the wake of the breakdown of the World Trade Organization summit in Seattle, there has been a seemingly endless round of finger-pointing and recrimination. In the end, however, it is less important to attach blame than it is to forge a strategy for the future.

In this vein, it is time to seriously consider a trade-policy option that has been discussed with varying degrees of seriousness for several decades -- the concept of a GATT-plus. It may well be that this old idea, based on the WTO's predecessor, the General Agreement on Tariffs and Trade, is the best solution to the new trade problems made clear in Seattle.

The concept behind GATT-plus, now more appropriately called WTO-plus, is simple. In essence, a like-minded group of countries negotiate new trading rules that deepen free trade among them and extend trading rules to new areas.

A WTO-plus arrangement is similar in many respects to a large free-trade area. The benefits of the new trade liberalization and trading rules would be confined to the countries that accepted the WTO-plus framework.

Countries that opted not to be involved would still enjoy the guarantees set out in the WTO, but not the additional benefits stemming from the WTO-plus agreement. New members would be allowed to join the WTO-plus provided they were willing to accept the new disciplines that it provided.

The evolution of the WTO makes this idea far more attractive than it was in the past. In 1947, the world trading system began as a relatively small group of like-minded countries interested primarily in cutting tariffs. As time went by, the trading system's membership expanded and the scope of issues addressed grew increasingly broad.

Now the WTO claims more than 130 members, with more being added all the time.

In the near future, a number of countries with quite different perspectives on trade -- like China and Russia -- are likely to become members.

With this greatly expanded membership, the WTO can no longer be called a like-minded group. In fact, there is an increasingly wide gap between the views of developed countries and those of developing countries.

At the same time, the scope of issues covered by the WTO has greatly expanded. What was once mostly a tariff agreement now grapples with issues such as protection of intellectual property, trade in services, and investment. Beyond that, waiting to join the agenda are issues such as labor rights and the environment.

Simply put, the combination of the trends toward increased membership and broadened scope of issues make consensus almost impossible to achieve. The gap between the developed and developing world on issues like labor rights and investment already seems unbridgeable as developing countries demand more control over the WTO.

At best, negotiating by consensus in such a diverse group ensures that the result will be least-common-denominator agreements that are unlikely to tackle new issues. The breakdown in Seattle demonstrates that this is no longer just a theoretical possibility.

A WTO-plus would provide an alternative to break the deadlock. Trading rules could be extended to new areas, like services, competition policy, labor rights and the environment. It may even be possible to take initiatives, like slashing or eliminating tariffs in selected industrial sectors.

Such an arrangement is likely to be attractive to the world's Big Three economic powers, the United States, the European Union and Japan. It could also appeal to some developing countries, such as Chile.

With a group of this size supporting a WTO package, there would be powerful pressure on other countries, mostly developing countries, to accede; the prospect of being excluded from a major agreement would likely be too great to ignore.

Countries would also be able to accede when they chose to, which would allow them some flexibility without forcing the rest of the world to wait.

Within the United States, this option should appeal both to business groups that favor expanded free-trading rules and to those on the streets in Seattle who wanted issues such as labor rights and the environment to be addressed.

A WTO-plus would not be a cure-all. There are some problems that are essentially disputes among developed countries, such as the EU-U.S. struggle over agriculture. These will not magically disappear, but they are not made worse by the movement to a WTO-plus setting.

After Seattle, a bold, new move like creating a WTO-plus has undeniable appeal. It will doubtlessly be criticized by some developing countries. In the end, however, the prospect of being left behind may well prove to be the powerful incentive needed to keep the world moving forward.

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